It’s every marketer’s nightmare. And while not all customer churn is bad (not every customer is a good fit for your company), your ability to proactively prevent existing customers from slipping through the cracks of the sales funnel can boost your business.
Everything from your company’s growth rate to customer lifetime value and CAC payback period is directly related to your churn rate, which is why it’s one of the initial hurdles startups must “climb” (no pun intended) from the start.
You can do everything else (build your minimum sms gateway chile product and pull off the marketing masterstrokes), but you’re unlikely to have a sustainable business model until you reduce customer churn to its lowest point. KPMG’s Global Customer Experience Excellence report also indicates that customer retention is the key driver of a company’s revenue.
Are you ready to start removing churn obstacles on your path to efficient growth and expansion? Here's everything you need to know about what customer churn is and why it matters, plus some CRM strategies to help you reduce churn .
What is “Churn”?
Churn , also known as customer abandonment rate, is the proportion of customers you have lost in a specific period in relation to the number of customers you had at the beginning of that period. Basically, it is a measure that tells you how quickly you are losing customers.
It is such an important metric for any type of business, since it gives us a clear direction of how we are doing. In fact, for an example, look at this data:
How to reduce churn based on your type of customer - Fact
Okay, so why is it important to consider this metric?
To illustrate, if you had 1,000 paying customers at the start of Q1 and lost 100 of them along the way, that’s a churn rate of 1 in 10 customers or 10% .
Why does this matter? Consumer data shows that retaining existing customers costs five times less than acquiring new customers and that selling to existing customers has a success rate of up to 70% versus 20% for new customers. What’s more, this research from Bain & Company indicates that just a 5% increase in our customer retention rate can dramatically increase your bottom line from 25% to 95%.
Given the broad similarities between the two markets, these trends are expected to be just as true in Europe as they are in the US, where the data was collected. With the data available, we can agree that it’s much cheaper, easier and more profitable to retain existing customers.
So, regardless of how many new customers you acquire, you're leaving a significant amount of money on the table because of all that lost customer lifetime value, if churn is high.
