In a tight market, for a company to be successful it necessarily needs to know how to lower churn rate, especially if your business model is focused on providing services or the form of subscriptions.
This is because, if this index is not properly evaluated, the company in question may lose sight of the number of customers who stop consuming its products. A problem that, over time, is capable of compromising its viability. Fortunately, the calculation of this value is not complex and can be done easily.
Would you like to follow more closely the number of customers leaving your business and identify the reasons that lead to this result? So read this article and find out what it is and how to reduce the churn rate!
What is Churn Rate?
The churn rate is the rate at which customers stop doing business with an entity. most commonly expressed as the rate at which subscribers discontinue their subscriptions. for a company to increase in growth its clientele its growth rate must be higher than the churn rate
How can this problem affect a company?
A company that has its business model based on service delivery, especially those that sell a service in the form of subscriptions — as many companies that operate with Saas (software as service) do need to pay special attention to this indicator. After all, he accurately points out the satisfaction of his customers, so that if it is too high, it is a clear sign that something is wrong.
Attracting new customers is important and all businesses that want to grow must be successful in this task. However, there is little use in all the investments to attract consumers if there are situations that lead them to cancel the service. The big issue is that if the churn rate is not reduced, the company’s operation may not be sustained, which would obviously lead to bankruptcy.
How to calculate churn rate?
To learn how to lower the churn rate, you must first understand how to identify it. Fortunately, the calculation of this indicator is quite simple. To accomplish this, the manager or employee needs to establish a period and then divide the number of customers who left the services provided by the company (in that period of time) by the number of customers who joined them in total.
Finally, it is enough to multiply the result calculated by 100, so that it is seen in percentage form. It is possible that at first glance, this whole account proves to be very complex, we will use an example so that you understand how it works in practice.
Let’s say that in April a company had 50 customers. In the same period, however, 4 people gave up their services. Following the concept presented, the calculation should be done as follows:
- Churn Rate = (customers who left the service / customers who use the service) x 100;
- Churn Rate = (4 / 50) x 100;
- Churn Rate = 0.08 x 100;
- Churn Rate = 8%.
What are the methods to eliminate it?
While outgoing customers are a problem for any company, regardless of their size or area of expertise, some measures can be implemented to avoid this problem and ensure that index levels remain at an acceptable margin. Next, we’ve set up some of them to help you with this task!
Offer quality service
The first step in ensuring a customer’s stay is to offer them a quality product. After all, if the service provided by the company does not meet the needs of the consumer or is full of failures, it will hardly continue to make use of it.
For this reason, it is important that the company monitors the service for errors that can be eliminated and features of the service or product that can be improved, so that they become more accessible and enjoyable for its users.
Even implementing measures to ensure the efficiency and quality of its service, the company can miss some factors that displease the end-user, leading them to cancel the partnership. To identify this type of problem in a timely manner, it is important that the company has a tool to monitor indicators and thus observe this trend.
In this case, monitoring the Churn Rate is indispensable to ensure that it is under control, but there are other useful signals that can help the management team understand the problem. Among them, we can mention the average time that dropout customers take to abandon the services provided by the company.
Offer efficient communication channels
One of the most efficient methods to identify what led a consumer to leave the company is to ask him directly. For this reason, it is necessary that, together with the option to cancel the service, on the company platform, there is a dialog box questioning what reasons led the customer to give up.
The big question is: why wait until the final moment to find out about people’s satisfaction with the solutions offered by your company? Instead, it is much more interesting to send small questionnaires frequently so that the customer can give an opinion on the quality of the service. Creating a suggestion guide on the company platform is also an interesting idea.
The important thing is that the company has access to a solid database to develop its products and services so that they become as aligned as possible to market demands.
In addition, data verification and analysis, indispensable tasks for the company’s services and products to be optimized, can be performed more simply through technological tools. In this context, the use of technologies such as Big Data and Machine Learning can make the process more agile and efficient!
Finally, after knowing how to lower the churn rate, it is necessary for the company to think about how to improve the experience of its customers, in a way that its solutions are complete and accessible. To achieve this result, it is important that the company has qualified professionals and that it uses to your advantage the tools that facilitate the performance of this activity!
Now that you know how to lower the churn rate, what do you think about having a smart software option to deal with this problem? Contact us and discover our solutions!