To say that customer churn is a problem for companies is obvious. We all know that losing customers is bad for business. Companies focused on growth need to combat customer churn and improve retention.
The best way to succeed is to understand what causes customer churn in the first place. In fact, combatting churn is the highest impact step a company can take on its journey to growth.
What is Customer Churn?
Let’s start by breaking down the fundamentals of churn because the question “what is customer churn,” isn’t as simple as it might appear at first blush.
There are two kinds of customer churn:
- Customer Churn – A customer terminates their relationship with you
- Revenue Retention – A customer adjusts their spending with you
Now, you might think these customer churn examples are the same, but they’re not. Customer churn is, effectively, binary. Someone who used to be a customer stops being a customer. They’re gone.
Revenue retention, on the other hand, is more nuanced. Revenue retention can take into account upsells (a customer spends more money with you), down sells (a customer sticks around but reduces their spend) and churn (the customer stops spending money – at least for the moment).
How To Use Customer Churn Analysis
Customer churn analysis helps companies dig into the reasons why customers leave. (Yes, it’s also important to understand why they upsell or down sell, but we’re focusing on churn for now.
The three biggest factors that lead customers to churn are:
- Product/Service Delivery
- Customer Experience
A customer may leave for any, or all, of these reasons. As companies evaluate behavior along a customer’s lifecycle with your company, clues emerge that can help establish where issues are arising and where the relationship is breaking down. Of course, companies need a customer churn dataset to populate any analysis.
The data that drives the churn analysis can be quantitative or qualitative. For example, knowing when a customer is engaged with a customer support or customer success team can provide a window into churn. If a customer interacts with a customer team and has a negative experience, then leaves, that’s a clue.
It’s important that companies be thoughtful about the kind of data they collect and how they use it so they can be strategic about customer churn predictions. When companies can predict the key inflection points that either build or break loyalty, they can start creating processes to combat those weak points and prevent churn from happening.
What Is Good Customer Churn?
You’ll want some benchmarks to determine whether your company has good customer churn. Churn rates vary by industry. Even inside industries, a benchmark can differ based on the size of the client, the length of engagement or the amount of money spent.
For example, in the Software-as-a-Service industry, the goal is an annual logo churn rate that’s 10% or less. However, the benchmark for revenue churn is north of 100%, as growing companies are expected to add revenue for each customer, on average, along their path to eventual exit.
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.
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.