Retaining customers is essential for business success. But you risk losing money if you’re not measuring your customer churn rate.

No business wants to lose customers. Yet it’s a fact of business life. We win customers, we lose customers. But do you know exactly how many customers you lose each month, quarter, or year?

Knowing your customer turnover rate – or churn – is crucial. Without this insight, you won’t know how many customers you lose over time. Nor will you understand the consequences of your churn rate.

Is your churn rate impacting your revenue? Are you getting a good return on your customer acquisition cost?

Here we show you how to calculate your customer churn rate. Importantly, we also share three easy steps to improve your customer retention.

What Is Customer Churn Rate?

Sometimes known as attrition rate, churn rate is the percentage of customers you lose over time. If your business is subscription-based, this metric refers to the percentage of subscribers who cancel or fail to renew their subscription over a specific time period – per month, quarter or year.

How to calculate your churn rate

To calculate your customer churn rate, you will need to work out:

(Lost Customers during Time Period ÷ Total Customers at Start of Time Period) X 100

Given this formula, you need to know three things:

  1. The relevant time period: monthly, quarterly, or annual.
  2. The number of customers you had at the start of the time period.
  3. The number of customers you lost or churned over the time period (Customers Start of Month – Customers End of Month).

Imagine your company had 750 customers at the start of last month. But by the end of the month, this number dwindles to 665. This means your customer monthly churn rate for the previous month is 11.3%.

Now you may ask, “Is 11.3% bad?”. Probably, but the answer depends on your industry and the type of customer you serve.

Some say the “best” churn rate for subscription-based companies targeting small businesses is 3-5% monthly, while an enterprise-facing company will likely aim for less than 1% monthly.

Either way, reducing your churn by keeping your customers is essential. Incentive and welfare programs for employee retention, building staffs loyalty reduce resignation rate for important talent, boss holding magnet to pull back resigned or leaving employees.

mprove Customer Retention and the churn rate

Three Easy Steps to Improve Customer Retention

Customer insight keeps your existing customers happy and attracts new ones. Here are three insightful steps to help you into the habit of keeping, and increasing, your number of customers.

1. Optimize customer journey touchpoints

The best brands exceed customer expectations across the customer journey. But how?

By gathering customer feedback at every brand touchpoint – your social media channels, chat lines, checkout, and more. With customer touchpoint feedback, you can identify and make continuous improvements across your customer journey.

2. Provide customers with an agile response

What happens when you respond to customer feedback promptly? You meet, even exceed, customer needs.

An agile, timely response builds customer loyalty. In turn, loyalty converts into less customer churn.

3. Better predict customer churn

Prevention is always better than a cure. With customer data, you can identify the patterns, or factors, that lead to customer churn. Armed with this timely insight, you can predict when and why churn will likely occur. Prediction means you can intervene before churn occurs.

Summary customer churn rate

Every business needs to keep a close eye on its customer churn rate. Yet while we cannot avoid losing customers, there is a lot you can do to reduce customer churn. Customer feedback is key to making this happen.

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