HOW DO YOU CALCULATE CHURN RATE?

It’s important to know how to calculate customer churn rate in a company, but churn rate is only one small piece of a bigger picture when it comes to your company’s path to growth. 

  • You’ll likely want to consider both customer churn rate and employee churn rate, especially since they’re interrelated. 
  • You’ll also want to evaluate why you have churn. All departures are not created equal.
  • Finally, consider your reality and what is a good churn rate in your industry.

Let’s take a look at how you might tackle these three elements of churn.

Employee Churn Rate vs. Customer Churn Rate

Companies tend to evaluate employee churn rate as being distinct from customer churn rate. In fact, they go hand in hand. Have you ever gotten a truly exceptional customer experience from a disengaged, unhappy employee? Me neither. 

Employee experience can lead to either a vicious or virtuous cycle. 

Sometimes employees are disengaged because they’re not given a clear path to being successful in their jobs. When people aren’t shown what to do or why they’re doing it, it’s hard for them to care about customers. It’s incumbent upon companies to deliver a clear and consistent way for employees to successfully deliver a customer experience. When employees lack these essential tools, their negativity can leak onto customers and lead to more customer churn. 

Companies with a high customer churn rate can see even more demotivated employees, leading to more employee turnover. This is the classic vicious cycle.

Conversely, engaged employees are more inclined to deliver an excellent customer experience, which leads to retention and growth. And when employees deal with engaged customers, they become more motivated and inspired to stay at the company – a virtuous cycle.

Employee churn rate and customer churn rate are used to evaluate and analyze the impact of churn on companies.

Employee Churn Analytics vs. Customer Churn Analytics

Employee churn is often described in terms of turnover vs. attrition. Employee turnover is the voluntary or involuntary departure of an employee that the company intends to replace with another employee. Attrition, on the other hand, is a voluntary departure from a position the company doesn’t intend to refill. Sometimes companies retire a role when a person departs. 

The analog for customers is in the distinction between turnover and graduation. Turnover occurs when a customer leaves because they were dissatisfied with some aspect of their experience. The reasons can include:

  • Product
  • Price
  • Customer support
  • Departure of a key contact or champion within the customer’s company

In short, there are lots of reasons why customers turnover. 

Customer retirement or graduation occurs when a customer stops being a customer because you fulfilled their needs. Customers often purchase products and services to solve a problem. If your company helps them see that problem through to resolution, and the customer concludes their business with you, is that churn? No, it’s a different dynamic and should be evaluated through that lens. At Alignmint, we call that retirement or graduation.

Whether looking at employee churn or customer churn, you need to analyze more than the raw churn analytics. The numbers may not tell the whole story, and going a layer deeper to appreciate the reasons behind your churn rate has value. 

Analyzing your numbers is especially important because churn is, ultimately, a lagging indicator of company performance. In other words, if your company waits until you have a churn problem, you’ll already have a bunch of unhappy customers who have left. Not only does that kind of churn deliver a financial hit, but the non-financial costs of negative word of mouth from unhappy customers is also an expensive problem to solve. Your company is much better off understanding how to inspire customers to stay for the long-term before you have a churn problem to untangle.

What is Good Churn?

Whether you’re evaluating employee churn analytics or customer churn prediction, you’ll want to know whether your company’s churn rate is decent. There’s no simple answer for that. Sure, there are industry benchmarks, but what is good churn for you? The answer to that question is dependent on your unique business circumstances.

At Alignmint Growth Strategies, we’ve created a rich set of customer churn rate calculators to understand the business impact of customer churn. These walk through the impact of churn on your cost of customer acquisition, your ability to hit key revenue goals, and even be acquired or IPO. 

Get access to those calculators, and the white paper that walks you through them at The Churn Virus.

Design Your Company’s Path to Next-Level Growth with Alignmint Growth Strategies

Your company may have great product-market fit, a well-designed product, and sales/marketing teams that bring in new customers. But when those wins are met with a churn problem, it becomes impossible to grow and meet revenue targets. 

Successful churn reduction strategies align your company to boost customer lifetime value…aka retention.

At Alignmint Growth Strategies, we deploy churn reduction strategies so that you hit your revenue targets and maintain momentum. 

Your outcome? 

Customers spend more, stay longer, and refer like crazy. Employees feel connected to your vision and confident they can be successful in their work. And leaders focus on progress and growth.

Discover the churn rate reduction strategies that work best for your company by making an appointment with Alignmint Growth Strategies. Connect with us today.

1 thought on “HOW DO YOU CALCULATE CHURN RATE?”

Leave a Comment

Your email address will not be published.