It is not unknown that customers come and go, and they are never permanent. But keeping your customers satisfied and loyal to your company is every business’ priority. Ultimately, it leads to reputation building and more revenue generation for the business. You will be surprised to know that minimising one key factor of a business can create a huge difference. That factor is customer attrition rates, also referred to as customer churn, and reducing it will eventually lead you toward success. In this post, we will discuss in deep what is customer attrition or a client attrition rate.
What is customer attrition?
A customer churn is the number of customers who did not repeat their utilisation of your services or products. Here, churn means the rate of change in the number of customers over some time. This quantifiable key factor means the loss of customers, and measures should be taken in order to reduce this rate. Several ways to prevent customer attrition are by maintaining a trustworthy relationship with your customers and keeping them satisfied. In short, customer attrition means the number of customers a business loses over a given period. Losing clients for several reasons is not new, but it might have a negative effect on the company’s growth.
Types of customer attrition
Before developing retention strategies, one must identify the kind of business they are in and the type of customer attrition. Basically, we can classify customer attrition into two kinds: active and passive.
Active customer attrition: This kind of attrition happens when a person voluntarily and thoughtfully stops being a customer of any business. It covers industries that depend on subscription-based models, such as telecom, insurance, cable, entertainment, publishing, utilities, and internet providers. It implies anything the customer pays for and stops after completing a specified time. Further, active customer attrition also happens in sectors that do not necessarily need a fee but maintain a presence through accounts, such as banks, social media platforms, and more.
Passive customer attrition: It refers to the loss of customers just because they stop transacting with your company. It covers industries such as retail, groceries, e-commerce stores, and automobiles. Moreover, customers do not need to cancel a subscription voluntarily, call to cancel an account, or take any action overall. There could be many reasons why an individual might stop purchasing from your company.
Therefore, it is important to divide and analyse your customer attrition type to develop strategies and plans based on the behaviour of customers.
How to calculate the customer attrition rate?
It is important to calculate the number of clients lost when hit by customer attrition to develop and implement the most effective strategies. The customer attrition formula calculates the client loss rate in percentage. The first thing you have to do is specify the duration for which you wish to calculate the attrition rate. First of all, analyze the number of customers you have at the start and the end of a certain period.
The formula is as follows:
Customer Attrition Rate = (Number of Customers Lost / Total Number of Customers) x 100
For instance, if you had 200 customers at the start of the period and have 50 left by the end of that duration, then your customer attrition rate will be (50 / 200) x 100 = 25%
Also read – From Good to Great: Achieving Customer Experience Transformation
How to reduce customer attrition?
After conducting the customer attrition analytics process, if you discover that a large number of clients are leaving your company, follow the steps listed below to prevent high customer attrition.
- Improve the quality of your product or service. Analyse whether your customers’ needs are met. Providing the best and highest-quality offerings will ultimately attract more customers.
- Direct your efforts to the right audience. Those whose demands do not align with your brand’s offerings will leave it for sure. Therefore, instead of targeting everyone, determine your target audience and keep them for the long term.
- Providing better customer service and purchasing experience will help you keep the clients satisfied. Make sure that they are well aware and do not face any obstacles in the process. There are plenty of tools that can help you with this: from live chat solutions to AI-powered chatbots.
- Maintaining your relationship with existing customers is another crucial task. To retain customers, try personalising their experience.
- Retain your already existing customers by developing and implementing favourable strategies, such as discounts and offers.
Conclusion
Ultimately, losing customers is the most demotivating thing for any brand. Analysing customer attrition data will help you determine your company’s strengths and weaknesses. This will allow you to develop strategies that will prevent you from losing clients and drive more revenue and success in your business.