Every business wants to retain its customers, but there are many reasons customers churn, from poor customer service experiences, to a desire to take advantage of a competitor’s lower prices or better features, to no longer having a use for a product or service, and more. You may not be attracting your ideal customers to begin with, meaning your business may not be the ideal fit for some of your existing customers. Once you identify your target customers, get to know your audience, and find ways to attract your ideal customers (such as by harnessing behavioral data and leveraging analytics solutions like Google Analytics), you want to keep as many of them as possible.
The key to lowering customer churn is to measure it, find out why your customers are leaving, and then take action to entice them to stay. But how do you calculate customer churn, and what steps can you take to lower customer churn if your churn rate is too high? To learn more about what you can do to monitor your churn rates and foster customer satisfaction and loyalty, we reached out to a panel of marketing and customer service professionals and asked them to answer this question:
“What is your top tip for companies struggling to calculate and lower customer churn?”
Meet Our Panel of Marketing & Customer Service Pros:
Keep reading to learn what our panel had to say about the best ways to calculate customer churn and their top tips for reducing customer churn.
Paul Sherman is the Chief Marketing Officer at Olive.
“Offer customers incentives for staying loyal to your company. Sometimes, customers on their way out can be convinced to stay. It just takes giving the customer a good enough reason to do so. The idea is to give customers something special in return for their ongoing loyalty. For example, this might include offering a discount, a complementary product, or staggered loyalty rewards that compound the longer they spend with your company. These small additions don’t cost you much, but they can be incredibly effective in retaining customers and preventing churn.
The main consideration is simply ensuring that customers understand just how much you value their business.
One consideration while offering incentives is to consider where the customer is in their journey with your company. For example, if they’re nearing the end of their contract, you might choose to offer a discount on their next two months of service if they renew. Different customers will be persuaded by different incentives, so be sure to consider context above all. While this slightly lowers profits in the short run, it reduces customer churn by a significant margin.”
Jason McMahon is a Digital Strategist at Bambrick.
“The most important strategy for reducing churn is to provide a valuable service and a high-quality customer experience. Before getting caught up in the numbers, keep in mind that your product or service is being used by a real person, and keeping them happy, engaged, and interested is a top priority. Providing a high-quality product or service, as well as guaranteeing a user-friendly experience and responding to client feedback, are all excellent strategies to increase customer retention and, as a result, lower your churn rate. When assessing data and coming up with solutions, keep this in mind.”
Alexey is the director at BAM Studio. They provide web development services to clients in Australia and around the world for over a decade. Having both feet in the process of development and accounts management he can relate to the importance of customer retention.
“Over the years, I’ve come across clients which only require a phone call every other week to clients that are purely price driven in order to keep the revenue flowing. The one major problem with customer retention, especially when it comes to retainers, is the level of creativity on the agency’s side of things. For example, if the client goes a little stale with latest marketing initiative or even just artwork, I will rotate team members for creative. In order to beat customer churn, we continue to excite them with new and innovative approaches. Equally, we must make sure that our team members are excited as well while working on the client’s profile and demonstrate a good fit with the client’s industry.”
James Crawford is the Co-Founder of DealDrop.
“For a small business, calculating the churn rate can be relatively straight forward. Simply divide the number of customers you have lost by the number you had at the start of the month to find your monthly customer churn rate. Aim for somewhere below 5% to begin with. If it’s over 10%, you need to look at ways of reducing your customer churn rate.
Target the right audience. Do some research to find out exactly who your primary customers are, then base your targeting campaigns towards that demographic. Make full use of social media to ensure that you can reach your target audience.”
Benjamin Rose is the Co-founder of Trainer Academy.
“Offset churn with user acquisition. Customer acquisition is not a direct solution to reducing churn, but it can be a temporary fix while you try to figure out what’s causing your high churn rate. If you need to buy yourself some time while you figure out what’s causing your high churn rate, user acquisition can assist. Because customer acquisition is more costly than customer retention, it is preferable to address the problem directly whenever possible. Always keep in mind that acquiring new clients is expensive, and your best value comes from consumers that stay with you for a long time and spend a lot of money.”
Tanner Arnold is the President & CEO of Revelation Machinery.
