What is Churn Rate?
Churn rate is a term for the percentage of your customers who, within a given period, have switched to a different provider of your product or service. As a KPI, churn rate is simple: the lower, the better.
Churn rate is a key metric that is relevant to the business as a whole and several of its departments. It is an indicator of how loyal your customers are.
What is Churn Rate used for?
Churn rate can be used both as a general KPI for your customer loyalty and to help you measure, adjust, and optimise it.
There are many things you can do to reduce your churn rate. At its core, it is about increasing customer loyalty. Below you will find some tips for increasing customer loyalty and reducing churn rate.
5 quick tips for a lower churn rate:
- Set up email marketing flows for customers who have not purchased from you in a long time.
- Work with content marketing for your existing customers.
- Work with email marketing flows that reward loyal customers.
- Create email marketing flows that encourage repeat purchases.
- Focus on delivering a great customer experience.
Read more about email marketing – an effective tool for reducing churn rate – here
How do you calculate Churn Rate?
Churn rate is typically calculated within a given time period, which is then compared to other periods in order to track development and measure the effect of the actions you take.
The formula for calculating churn rate is:
Churn Rate = Number of customers lost over a given period / Total number of customers at the start of the period x 100
As an example, say you have 1,000 paying customers at the start of a period. During the period, 100 customers "leave" you:
100/1000*100 = 10% churn rate.
How low/high should my churn rate be?
The lower the churn rate, the better. But exactly how high it should be depends largely on your industry. For example, churn rate is extremely high in the fashion industry and very low in the banking sector.
A good churn rate is, in other words, what is relatively good compared to your competitors.
Would you like concrete advice and sparring on how to increase your customer loyalty?
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