Customer retention is key to the success of most businesses. By focusing on establishing a strong and consistent customer base, you can maximize profitability and minimize the need to spend countless hours on acquiring new customers.
To evaluate whether lost customers are leading to lost revenue, it’s important to learn how to calculate your customer churn rate. This essential metric provides valuable information about how well you’re retaining existing customers. It can also help you identify when it’s time to make changes in your business.
How to determine customer churn rate
Your churn rate refers to the percentage of your customers that you’ve lost in a certain time frame. Your average churn rate for a month identifies how many customers you lost that month compared to how many customers you started the month with. The lower the churn rate, the better your customer retention is: High churn rates are cause for concern.
The simplest way to determine your churn rate is to divide the total number of customers you lost by the number of customers you started with. Decide on a time period to measure and focus only on the customers who left during that period. Divide that number by the total number of customers that you started that particular period with.
Multiply the resulting number by 100, and you’ll have your churn rate as a percentage.
For example, let’s say that you want to calculate your customer churn rate for the month of December. At the beginning of the month, you had 600 subscribers. By the end of the month, you only had 400 subscribers. To calculate your churn rate for the month using the above churn rate formula, you’ll follow these steps:
- Subtract 400 from 600 to determine your total number of churned customers, which is 200.
- Divide 200 by 600, which is the number of customers you started with during December. The result is 0.333333.
- Multiply 0.333333 by 100. The result is 33.3333, or roughly 33 percent — your churn rate percentage for the month.
This churn rate calculation method is basic, but it’s also easy to understand. You can use the formula for any time period, whether you’re looking at your monthly churn rate, your annual churn rate, or churn over another period of time.
Why you need to understand the causes of customer churn
Calculating your average customer churn is important, but it’s equally important to identify why that churn is occurring. Customer acquisition costs can be significant, and if those customers are only loyal for a short period of time, you’re losing out on profits. Churn can also reduce your customer lifetime value, meaning you make less from every customer you acquire, but still have to pay just as much to acquire them.
Customer churn can indicate issues with customer satisfaction. If you notice significant churn at certain times or an overall poor customer retention rate, it’s time to look for the causes of your customer attrition. Enhancing customer support, evaluating your product or service quality, and evaluating the overall customer experience are all good starting points.
But the best way to find out what’s going on is to turn to your customers directly to determine why they’re leaving.
How to create a customer churn survey
You may be able to gain valuable insights into what’s going wrong from the customers who have left your business. You can accomplish this by creating a customer churn survey.
Your customer churn survey should be a brief survey that gives your customers a chance to let you know what went wrong. You can ask for feedback about certain elements of your business and then leave your customers a field where they can enter their own text with details about their experience and their reason for leaving.
This kind of survey can offer your business many benefits. It can highlight issues that you may not have been aware of, giving you the chance to make improvements so problems don’t drive future customers away as well.
But the survey can also give you a chance to open up a dialogue with your previous customers. By including a field that lets the customer request that you contact them to discuss the issues they encountered, you create an opportunity to talk with them and make things right. In some instances, you may be able to win back those customers and demonstrate that you truly value their experience.
With Jotform, it’s easy to create a customer churn survey. You can use one of Jotform’s more than 10,000 form templates, such as a customer feedback survey template. Just customize the template to your needs and send it to customers who have cancelled subscriptions or otherwise left your business. You can collect survey responses using a Jotform Tables template, making it easy for your management and customer service teams to review and follow up on the responses.
Why you should monitor your churn carefully
By carefully monitoring your customer churn and following up with your previous customers, you can improve your business operations and boost your customer retention. The result will be higher profits and a more stable customer base, both of which are key factors in the success of your business.