Customer churn explained + 9 ways to reduce churn in 2022
Posted: Wed Dec 04, 2024 5:01 am
If you run a SaaS business, you probably have nightmares about high customer churn .
HOWEVER, this problem is not just a problem for those with a subscription business model, understanding how to reduce customer churn should be a priority for ALL business owners.
Why? Because reducing monthly loss will have a huge impact on your revenue and overall business valuation.
cohort-performance-churn
When your monthly loss is +3%, your income will go from $0 to $140,000 in three years.
But if the loss is -3%, your income will be $450,000 after three years.
In other words: reducing your monthly loss by 6% will lead to a staggering 221,429% increase in revenue.
Also keep in mind the maxim that attracting new customers is afghanistan telemarketing data five times more expensive than retaining an existing one.
cost-of-customer-churn
Read more to find out what you need to know about loss rates and how, by understanding them better, you can directly :
Lose fewer customers
Less loss of income
More recurring purchases
Less work for the sales team
Lower customer acquisition costs
Higher customer lifetime value
Topics covered:
Loss of customers in general
What is loss of income?
How to identify losses in your business?
A simple guide to analyzing loss
9 Ways to Reduce Loss in 2022
1. Loss of customers in general
Customer loss = customer attrition = churn rate = customer turnover = customer desertion = customer churn
Call it what you want. In simple terms, it means you lose customers (or subscribers if you are a SaaS company)
Churn is expressed as the percentage of customers who stopped using your services or products within a given period. The period can range from daily, weekly, monthly, quarterly to yearly, but most companies calculate it on a monthly, quarterly, and yearly basis.)
Here's a simple way to calculate your monthly loss .
Take the total number of customers who left you that month
Divide it by the total number of clients at the beginning of the month
Multiply by 100 (to get the %)
Voila! You have your monthly loss rate. The closer you are to 0%, the better you are doing.
churn-rate-formula
If you need the weekly rate, just use the weekly figures. Simple.
Keep in mind that churn rates vary widely by industry. You need to know your market, customer segments, and customer journey to effectively reduce churn.
2. What is loss of income?
By calculating your customer churn rate, you will find out if you are retaining customers well. Revenue churn gives you an idea of whether you are retaining your revenue well over a certain period of time.
customer-vs-revenue-churn
Revenue loss can be used to analyze how the loss affects your total revenue.
Most commonly, revenue means Monthly Recurring Revenue (MRR) which translates to the revenue your business is expected to receive in 30 days.
HOWEVER, this problem is not just a problem for those with a subscription business model, understanding how to reduce customer churn should be a priority for ALL business owners.
Why? Because reducing monthly loss will have a huge impact on your revenue and overall business valuation.
cohort-performance-churn
When your monthly loss is +3%, your income will go from $0 to $140,000 in three years.
But if the loss is -3%, your income will be $450,000 after three years.
In other words: reducing your monthly loss by 6% will lead to a staggering 221,429% increase in revenue.
Also keep in mind the maxim that attracting new customers is afghanistan telemarketing data five times more expensive than retaining an existing one.
cost-of-customer-churn
Read more to find out what you need to know about loss rates and how, by understanding them better, you can directly :
Lose fewer customers
Less loss of income
More recurring purchases
Less work for the sales team
Lower customer acquisition costs
Higher customer lifetime value
Topics covered:
Loss of customers in general
What is loss of income?
How to identify losses in your business?
A simple guide to analyzing loss
9 Ways to Reduce Loss in 2022
1. Loss of customers in general
Customer loss = customer attrition = churn rate = customer turnover = customer desertion = customer churn
Call it what you want. In simple terms, it means you lose customers (or subscribers if you are a SaaS company)
Churn is expressed as the percentage of customers who stopped using your services or products within a given period. The period can range from daily, weekly, monthly, quarterly to yearly, but most companies calculate it on a monthly, quarterly, and yearly basis.)
Here's a simple way to calculate your monthly loss .
Take the total number of customers who left you that month
Divide it by the total number of clients at the beginning of the month
Multiply by 100 (to get the %)
Voila! You have your monthly loss rate. The closer you are to 0%, the better you are doing.
churn-rate-formula
If you need the weekly rate, just use the weekly figures. Simple.
Keep in mind that churn rates vary widely by industry. You need to know your market, customer segments, and customer journey to effectively reduce churn.
2. What is loss of income?
By calculating your customer churn rate, you will find out if you are retaining customers well. Revenue churn gives you an idea of whether you are retaining your revenue well over a certain period of time.
customer-vs-revenue-churn
Revenue loss can be used to analyze how the loss affects your total revenue.
Most commonly, revenue means Monthly Recurring Revenue (MRR) which translates to the revenue your business is expected to receive in 30 days.