customer churn rate

What is Customer Churn rate and How to Calculate it?

By Mayank Puri
9 minutes

A business may end up eating your mind on why customers left and who is responsible for crushing business Revenue. Losing customers can be irksome. And no one likes the Business revenue fall. Wherefore, the Customer Churn Rate method is unprecedented. It might be intimidating but the most important metric for business handling. 

Have you asked yourself why 20% of new clients deal just for one month and move to your competitors? 

Why does everybody deal with your products just for 3 months only? 

It’s just the beginning of questions as there are several businesses asking from themselves. But the reality is they are always clueless and carry on with what they have. This is why today every diverse type of industry needs to know Churn Rate. A top-most analysis to unpack information of how many customers you retained. In this blog, we are going to help you by explaining “what is Customer Churn Rate” and how to calculate it. Just stick to this blog-

What is Churn Rate?

This metric means the percentage of customers who stopped using the products and services you are providing during a certain time frame. To know how many customers you retain and to improve customer satisfaction, dive into the customer churn rate metric. Most significant and rich metric! 

customer churn rate

Suppose two months ago you got 200 customers and currently few of them have left. You don’t have reasons why they are dealing with other businesses. But you want to calculate how much you retain. This metric “Customer Churn” is awesome for this task. Everyone wants to know why the customer canceled the subscription from your products/service. It is indispensable for the business team to know who canceled and for what reason. 

“Customer rate churn is also known as Rate of attrition”

Why does Customer churn rate matter?

Generally, SaaS Marketing Businesses apply for this analysis. But research says all sectors who are looking to scale in the market must endeavor for it. No customer means No revenue. Like how you curate the strategy to welcome those customers to enter in your business, the same strategy you should make to retain them for lifelong. 

Churn rate aids to gauge all details and will uncover them in front of you. Start with splendid strategies such as Rating of Products, Short surveys, and the list goes on. 

“Customer stay longer means Rate of attrition will decrease” 

How to Measure it? What is the Churn Rate formula?

Might be a scary metric but it can help you to improve your business and will let you reach your goal. So, the question here arises: what is the churn rate formula? 

The Lost Customers should be Divided by the Number of Customers at the start of the Time period. And it should be multiple with 100. 

Let us share an example here to understand this formula:

In June 2021, you got 300 Customers for your Business sale. But currently, you have seen that 10 customers left your business. So, divide 10 by 300. The answer is 0.03. Now multiply it with the number 100. So, your Customer churn rate is: 3%

churn rate formula

Remember: 

  • 42% of small businesses see a higher churn rate than large-scale businesses.
  • SaaS companies had a 5% or more Rate of attrition in a year.

List of all causes of Customer rate churn

One focal thing to note is why this metric will increase. We are going to write down customer churn points. Read out thoroughly-

  • When you offer Poor Customer Service

As we already told you in our previous blog of CRM for Small Business– “Customers are the lifeblood of your organization”. Don’t even think of sharing a bad service with them. Research says the increased rate of attrition is when a company shares bad customer service. 

What’s on your mind? You don’t want to invest in customer service? You don’t want customers to retain? We researched and got to know 9 out of 10 customers have abandoned a company. The reason is bad service. Well, it also can tarnish your brand reputation. Save yourself from a huge loss today! 

  • When your competitor offers something better than yours

It’s a part of the business game. You are not running alone in the race to acquire the end number of customers. Like if you are offering SugarCRM Services (Just an example) then it doesn’t mean your competitor will start another business. If a customer gets an affordable, user-friendly service and yes, better than yours, they will shift. 

Customers are always looking for a great deal. So, they keep on searching for better and better because they are going to put their investment somewhere. If they find competitors the best then the chances are very very high of increasing Customer churn rate. This is the second and most prevalent one in the market. 

  • When it’s all about Product Quality and Price

Again this might be prevalent these days why customers deal for long with others not you. You have made several strategies like sharing immaculate experiences, giving them offers, etc. But how that would benefit them when your product quality is low and it is expensive. 

