What Is Churn Rate & How to Reduce It?

Today, in this short guide, we will explain what’s churn rate and how to calculate it. A very straightforward yet imperative thing.

Metrics help companies determine their products’ success rate and allow them to make the appropriate improvements.

To avoid dragging around, here is short theory + a few proven tips.

What Is Churn Rate, Exactly?

Well, let‘s say your company offers a subscription service. At the beginning of the month, you could have 500 people subscribed. Then, by the end of the month, you have 450 left. Meaning that 50 people unsubscribed — “churned”. Churn rate is simply a percentage that reflects the churned customers over a given period of time.

It’s really pretty simple.

How Is Churn Rate Calculated?

Churn rate is calculated by dividing the number of churned customers by the number of all customers starting at one particular period, times 100%. This is how you get a percentage value. Depending on your industry, the average churn rate will turn out different, so study the market and make out where this value puts your company at in terms of general customer satisfaction.

How To Reduce Churn?

Even though churn can never be fully eliminated, taking measures to improve customer onboarding and long-term satisfaction is crucial to the retention rate. 

  1. Gather customer feedback

Sometimes it’s best to go directly to the source and address your customers: what do they think should be done differently? Gathering qualitative feedback directly from customers through surveys and interviews allows businesses to address recurring issues and make improvements that prevent churn. Analyzing buyer responses and collaborating with the development team to address concerns can help enhance the customer experience and reduce churn rates.

2. Improve your sales process

High customer churn rates often stem from a mismatch between the product and the customer’s needs. If your sales representatives overpromise, it’s probable that these customers will churn once they realize that your solution doesn’t align with their goals.

To address this issue and reduce churn, it’s important to streamline the sales qualification process.

To begin, develop an ideal customer profile (ICP) that outlines the characteristics of companies that would benefit most from your products or services. Analyze data from your sales CRM to identify common attributes among your most engaged buyers.

Try to concentrate on real value your produce delivers, and articulate it in demos and presentations, rather then offering too much and striving to close a deal at any price. Also, it’s a bad practice to shift into lowering price or offering discounts in hope to engage leads and “close that deal” — it’s better to articulate the value you deliver in a way that kills all hesitations.

3. Define who is at risk of churning

Identify who is on the verge of cancellation, implement alert mechanisms. When a user doesn’t log in for a long time, this user can be sent to those at risk of churning.

4. If a user has already cancelled subscription?

That’s not good.. Here is a few ideas.

  1. Set up a pop-up that promotes certain upcoming features.
  2. Create an email campaign that will send your digests 3 times/month, telling about all the new features that have been developed
  3. We think it’s a bad practice to offer % off just to make them stay. Better explain what’ve beed added to your product and how they can benefit even more. Of course, promotions also work: just send them juicy offers once a month or any other discounts that would hook them.
  4. Knock on LinkedIn or in email — Closely will gladly help with mass outreach. 🙂

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Content creator at Closely. I write about marketing & B2B sales. Welcome to our LinkedIn Sales Hacking Universe ;)