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Churn rate: what it is and how to keep it at zero

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Having loyal customers within a company is a key factor and you surely know how important it is and the benefits it brings. That's why having a high churn rate is a problem for a business.

This is where the churn rate comes in, one of the essential metrics that you must apply in your company if you want to know the churn rate of your customers. Keep reading to know everything about this metric!

what is the churn rate?

The churn rate is a metric that indicates the percentage of customers or subscribers who stop using the services or unsubscribe from a subscription list or database. This rate not only measures the rate of customer churn, but also the ability to retain them.

It is a basic metric to understand customer satisfaction and thus evaluate the success of your brand, because the result of calculating this rate tells you all the customers that have been lost, and therefore are no longer in the conversion funnel.

In other words, the churn rate refers to the total percentage of customers who unsubscribed from a service in your company during a certain period. This rate can be calculated on a monthly, quarterly or even yearly basis, depending on your needs.

how to measure churn rate?

The churn rate formula is as follows:

(No. of customers or subscribers lost / No. of customers or subscribers in total) x100

As you can see the formula is not complicated, but remember that it is calculated over a period of time, i.e. customers lost during the last quarter, for example.

Imagine you started the quarter with 1000 subscribers, but at the end of the quarter you lost 150 of them. Your churn rate would be 17.6%, because you have divided the (150 / 850) x 100. 850 is the total number of customers you ended the quarter with, because out of the 1000 you started with, you lost 150.

It is difficult to determine between what percentages it is ideal to maintain the churn rate, as it depends very much on the sector, the company and the circumstances in general, but it is generally considered that more than 15% churn rate is an alarming indicator.

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how can you reduce the churn rate?

Ideally, we would like to have a churn rate of 0, but this is almost impossible, so the ideal is to get it as low as possible. Here are some practices you can do to get your churn rate as low as possible:

  • Identify your weaknesses. It is clear that when a user subscribes to your newsletter, your database, or wherever, it is because they are interested in what you offer. But when they unsubscribe it is because they are no longer interested, that is, because your product, service, offers, content, or whatever is no longer of the same quality or as interesting. Analyse what is going wrong and compare and investigate the competition.
  • Find out why the cancellations are happening. You have to identify the problem in order to improve it. You can ask your customers directly through surveys to get their opinion. This way they will be the ones who will give you the keys to why you are failing.
  • Make a good segmentation. It is an essential step to know the needs, tastes and doubts of your customers. You cannot make campaigns for everyone, you have to address your ideal customer, that is why it is important that you create the profile of your buyer persona, because it is to them that you address your products and services. The better you segment your audience the better, because you will avoid a higher cancellation rate, as you reach the people who are interested in your company.
  • Keep up to date: What you offer today may work today, but in a few months time it may not. It is important to keep up to date with new trends and offer value. Change the design, add new content, find new ways to communicate, etc. Keep subscribers engaged with your brand.
  • Improve what you offer. A customer subscribes to a company's list because they are interested in what it offers, but if it is always the same, or your campaigns and actions are not up to the standard of your products, the customer will get tired and unsubscribe if they don't get anything new.
  • Find the ideal frequency. One of the main reasons for unsubscribing from a brand's contact list is to receive too many emails or notifications from them. Neither too little nor too much. At this point, many companies send so many emails that they are considered spam, and others, to avoid it, fall very short. You have to find the right time, the right amount and the right design.

To conclude, we recommend that you do not get overwhelmed with the result of the churn rate. Sometimes it is not so bad to lose customers, because if they do not adapt to your business and are not going to move from phase to phase in the conversion funnel, it is better that they no longer belong to your database.

The churn rate is an important indicator, so you should not neglect it, but you should not get frustrated by the result. You have to find a way to attract new subscribers, but never neglect the ones you already have. Besides, keeping a customer is much more profitable than making a new one.

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