All SaaS organizations may expect some amount of client churn. Some consumers who sign up for a free trial may decide not to subscribe, while others may decide they don’t want to renew their membership. Some users won’t be satisfied with the program and will hunt for an alternative. As you can see, there are a wide variety of reasons why consumers of a SaaS business can decide to quit.
Your company faces major financial and brand risks if its customer turnover rate is on the rise. If you see this occurring, you should investigate the cause. The cost of acquiring a new client might be far higher than the cost of keeping an existing one. That’s why it might be helpful to conduct a customer turnover study as part of an effort to boost retention rates. Here, we explore the seven stages of completing a fruitful Customer Churn Analysis.
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What is the Customer Churn Rate?
A company’s customer churn rate is the percentage of current customers that stop purchasing the company’s goods and services. Your turnover rate may be expressed as a percentage. First, you’ll need to establish a period range for which you’ll be estimating client turnover.
The percentage of consumers lost should then be calculated by dividing the number of customers lost by the total number of customers for the time period in question. For the turnover rate as a percentage, take this figure and multiply it by 100.
What is a Customer Churn Analysis?
Understanding why you’re losing customers is the goal of customer churn analysis. It’s not enough to realize that clients are leaving you. Examining your turnover statistics thoroughly will help you discover why consumers are leaving. The best strategy to lower your customer turnover rate may be determined thereafter. Analysis of customer turnover may help companies identify problem areas in the customer service process. The following are some of the questions that businesses may utilize data and insights to answer:
- Who are the churning consumers, exactly?
- To what end are they leaving?
- Which consumers are the most likely to leave in the future?
- How may we lower the rate of client churn?
Churn Analysis: Seven Easy Steps
1. Select the Correct KPIs
Customer turnover analysis is only useful if accurate data is collected. Spend some time thinking about what characteristics of your consumers will tell you the most about your churn rate. Observing customer behavior may be the best predictor of customer retention. Customers’ product consumption may be monitored, for instance. There may be a churn risk if use suddenly drops.
Not only will your customers’ product use demonstrate their level of involvement, but so will their use of more conventional means of contact like email, video chat, and face-to-face gatherings. For a complete picture of a customer’s health, you need to evaluate their actions both within and outside of your product. When thinking about what motivates people to take action, you should also consider:
- Quantity of contact: if a client hasn’t communicated with you in the onboarding process for two weeks, they may not be a good fit.
- Submitting a support ticket may be indicative of a highly engaged consumer, whereas an excessive amount of open tickets or issues that aren’t addressed may suggest an unhealthy customer relationship.
- National Customer Satisfaction Index (NPS®) rating: a low NPS rating may indicate that there is an issue with this account.
- Product feedback: Normally, this signals an engaged consumer; but, if a customer is providing feedback on your product on a near-daily basis, they may be unsatisfied with your solution.
The majority of your customer churn analysis may begin after you’ve determined which KPIs will be used in the process.
2. Monitor Those KPIs
You need to collect and analyze data over a long time period for your customer churn study to provide meaningful results. At least a quarter’s worth of information is preferable for calculating customer health ratings. More detailed tracking of sales, client retention rates, and customer behavior analytics will provide more actionable insights.
In addition, the more information you have at your disposal, the more precisely you can analyze it, and the more robustly you can construct churn models and make conclusions. Customer Churn Analysis may be run anytime you think it’s essential if you’ve been keeping meticulous records.
3. Divide the analysis into segments
While it’s useful to look at Customer Churn Analysis from a bird’s eye view, sometimes the devil is in the details. It is easier to see patterns and trends in your customer turnover rate if you divide your data into several categories or cohorts. Segmenting your consumers into like-minded subsets allows you to examine the possibility of repeating trends amongst a subset of your clientele. You may also keep these segments or cohorts and monitor them over time.
You may discover that particular sectors have greater turnover rates during certain times of the year, or that various client groups have distinct buying habits. Determine which features will be most helpful in classifying your customers. Purchased goods and services, location, and occupation are all commonalities.
4. Collect Feedback
In order to create a useful customer turnover study, you’ll need both quantitative and qualitative data. If the goal of your customer churn study is to determine why customers are leaving, then qualitative responses will be quite helpful. Customers who have recently churned may be surveyed in the same way that current ones are.
Existing customers may benefit the most from tracking their customer health ratings. Sending a follow-up survey or conducting an exit interview with Customer Churn Analysis is one way to get useful insights from their experience with your organization. These types of insights from your customers can help provide meaning to your statistics and place the figures from your customer turnover research into a bigger perspective.
5. Always Monitor Your Rivals
Customer retention efforts should prioritize internal initiatives, but someone should also be monitoring the market and looking for ways to win over customers from the competition. If they are successfully luring clients away from you, their activities may increase your turnover rate. When doing a customer churn study, it’s important to keep your competition in mind for a variety of reasons.
Your customer churn rate may be influenced by a variety of factors, including the pricing of their products and services, the availability of new products, the level of brand awareness and customer engagement, the attractiveness of upgrade and renewal offers, and the quality of reviews written about their products and services.
6. Create a Predictive Model for Future Churn
You may use the information gleaned from a thorough Customer Churn Analysis to foretell how many of your customers will leave in the future. Using this study, you may identify patterns that may be contributing to a rising churn rate and get insight into why customers are leaving your service. When you have a firm grasp of the driving forces behind your churn rate, it becomes much simpler to plan for the future.
A customer churn study may help you determine which customers are most likely to leave and establish which points in the customer journey are most predictive of churn. The health scores functionality in ChurnZero will do this evaluation without any input from the user. Our program will accomplish it automatically, saving you time and effort.
7. Take Action to Reduce Customer Churn
It’s time to put what you learned from your customer turnover research and your newfound prognostic acumen to use. Customers are more likely to return if you can predict when they will leave and why. To improve the customer experience and provide your clients additional reasons to stay with your business, you should center your efforts on eliminating particular and reoccurring frustrations they experience. If you and your business want to know how to reduce customer churn, a Customer Churn Analysis is a must. Instead of always feeling like you’re putting out fires, you can feel in charge of what your business is doing to keep customers.
Customer churn analysis is a helpful tool for decreasing the pace at which customers are lost. Insight into client retention may be gained by tracking how often they leave, what motivates their departures, and what reasons are most commonly at play.
It’s a fact of doing business that you will lose some clients. However, if you can figure out what’s making them leave, you may start thinking about ways to improve your products and services. Because of this, client attrition can only be reduced, not eliminated.
By comparing turnover rates throughout periods and keeping an eye on other key performance indicators, you may better understand what factors contribute to customer defection. Addressing these factors can improve retention rates and bottom-line results. Often known as “client attrition analysis,” churn analysis makes heavy use of such data. With the help of other company data, you may make reliable predictions regarding churn rate patterns.
Wrapping It Up
Understanding why a client is considering switching to a competitor is critical. There are several ways in which a company’s products or services might benefit from this. The quality of a company’s products and services may continually be enhanced. Analysis of customer attrition might reveal weak spots in a company’s operations. Customer churn may be reduced, and loyal customers’ pleasure can be increased using this method.