“Listen carefully to what your customers tell you. Some business owners believe that no one knows their business better than them, but they are mistaken; their customers do. One of the most effective strategies to detect people who may be on the verge of abandoning a ship is to pay close attention to customer feedback. If a customer threatens to cancel their account because your service is too costly, they may be implying that they haven’t had enough time to properly study the product, leading to a misunderstanding of its genuine value. On the other hand, it’s possible that you’re overcharging.
Try to pay attention to what your consumers are saying, no matter what they say. Consider how salespeople deal with objections from prospects: many people raise ‘smokescreen’ objections that may or may not be legitimate concerns simply because they don’t like being ‘sold to.’ Be prepared to make your customers’ lives easier with real solutions based on what they’re actually saying, not what you think they’re saying.”
Jonathan is the Chief Marketing Officer of GoReminders, a scheduling & communications platform that helps businesses increase revenue and cut wasted time by eliminating no-show appointments.
“My top tip for companies struggling to lower customer churn is to talk with customers who cancel or stop doing business with you. The most important thing to figure out is why they are canceling. You don’t have to actually ‘talk’ to the person – just find ways to get the cancellation reason from customers who churn, whether that’s through an automated survey, live chat, phone call, or any other means. Do it during the cancellation process; otherwise, it will be next to impossible to get a response from the customer after they churn.
Getting the cancellation reason will help you in two crucial ways. First, you’ll have the opportunity to solve the problem that’s causing them to churn and potentially keep them as a customer, thus immediately lowering churn. This is only applicable if the customer is churning for a reason you can address. For instance, a customer who wants a specific feature that they think you don’t have, but you actually have that feature and they just weren’t aware of it. Second, you can get valuable product insights from churning customers.
For example, if you notice a trend of customers churning because they want a particular feature you don’t have, that could be an indicator that it’s worth building that feature. In this situation, you probably can’t prevent the customer from churning in the moment, but you’ll lower churn by using cancellation data to shape your roadmap, preventing other customers from churning in the future.”
Elizabeth Hicks is the Co-Founder of Parenting Nerd.
“There is no better way to retain customers and lower customer churn than to engage with them and educate them. Research has shown that engaging with customers and educating them about how using your products and services would benefit them is a successful way to make them come back again. Use social media, company websites, and email marketing to engage with them and provide them with the required knowledge about the value of your products and services. Tutorials, how-to guides, and product demos are other great ways to educate your customers.”
Lucas Travis is the CEO and founder of Inboard Skate. He has years of experience in the recruitment and tech industry, building multiple businesses along the way before finally deciding to pursue his passion for skateboards and electric scooters.
“Actively engage your customers with your products. Always give your customers a reason to come back. This is the key in retaining and growing a business. Your business might survive the first few months with new customers coming in, but if they aren’t satisfied with the experience, then they won’t have a reason to come back. Returning customers should be one of the goals of every business. Apart from quality service and products, create content that will interest your customers more. Find all channels they are using and engage with them on those platforms too. Make them feel that you need them and that they need you as well.”
Keeon Yazdani is the Chief Marketing Officer at Elevate Delta 8. He is a digital marketer from Southern California. When he isn’t busy running marketing campaigns, he enjoys training Muay Thai, Jiu Jitsu, and surfing the sunny beaches of Southern California.
“A great way for e-commerce businesses to lower customer churn is by creating a customer win back flow in their CRM. We started using this email flow in our CRM, Klaviyo. We’ve been able to win back 30% of our customers by using this email flow. Klaviyo is able to automatically calculate which customers haven’t made a purchase in the last 60 days, and the win back email flow is sent to customers on our mailing list who fall into this category.
The win back email flow consists of 4 emails. The first email offers the customer 10% off their order. The subject line of the email reads, ‘10% Off Our Entire Store…(Exclusive Coupon Inside).’ The second email is sent 24 hours after the first email and is a reminder of the 10% discount we are offering. We build urgency by including this statement in the subject line: ‘Last Day to Save 10%… Sale End in 24 Hours.’ The third email is sent 8 days after the second email and offers 15% off our entire store for 48 hours. The last email is sent 2 days after the third email, and this email promotes a 15% off sale on our website that ends at midnight. “
Chris Bolz is a serial founder and entrepreneur at heart with two decades of professional experience in the tech field. He and his team are currently working on several projects, including a business incubator, Coara, where they build MVP products for startups who are looking for outsourcing solutions.