Earlier, they had no choice so they strived for your product. But now they are finding cheaper+valuable products from somewhere. They are looking to get ultimate advantages, but as we see no customer can garner benefits from the product that is of low quality plus expensive. Think about it! Because it is one of the causes of the Rate of attrition increase. 

  • When Customer is not getting enough success from product 

You convince them to subscribe and deal with your company. They like all the services and products but what if they’re not getting enough success. Well, success matters the most for them. Because they invested their extra saved dollars to buy. Customers get frustrated and will go to unsubscribe. 

No success means not dealing with that company again. And in this way, your churn will increase. You can’t keep 100% of clients in your hand. Here just think about your product which is not giving that much results to take customers near to the success. 

Best Ideas to Reduce the Customer rate churn

It’s time not to procrastinate about decreasing the rate of attrition. We have unpacked some best tricks for businesses of all sizes. Let’s get started-

  • Get engaged with your Customers more

We are going to start with the first simple trick for everyone here. When your team informs you about the customer leaving, just simply share a personalized email with them and discuss with the customer why they are leaving your organization. 

Discuss with them by conducting a Meeting or you can go for a normal call. Discuss every single point and it should make them feel like they are valuable to your company. Chances are a bit high to retain them. Also, it reduces Customer churn rate. We can’t say 0% but probably the best you will see. 

  • Gauge your weakness and bring something extraordinary

The above point indicates that you need to talk to your customer. This means the customer will speak about what they are facing. You will get to know every single issue about the products and services you are promoting in the market. Don’t get demotivated from this. A customer shares your business weakness so take it as a challenge. 

You can work on those products and can make your business future much better. These are not the only customers who will deal with you. Try to reach customers and get to know about your organization via Feedback survey, social media comments, and more. 

  • Offer some Best Incentives to your customers

We have seen large-scale industries use this strategy to win the hearts of their customers, so why not you. Every customer is valuable to your company. Offer them the best incentives. Some special offers are something that nobody will say No to any company. 

Always appreciate your customers and offer them ultimate incentives like a big discount for purchasing multiple products. It not only helps your company but also better for customers. Because they are getting more by spending less. Customers will stay. And without any shadow of doubt, the rate of Customer Churn will fall. 

  • See what your competitors are doing globally

Keeping eyeballs on the competitors who are doing the same business is not a cakewalk task. Several businesses have several strategies as your idea to attain customers might be different from your competition. So, in short, you should be aware of every activity of your competitors. 

Suppose if CRM software business competitions are performing amazing in comparison to you, customers might leave you. Customers will dive into the pool where they are getting exceptional benefits. So, you need to be sure whether you are winning against your competitors in every aspect or not. Again the best holistic method to decrease the rate of attrition. 

  • Share Additional services to your customers

Businesses want to win indefinitely, not just for a month. Even the goal of reducing the churn rate is now going to happen. How? An awesome idea is to offer some additional service to your customers. We will tell you what to do-

You have the best SugarCRM Plugins/Products for every client globally. You shared with them. Your job is still pending as you can offer Free tutorials on how to use such rich products for their task. Presenting the tutorials or tips to use makes them feel like all products are user-friendly and powerful. Additional services always hike up the chance of increased sales. 

  • Start working on Customer Service

How can you achieve the goal of building an ever-lasting relationship with the customer when you are not offering good customer service? Is it a perplexing task? Not at all, it depends on the company whether they want to keep their customers or not. This is another marvelous way to reduce the customer rate churn. 

Offer stellar customer service. Advanced service makes them feel like you care for them. Your task is to identify what issue they are facing and solve those issues on time. The bonus is: you will win the customer’s trust, improve their experience, and of course, can strengthen your relationship. 

Summing up

Like how you give importance to all the metrics, the same applied to the Customer churn rate. It’s always a hassle to know how much a business retains customers and how close they are to improve customer satisfaction. This scary but crucial metric will help your business and enable you to bring more revenue in the future. Check out the above what mistakes you are making and what steps you need to follow to streamline your business goals. Good Luck! 

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