Customer Churn rate

Churn rate is the percentage of customers stop using our service (unsubscribe) within any specific time. It represents the percentage of customers who discontinue or unsubscribe from our service.

The customer churn rate will have a significant impact on company profit, so managements have to find the solutions to reduce it.

The service company does not have the cost of goods sold, so any change in revenue will impact net profit. It is different from trading and manufacturing company, where only a portion of sale change which will impact net income.

Customer Churn Rate Formula

Customer Churn Rate = (Lost Customers ÷ Acquired Customers) x 100%

Example

Company A is providing a service on lunch delivery to the office worker in the city. Customers will receive a lunch box every day depend on their monthly subscription. Currently, the company has 1,000 customers with New York. During the holiday, 100 customers have unsubscribed from the service.

Please calculate the Churn rate.

Customer Churn rate = (100 / 1,000) * 100 = 10%

How to deal with customer churn rate?

The solution to the Churn rate
Know your customer and their expectation	We have to know our customers, their favorite, their intention and especially the expectation. If we miss their expectations, they will go without any hesitation.
Analyze the cause	There is a lot of cause of leaving, and we have to know them. These reasons must be categorized and carefully analyze. After categorized, the most common issues must be addressed immediately. In the next step, we need to look into the following commons issues and solve them one by one.
Train the customer support and sale person	Customer support and sales teams are the people who will face customers, if they do not perform well, it will have a direct impact on the whole company. So we have to make sure they really care about the customer relationship.
Review and solve the customer complain	There are many forms of complaint such as call, email, or review. All of them must go through and summarize. The major complaint must be identified first and follow by the secondary.
Survey with our customer	Besides the complaint, we must have another channel to collect customers’ feedback. Not all customers willing to complain about their issue to us. They just provide, so we have collected their feedback and fix it before they move on, and it will decrease our churn rate.
Improve customer experience	When the customer subscribes to our service, they expect something from us. It is the most basic thing which we need to provide for them. What if we provide more than their expectation, they will never leave our service.
Solve the problem quickly	Whatever we provide, there will be problems. Some problems happen to all customers, it is a critical issue that must be identified immediately otherwise our business will go in no time. Some issues just happen specifically on some customers which leads to customer support who will help them deal with it. The company must ensure that all customers’ problems solve within the proper time.
Keep improving our service quality	Even now our service is the best in class, but the competitors will catch at any time. So we must improve our quality and make sure the customers who are with us will not move to the competitors.