“Tracking customer churn gives a company an understanding of when they are going against the wishes of their audience. Keeping an eye on our CCR helps companies uncover any patterns that could be affecting customer satisfaction. This is important to track as the business generates revenue from customers that are on a recurring payment plan. By grasping the CCR trends, they can link these changes to different initiatives within the company that had an impact on customer satisfaction. From understanding what has led to these changes and having an agile approach, they can adjust their efforts to improve customer satisfaction (e.g., if the CCR goes up, they can analyze and identify the issue while doubling down on efforts to ensure that their customers get the best customer experience that they can have).”
Joshua Feinberg is CEO of SP Home Run and a digital transformation go-to-market content strategist for mid-market and enterprise IaaS, SaaS, and FinTech. Since 2002, he’s been building full-funnel inbound sales and marketing programs. He helps companies get found by the right people, in the right places, at the right time, and in the right context – and uncover new revenue growth opportunities.
“Every kind of business will have a different way of calculating and lowering customer churn. For a SaaS business, make sure that your product roadmap and resulting R&D, marketing, sales, and customer success investments all focus on solving your customer’s most important goal or biggest challenge.
The Jobs theory (commonly referred to as Job to Be Done), developed by the late Clayton Christensen of Harvard Business School, is an excellent framework for understanding the job that your SaaS product is hired to do. As a result, the competitive alternatives are summarily fired.
Once you know the actual job that customers hire your SaaS product to do, build in instrumentation within your platform so you can measure various degrees of utilization and goal attainment. SaaS companies scaling around product-led growth (PLG) – such as Slack, Zoom, Dropbox, and HubSpot – all have ways to know (a) how customers utilize their software and (b) when a customer crosses a product utilization threshold that nearly guarantees long-term retention and nearly eliminates churn risk.
Once a SaaS company has adopted a focus on solving customer problems, prioritized the underlying true Job to Be Done, and developed internal gauges within the platform to measure product utilization to progress towards goal attainment, you can then define what initial value, intended value, and extended value look like.
Product teams, customer success teams, and customer marketing teams can all focus resources on driving good-fit customers towards goal attainment (that minimizes churn). In the Inbound Methodology, this intended state is known as the Delight phase. This mindset around customer Delight is critical to keep the growth flywheel spinning in a world where so much of the buyer’s journey depends on reviews and social proof.
Then marketing and sales teams can focus their entire go-to-market strategy on attracting and engaging good-fit customers with the highest likelihood of becoming long-term delighted customers that graduate into delighted promoters and evangelists. This focus also helps to inform strategy around buyer personas, ideal client profiles, and buyer’s journey mappings.”
Chris Gadek is an early-stage startup Growth & Marketing leader at AdQuick with a strong focus on ROI and efficient tracking of marketing programs and growth experiments. For the last 10 years, Chris has focused on helping build and grow B2B software companies – operating at the intersection of product, engineering, sales, operations, and finance teams.
“My top tip for companies struggling to lower their customer churn is to invest in a customer success team. Customer success is a vital part of any organization and helps ensure the success of your customers once they are onboarded. This team focuses on building relationships with customers and ensuring they have a fantastic customer journey. If you don’t have a customer success team in place and you are seeing high customer churn, it might be because your clients are not getting the value out of the product you are providing. Having a dedicated team to make sure that customers are getting the value out of the product is essential for your business’s growth.”
Jonathan Zacharias is the Founder of GR0, a focused, dedicated and committed digital marketing agency that will GR0 your brand online. He has over a decade of experience working in organic SEO, and his agency was named Fastest Growing Company of the Year by the American Business Awards.
“Excellent customer experience creates customer loyalty and reduces churn. Customer service must be reliable above all else. Customers want to feel recognized and connected enough that they trust you with their business and, more importantly, trust your business enough to continue working with you. Customers need to be able to rely on timely and informative service that is delivered with great care. In addition, I’ve found that transparency is key. The more transparent you can be with your business operations, especially with a potential client, the more likely it is that expectations can be managed effectively.”
