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Churn rate is an essential metric for any business. Churn indicates how much your company has lost customers or revenue. To reach this rate, the calculation is very simple. Divide the number of lost customers by the number of existing customers. Thus, we arrive at the churn rate. Very easy: if you have 50 customers and lost 5, your churn rate is 10%.
It is interesting that any company knows that it must retain its customers as much as possible. But in the day-to-day service and delivery of services and products, many companies end up getting lost in their day-to-day activities and, without knowing it, forgetting some fundamental points for customer retention.
In this article, we will delve a little deeper into churn rate, understand its importance and learn how to reduce this rate. Check out!
Well then: what is Churn Rate?
The term churn means to shake, move, beat. Roughly speaking, then, churn indicates movement (in this case, in your customers). When we bring it to the business world, churn rate means customer cancellation rate.
The cancellation rate is essential in several segments. We can mention, for example, telephone and landline operators, where turnover is very high. Evaluating the churn rate is very important for the business.
One of the ways to analyze customer-related metrics, such as lifetime value and churn, is to have software CRM (Customer Relationship Management) – Customer Relationship Management in your company.
Why is it important to measure Churn?
Customer abandonment can be caused by several factors. Measuring churn is important as it helps you understand where the bottlenecks are in customer service, service, product, etc. Understanding why customers are leaving helps to improve processes and the business itself.
Assessing churn helps increase lifetime value within your company and even increase the average ticket. It also helps to plan marketing actions and adjust products and services.
What churn rate should I aim for?
Each business may have its own acceptable churn rate. But the good answer to the question above is: the lowest rate you can get. There are some churn benchmarks, such as SaaS, for example, which are between 5 to 7% per year.
There are some segments that set a target rate of 5%, but it is important to understand that the best churn is the one that is below the previous year. Therefore, seeking to lower the rate every year can be a specific goal of a customer success department, for example.
Difference between Churn and MRR Churn
MRR Churn is revenue churn. Churn evaluates the number of customers who canceled a product or service, while MRR Churn evaluates how much revenue was lost.
So, you can have a very low churn rate, but a very high MRR Churn, and vice versa. It is therefore important to evaluate both rates, as MRR Churn, for example, may indicate that a type of service or product is being canceled more or less frequently.
This also has a direct impact on the business. If you are losing few customers but a lot of revenue, you should review the way you work with your services (or sell certain products).
How to reduce Churn using inbound marketing
Have you ever heard of the inverted marketing funnel? Well… it has a direct relationship with churn. Let's think about the following. A Purchase Journey it is not a Sales Journey. This is enough to know that the focus is on the customer and it would be no different in inbound marketing.
If inbound marketing is already an attraction strategy through content, which means that adherence to your product or service is greater than an impulse purchase through traditional advertising, the application of the inverted funnel means that this customer is even closer to you.
Research shows that 70% purchasing experiences are based on how the customer feels about how they are treated. And that's why inbound marketing makes perfect sense, as it's based on the customer's pain (or problem) and its solution.
The traditional inbound funnel (i.e., the top part) is made up of the following steps: attraction, conversion, closing and engagement. When we apply the inverted funnel, we have retention, enchantment, recommendation and new customers entering the funnel. And when we talk about retention and delight, we are talking about reducing churn. After all, a satisfied customer who recommends your company will not stop buying your services and products.
Conclusion
A happy customer is a satisfied customer. Therefore, it is essential to understand what is going on in the customer's mind, not only to attract the purchase, but also to ensure that they are loyal and remain.
Understanding what makes customers leave is an essential factor in business success.
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Marcel Castilho is a specialist in digital marketing, neuromarketing, neuroscience, mindfulness and positive psychology. In addition to being an advertiser, he also has a Master's degree in Neurolinguistic Programming. He is the founder and owner of Vero Comunicação and also the digital agency Vero Contents.
