Small Business Toolkit

Churn Rate Calculator

Churn Rate Calculator

Sometimes things don’t go as planned, and we lose customers or subscribers. Wouldn’t it be convenient if we could measure the rate at which we lose customers?

Well, that’s exactly what churn rate is for.

Calculate your Churn Rate

 

What is churn rate?

So, what is churn rate? Well, simply put, churn rate is the number of customers or subscribers you’ve lost from the beginning of a period to the end of a period.

Fairly self-explanatory, we know.

Contrary to popular belief, churn rate is a very important metric for businesses – not only for those using a subscription model but also those without, such as ecommerce businesses.

Churn rate is sometimes seen as more complicated to calculate for ecommerce businesses, as churn tends to focus on repeat customers. However, it can still be a useful metric when viewed alongside conversion rate and repeat purchase rate.

For subscription model businesses, the churn rate is an essential KPI telling you how useful customers are finding your subscription (helping you establish whether users only sign up for a month, for example, or whether a large number of users tend to abandon you shortly after a certain event or release).

This gives you the insight and opportunity to work on relations with customers during touch points prior to purchasing a subscription, during the purchasing process and after they’ve subscribed.

The business is therefore able to meet and exceed customer expectations during the customer’s relationship with them.

With potentially longer touch points, you don’t need to rely on the customer coming back, as the customer is already there – you simply need to keep them satisfied so that they don’t unsubscribe.

How to work out churn rate

Now you’ve got your the rundown on what churn rate is, we can start looking at how to work it out.

Churn rate doesn’t use a complex formula, but it is easier with a calculator.

The churn rate formula is quite simple:

Number of customers who churned in the given period / total number of customers at the start of that period.

Why is churn rate so important?

Customer retention is very closely related to business growth. If you’re retaining your customers, you’re growing your business.

One thing to always remember when you’re trying to grow your business or generate more revenue is that, in the long run, it’s a lot cheaper to retain current customers than to try to acquire new ones.

Let’s look at it this way: if you had no idea what your churn rate was, you’d have no idea of your business’s growth potential.

To summarise, churn rate is one metric that provides a meaningful understanding of whether your customers are happy or not – and how much potential your business has to grow.

How to reduce churn rate

Reducing your churn rate is all about reducing the number of customers cutting ties with you. The best way to do this is by increasing customer satisfaction.

Here are a few ways you can increase customer satisfaction:

Personalised email marketing

One way to increase customer satisfaction is to be personal. Sometimes, this can be difficult, but, if you’re sending emails to customers, adding a touch of empathy and useful content or information can go a long way.

A prime example of this is Amazon, who send emails to their users tailored to their exact needs.

They’ll recommend relevant and useful products that are on offer based on what you’re interested in.

Not only does this increase their customer satisfaction, but it also helps with repeat purchases.

Convenience

One thing users love is convenience – if you’re convenient enough, you can even become a one-stop shop.

Take Amazon again, for example – Amazon is convenient and is ever-growing in convenience, with its venture into home groceries.

If you can follow suit and cater to your customers’ needs, your customers will be significantly more satisfied – which will lead to a decrease in churn rate and your number of lost customers.

Transparency

When it comes to reducing customer churn, transparency can make a huge difference – particularly with ecommerce businesses as opposed to physical stores, due to the inherent greater risks that come with shopping online in terms of handing over payment details and anxiously awaiting home deliveries.

So, make sure you’re transparent with customers, letting them know exactly when their orders will arrive, keeping them up-to-date and being honest about delays to gain their trust.

If you walk through the process with customers who may have complications with their orders, it will increase their perception of your business.

This will lead to a loyal customer and, in turn, a reduced churn rate.

Exceed customer expectations

From the first moment of contact you have with a customer, you have the power to create an engaging and memorable experience.

Good etiquette and manners are a must, but what we sometimes have trouble interpreting is the customer’s expectations.

So, what do customers expect? Here are a few things that all customers consider bare essentials:

 

How do we go beyond these expectations and over-deliver for our customers? To do this, we first need to look at our touch points.

A touch point is simply a key moment between the customer and our business from the first interaction. This can take place at any point from pre-purchase to post-purchase.

Once you’ve got your touch points mapped out, you can look at focusing on increasing expectations. Try and focus on a single touch point.

If you try to exceed expectations on as many touch points as possible, you may find yourself spending more time and money than you have to spare.

Focus on one aspect that is or isn’t working and make it pristine.

A great example of this is Laura Ashley, who focus on exceeding customer expectations during the post-purchase touch point.

When you purchase bedding from them, two days before your bedding arrives, you receive a thank you letter and a pair of cosy socks.

Conclusion

Remember: the churn rate is the rate at which customers are cutting ties with your business. To keep your churn rate low, you need to keep your customers happy.
Whether you’re an ecommerce retailer or a subscription-based business, it’s vital to look at your churn rate.