Robin Waite is the founder of Fearless Business, Speaker, Podcast Host, and bestselling author of five books including Online Business Startup, Take Your Shot and Marketing Machine. For 12 years, Robin ran a successful marketing agency, serving over 250 clients between 2004 and 2016 and then pivoting to business coaching after selling the agency in 2016/17.
“My top tip is to lay down expectations for the customer in advance. Too many companies assume their prospective clients know exactly what to expect, what results they’re going to get, and when those results are going to happen. Unfortunately, a lot of the time their intuition isn’t 100% spot on.
We’ve found that when companies communicate customer expectations in advance, their upfront conversion rates drop slightly; however, their churn rate drops dramatically. An educated client is a much better client! They stick to the course, follow instructions, and don’t complain when things don’t go to plan because they trust in the process.
Also, when you make a product/service too easy for people to leave…then they invariably will. One of the best ways to communicate customer expectations is via a contract. It doesn’t have to be overly complicated, but it should detail what’s expected of both the client and service provider, which allows both parties to be collectively accountable in getting the desired outcome or result for the client.
We forget habits over the course of 90 days…which means we also need to periodically remind clients of that contract and reset expectations. That’s where the magic happens: during that conversation, where a client can let you know what they’re happy about or maybe not so happy about, and you can address their needs personally. Give them a virtual hug.”
Jon Torres is the founder and digital marketing consultant of Jon Torres and Brand Lovely.
“Take total customers at the start of a period, like a month, minus remaining customers at the end of the period. Divide the difference by the number of customers at the beginning of that period and multiply the answer by 100 to get a percentage. An attrition rate of over 10% is generally considered high. A monthly or quarterly period will help you act sooner to improve customer retention instead of waiting half a year or a full year.
Next, ask the customers why they’re leaving. This is especially easy if you offer services online. When someone clicks on the unsubscribe button or explicitly declares that they wish to leave, take them to a short, friendly survey. Provide open-ended questions and an answer box where customers can express their concerns in their own words. If you can afford it, invest in an AI solution that analyzes the complaints, suggestions, and concerns you receive via chatbots.”
Ravi Parikh is the CEO of RoverPass Campground Reservation Software.
“Calculating customer churn is relatively straightforward. Let’s say you’re looking at customer churn for a business quarter. You would take the number of customers you had at the beginning of the month and subtract from it the number of those customers left at the end of the month. Then you would divide that number by the number you had at the beginning of the month. New customers are not counted since you’re essentially measuring customer retention, not customer growth. (If you’re not keeping running tabs of how many customers you have, that’s obviously the first step.)
As far as reducing customer churn, companies will usually see results if they invest more in their customer service and benefits or perks for existing customers. Customer churn happens when customers no longer feel valued or as if a company’s services are worth their money. Stellar customer service and special discounts can help convince them otherwise.”
Jerry Han is the Chief Marketing Officer at PrizeRebel.
“In order to calculate the customer churn rate, a business should simply identify the number of customers lost within a specific period and divide that by the initial number of customers they had at the start of that time frame. This can be done on a quarterly or annual basis.
Tips to improve customer churn:
- Identify the reason why churn occurs. While this isn’t always easy to do, it is essential to help you improve your churn rate. Analyze your business strategy or any changes that have occurred during that period and what the possible reason you’re losing customers could be.
- Reach out to your customers. Sometimes, talking to your customers is the best way to understand what the problem is. This can be as simple as getting them on the phone if you have their contact info, using live chat, or even via email.
- Give them a reason to come back. When you offer useful content on how your products or services can be used or other useful information they need, consumers will constantly feel the need to keep coming back.
- Offer incentives. One way to reach out to lost customers or lure them back is to offer incentives such as a gift, discount code, free delivery, or even loyalty programs for returning customers.”
Daivat Dholakia is the Director of Operations at Force by Mojio. Force by Mojio provides the best in class GPS fleet tracking for small businesses.
“Companies that are struggling to measure their customer churn need to start out by taking an inventory of their current customers. For a B2B SaaS company like ours, that’s fairly easy. We simply look at the number of businesses that have active subscriptions with us. You then measure how that particular customer base changes over a period of time. For example, if we had 5,000 subscriptions at the beginning of the month and by the end of it we only had 4,900, our churn rate would be 100 divided by 5000 or 2%.
