Churn Rate: What It Is, Formula And How To Reduce It

The churn rate is a super important index to pay attention to when it comes to the profitability of a business. That’s why we separate tips to optimize customer retention and reduce churn once and for all!

Every indicator has a purpose; that’s a fact. And when analyzing the profitability of a business, it is necessary to look carefully at why a customer remains loyal to a company and why he gives up on it. And that’s where the importance of the churn rate lives.

Thinking about maintaining a profitable and strong company within its market segment, it is necessary to understand what impacts a consumer when choosing to stop consuming this company. And to go deeper into the subject, we explain below what churn is, how to calculate this index and, above all, separate tactics for those who want to reduce their churn rate. Let’s go.

What Is Churn Rate?

Churn rate or churn rate is an index that measures how much a business lost revenue or customers in a specific period who canceled their services or did not renew their contracts with the company. 

The term “churn”, in free translation from English mean agitation or “turnover”. So, in other words, measuring churn is measuring the rate of cancellations or dropouts of consumers before a business through the turnover of that customer base.

Why Is It Important To Measure Churn?

In the business world, there are many important metrics to analyze and consider about a company’s growth. And among many metrics, those that symbolize alerts like the churn rate should also be considered carefully.

Consider the following: To remain loyal to a company, a customer needs to feel contemplated by the service or product offered and like the service provided. This retention symbolizes loyalty, which can help interpret what is being done correctly by the sales, service or marketing team.

But anyway, the opposite is also valid: a consumer abandoning a business from which he has already consumed also says a lot about the direction of a company and what needs to be kept in mind.

Customers who have been at the base of a company for a longer time become more valuable. Through them, the business can better understand its consumers and their habits and better direct offers and proposals to make that customer stay and prosper along with a certain brand. This would be a successful case!

And that’s why, to evaluate the real performance of a business, it is necessary to see it as a whole. And paying attention to churn rates is essential to analyze a company’s financial health and profitability. After all, understanding why customers cancel your services is also understanding how to improve satisfaction and think about strategies for the future, right? Start thinking like this!

How To Reduce The Churn Rate?

Among some possible tactics to reduce the churn rate, some strategies and tips that are easy to apply in your business routine can help. We separate some below; check it out!

Understand Why Customers Give Up On Your Services

First of all, as we mentioned earlier, understanding the origin and the central reason customers drop out is to understand where the business made a mistake or wanted to. Therefore, it is also to understand where it is possible to improve and how to optimize strategies on these fronts.

Suppose, for example, that the churn rate increased in a given month due to ineffective support provided by the company. After diagnosing this problem, it is possible to designate strategies for the Customer Success front, making new hires in this team or offering training to the team. Thus, it is expected to decrease the churn rate in the next analyzed periods.

Pay Attention To Customer Needs – Which Are Always Renewed!

In the digital world of consumption, consumer needs are always updating, and companies need to be connected and always willing to update. 

Lack of agility in the service, the bureaucratization of processes and performance problems in service delivery are usually relevant factors when measuring customer satisfaction, as all this tends to affect the churn rate negatively. Innovation and willingness to meet renewed needs must always accompany a company’s growth. Invest in this vision!

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