customer churn

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Customer churn refers to a high defection rate of customers from a company.
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Further discussion and example on customer churn:

Customer churn occurs, typically, when customers:

  • needs and expectations are not being met
  • poor product or service quality
  • high complexity with the service or product
  • frequent billing errors

Both cellular and cable (television) services see a high rate of customer defection or customer churn due to better offers by competing providers or a lack of quality service by the current provider.
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3 Steps for reducing customer defection rate:

  1. Define and measure your retention rate: First, a company needs to identify that it has high customer defection. A good way to measure is to determine if customers renew subscription or services for subscription based products. Sales for a given month, compared to sales for the same month in the previous year, is a good way for retailers to measure customer churn.
  2. Determine the cause of customer defection: Surveys are a great way to discover why customers leave. Listening to customer complaints is another way. Companies must also consider customers who may move away, or have economic issues due to job loss or a poor economy. These customers should not be included in the company’s assessment of customer defection.
  3. Compare the lost customers lifetime value to the cost of the defection rate: If it costs less to keep the customer than the loss of profits sustained by the customer defection, start a program to spend the money  to keep the customer.

 

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