Lowering your customer churn comes down to staying engaged with customers throughout their journeys, ensuring they understand the benefits of your product, identifying the signs of an at-risk customer, and giving incentives. I would say the #1 reason most businesses lose customers is that they don’t understand how a product benefits them. Due to this, it’s important that you educate your customers constantly about new features and ensure they’re using the product correctly. Customer churn is also lower for companies that know their ideal clientele and market the product within that niche. Make sure you’re attracting the right people to begin with, and you won’t lose so many later on.”
Amy Troutman is the Head of Business Operations at Resourceful Compliance.
“If you’re losing customers, you need to pinpoint the reason why. Customers are like air in your dinghy; you need to keep them to stay afloat, and that means finding the hole to plug.
There are a few good ways to monitor a customer’s journey, such as Google Analytics 4, but how did that customer get to your site in the first place? When trying to find out what is happening, follow it right back from the beginning. Did they follow a particular marketing link? Was what they were expecting from that not what they found? You have to keep flow in a customer’s journey.
Here are some common reasons businesses usually lose customers:
- Mobile compatibility. Check your website on multiple devices. Unclickable links and off screen text are a surefire way to lose customers.
- Poor product descriptions. Make sure that they know the details of what they are buying, such as parts included, stock availability, and average delivery times, right at the beginning of their potential purchase.
- Customer loyalty. Making deals to bring in new customers is a great idea, unless it drives out existing customers. Make sure to highlight recurring customer reward benefits. Don’t slap a big ‘New Customers’ deal on the top of your site. Your loyalty to your customer is directly related to their loyalty to you.”
Will Ward is the CEO of Translation Equipment HQ and Entrepreneur. He deals directly with marketing for companies.
“Losing customers? Here’s how to track them and how to keep them.
- Universal Analytics is dead. Long live Google Analytics 4. It’s an event based Analytics software that can also draw in data from your current universal analytics software. With this you have a wider frame of reference for where you are losing customers. You can now pinpoint the problem and remove it.
- Continue the funnel. So you’ve brought someone to your page through an email link or marketing backlink, but is that where they want to be? What exactly did they respond to? Always give a link to a relevant part of the site and not just the main webpage. Sure, you should have a link to the main site too, but don’t let them slip out the rabbit hole lost in Wonderland when you had them at the table for tea. Keep links specific to where they want to be.
- Keep it clear and simple. Hesitation loses customers. If you make them pause, that’s the likelihood of a sale slipping with every moment. Keep directions on your website clear and functions like payment quick and easy.
- Offer surprise deals. We had a feature that gave random offers. We are currently working on bringing it back with modified features. People really like to know that the longer they stick around, the more likely they will have a deal pop up relevant to what they want. The more time you keep them on your website, the more likely they are to buy.”
Daniel Roberts is the CoFounder of ThinkImpact, a business and education company that helps small businesses scale and retain their customers through email marketing.
“Did you know companies lose $1.6 trillion a year due to customer churn? The process of acquiring new customers is insanely expensive and time consuming, whereas retaining your existing customers is far more profitable.
My number one tip to reduce customer churn is to engage more effectively with email marketing, but not just any old email marketing. If you send nothing but promotions, ‘update newsletters,’ or send few and far between, you’re not taking advantage of the full power of email.
Speak to your customers as though they were your close friends. Make them feel special, not just one of the crowd. Don’t distance yourself with fancy headers and templates.
Be vulnerable; tell real stories. Surprise them. Give them value, a reason to open your emails. Develop a real connection and open the door for a two way conversation.
Far too many businesses take the standoffish, professional approach but forget they are dealing with individual, real people. When you treat your customers the right way, they’ll thank you by becoming your true fans.”
Vincent D’Eletto is the Founder and CEO of WordAgents, an SEO company that provides revenue-boosting content for companies that range from J.D. Power to Alpha Investors.
“Considering that acquiring new customers costs five times more than retaining customers, it’s in any marketer’s best interest to cut down on churn. A strong content strategy is key to building brand loyalty that makes businesses resistant to churn.
You can fortify your relationship with customers through a robust and regular content strategy. Make sure they know exactly how and when to best use your product or services with educational content. Show them the values behind your business with informational content. And keep them connected to new developments in your industry with newsletters, regular emails, and social media posts.”
