What are Customer Churn and Churn rate?

What are Customer Churn and Churn rate?

What are Customer Churn and Churn rate? Customer Churn is also referred to as the rate of attrition or churn rate. It is nothing but the rate of customers who stopped doing business with the entity. It is mostly expressed as the percentage of customers who subscribed for the services, left or discontinue the service once its subscription ended. It is also referred to the customers who discontinued their jobs within a certain period. The churn rate can be calculated by dividing the lost customers total of that period by the customers that you had at the beginning. Customer churn rate is seemed to be the most important factor in the telecommunication industry. Many companies compete and that seems easy for the customer to choose another company. Good and bad customer churn rate depends mainly on the companies. There are both advantages and disadvantages to this customer churn.

                                           Why it is important to have Customer churn? It’s important to have customer churn as it helps to acquire more new customers than the existing old customer. And a survey said that increase of 5% of customer retention creates 25% of the customer which increase the profit compared to the old one. And a company can spend less on the operating systems to achieve many new customers to the company. And they don’t need to convince the old customers to come again back to the company as they have already made their decision of leaving this company. And the increase in customer churn could slowly affect the profits and growth of the company. Companies can calculate both the churn rate the growth rate of the company by comparing its new subscribers to the loss of subscribers. Overall, both the growth rate and loss of the company can be calculated through this.

                             Advantages and disadvantages of Churn rate. Calculating a company’s churn rate provides clarity on the business’s growth which reflects the quality of the service provided by the company. One can understand that the business is flawed if the churn rate is high. And it is indirectly said that the company may have poor customer services, faulty products, or maybe the customer felt the cost is not worth the price. It’s very easy to calculate. It allows one to compare themselves with the competitor company. Customers’ reasons for leaving the company can also be found out through the customer churn rate. Disadvantages of churn rate, it doesn’t consider the types of customers who are leaving the company. it never gives you the differentiation of companies that is whether it’s a mature or growing, or start-up company. These are the pros and cons which present in Customer Churn.

                                How to reduce your Customer Churn Rate? Churn rate can be reduced by following a few steps that are Focus your attention on your best customer, Analyse churn as it occurs, show your customers that you care. Focus your attention on your best customer, can give incentives to the customers who consider churning as it will be beneficial one and also helps to pool the resources of the company into a loyal customer. Understand why customers leave through the churned customers. And try to analyze deeply when the churn occurs in a customer with the company and try to resolve that with the help of the data of the ones who left. Showing your customers that you care is the most important tool to reduce customer churning rate. That is to reach out to your customers instead of waiting for them to connect or reach out to you. Show them that you care and for sure they like to stick around.