What is customer churn?Link to this section
Customer churn is the proportion of users who have discontinued using your platform in a given time period.
It shows the percentage of users who have cancelled their subscriptions or downgraded to a free account, meaning they are no longer paying to use your service.
How to calculate customer churnLink to this section
To calculate churn, divide the number of customers you lost over a given time period by the total number of customers you started with.
Churn (%) = Lost customers / Starting customers X 100
Why is a customer churn analysis important?Link to this section
Customer churn is one of many financial metrics you should be tracking in your company. By reviewing how many users are dropping off your platform, you can see exactly what is happening with your user base over different time periods.
There is no single benchmark you should be aiming for when it comes to your company’s churn rate. The rate will differ depending on what industry you’re operating in and what business stage you’re at.
But, the lower the churn, the more you’re retaining your existing customer base.
Importantly, a customer churn analysis allows you to track changes to your user base over time. By regularly calculating your churn rate and comparing this rate month-on-month (or year-on-year) you can estimate future positions and work to maintain and improve your cash flow.
Churn should be used as a way to broadly assess your user base. In order to learn more about what’s causing churn within your company, you’ll need to look deeper into your financial and user metrics (such as the answers in users’ exit surveys or feedback from customers who have downgraded their plans).
Tips for reducing customer churnLink to this section
Increasing customer retention is critical for any business looking to achieve long-term success. Studies show that a 5% increase in customer retention can lead to more than a 25% increase in profits. So, what can you do to improve customer retention?
One key strategy is to communicate with customers at every stage of their journey. From the initial onboarding process to ongoing support, you should strive to make customers feel valued and heard. By doing so, customers are more likely to remain loyal and continue using your product or service.
Using the insights gained from analyzing customer churn, future customer experience can be improved upon. By identifying the reasons behind the churn, you can address these issues, and make appropriate changes to reduce churn and increase customer loyalty.
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