Amber Kong works with CreditDonkey. She is a small business expert encouraging entrepreneurs and offering advice on the best way to get started with their business.
“Pay attention to complaints. Most businesses think they know their business best, but it’s actually their customers who do. If you listen to what your customers have to say, you can tell which customers are close to leaving. By understanding their complaints, you can figure out what about your service makes them dissatisfied and prone to churning. Customers whose complaints are heard and acted upon become more loyal and stay with your business longer.”
Petra Odak is a Chief Marketing Officer at Better Proposals, a simple yet incredibly powerful proposal software tool that helps you send high-converting, web-based business proposals in minutes. She’s a solution-oriented marketing enthusiast with more than 5 years of experience in various fields of marketing and project management.
“Churn can happen for many reasons, but a lot of times, customers sign up for one reason and they stop using your product once they no longer have use for it. For example, someone would sign up with us to send one proposal or two and suddenly stop. The best way to prevent this is to constantly educate your customers on the best ways to make the most out of your product. Email sequences, help center articles, blog posts, guides, videos – these are all great ways to show your customers how they can get the most use out of their subscription. If you expect them to discover new features and possibilities on their own, don’t be surprised to see a high churn rate.”
Jon Buchan is the CEO of Charm Offensive.
“Get proactive with communication. It’s important to understand that the customers are getting highly receptive. This means that they appreciate when brands put an effort to connect with them. When you reach your customers before they need you, you’re instilling them with a sense that you genuinely want to help them. Plus, it helps you evolve as a business that cares. This builds trust and loyalty, which eventually lowers churn rate.
Calculate churn rate as a probability. Every day that a particular customer keeps their subscription is another day they didn’t churn. For instance, if an individual is your customer for 8 days and churns on the 8th day, this means he/she churned on 1/8 days that they could have churned. You can combine this probability for all your customers and get a more accurate measure of churn rate.”
Paige Arnof-Fenn is the founder and CEO of global marketing and branding firm Mavens and Moguls based in Cambridge, MA. Her clients include Microsoft, Virgin, The New York Times Company, Colgate, and venture-backed startups as well as non-profit organizations. She graduated from Stanford University and Harvard Business School. Paige sits on several Boards and is a popular speaker and columnist who has written for Entrepreneur and Forbes.
“Churn is a way to measure attrition, or the number of customers who leave a product/service over a given period of time, and it is important to understand for the health, loyalty, and stickiness of a business. It sounds simple but can be tricky to calculate because how you define the customer, the time period, and the moment of churn affects the result. Is it only customers who arrive and leave in the same period, or do you include customers from before who are leaving now too? Is churn defined as the moment they cancel/return or when they stop renewing a subscription? Are you counting total customers at the beginning or end of the period? Looking at churn by segment or time frame may tell very different stories.
For simplicity, I recommend dividing the total number of churned customers over the period by the number of customers you had on the first day of the period. It is quick and easy to do and understand and works well, especially when you have stable growth. If you have high growth, though, it can be deceiving, so it may require further investigation. Once you understand the logic, you can do deeper analysis as needed.
For my business, I try to replicate my best clients, reduce churn, and learn what makes them happy. Knowing the value of repeat business helps you fine tune your marketing strategy and determine how much you should invest in customer retention and acquisition. It is critical to know what to keep doing and also what to stop doing to manage your budget most effectively and keep you on track. It is impossible to time your outreach so that you are in front of customers/clients exactly when they need your help, so I just try to stay in regular communication with them so that when they have a problem I can help them solve, they will think of me first. We are all in the relationship business, after all. Wasn’t it Woody Allen who said, ‘80% of success is just showing up’? It is a strategy that has worked for me.”
One of the best ways to reduce customer churn is to keep your existing customers engaged and informed. Encourage them to follow your brand on social media with ShareThis’ easy-to-install social media follow buttons. With a single click, your visitors can follow you on all their favorite social media networks to stay informed about new features, new product releases, upcoming webinars, and everything else you share with your social media followers to keep them engaged and foster brand recognition and customer loyalty. Not only are they easy to install in just minutes, but they’re also totally free to use!