Video: Measure the health of your business using Customer Churn rate KPI

We hope you liked the last videos, where we explained the top three KPIs to convert your company into a Customer-centric one. So far, we’ve described the concepts of Customer Lifetime Value and Customer Satisfaction CSAT. Today, we will complete the perfect triangle talking about Customer Churn.If you enjoy this type of videos, subscribe to Riccardo Osti’s channel in YouTubeCustomer churn or churn rate is a crucial KPI to determine the quality of your product, service, and experience. Low churn levels indicate that you are very good at cultivating your clients, and therefore you can expect not to lose them in the future. This is very important for high-growth companies, as the average growth rate is often calculated as growth minus churn. Therefore, generally churn determines the real growth rate of the company.

But, what is Customer churn? It is the number or percentage of customers who stopped using and consequently, buying the products or services from your brand, for a certain period of time. 

It’s quite simple. You can measure it by dividing the number of customers you lost during the last month, by the number of customers you had at the beginning of that month.

Let me share an example, at the beginning of October you had 150 customers, but at the end of the month, you only had 132 customers left. This means that you lost 18 customers, which equals 12% of 150 customers that you had at the beginning of the period. 12% is your churn rate. It’s sometimes expressed in monetary value, representing the amount of revenue lost due to the loss of your customers.

Churn rate is an essential KPI. We all know how hard it is to get new customers, and by paying attention to churn we could find smart ways to retain them, instead of losing them. 

So, how to reduce the churn? There’s no fast answer, however, I’ll try to share a couple of tips.

First of all, proactively reach out to your customers to know more about their experience. If they are dissatisfied, and they’re planning to leave, in most cases, they will tell you. It seems too simple to be true, but I tell you…brands hardly show interest in talking to customers, so don’t be surprised if this is not happening yet in your company.

Second, analyze the trend of your churn rate to detect anomalies, or changes in the trend as soon as they happen. In today’s volatile markets, a small defect of your product can determine the loss of many customers, in favor of your competitors. You want to keep an eye on this and react before it’s too late.

Third, create an engagement plan that keeps your customers excited. If you sell software, you could create a course where the users can learn more about the industry, study the best practices, or you could organize webinars. Generally creating educational materials and trying to create a community around your product, is the best way to increase loyalty.

These are just three quick tips based on our experience. Let us know your opinion by leaving a comment below. 

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