Business management expert points out how to reduce churn rate and ensure customer retention

It is a fact that the churn rate has become an indicator for the success and longevity of companies. This metric, which measures the rate of customer loss, has a direct impact on the financial health and growth of organizations. Therefore, managing this data is essential for companies seeking to keep their bases active and ensure a competitive position in the market.

By closely monitoring this indicator and implementing strategies to reduce it, organizations can improve customer retention, increase revenue and strengthen their position against the competition.Focusing on customer experience, personalizing communication and using appropriate tools are essential to achieving these goals.

According to Marcus Marques, a specialist in business management and founder of the Accelerator Group, the dropout or cancellation rate measures the percentage of customers who interrupt their relationship with a company during a specific period. In other words, it is a certain amount that ceases to use the products or services of an organization. “A high rate can indicate problems of satisfaction, quality of services offered or competitiveness of prices practiced. And this movement indicates an alert, which directly influences the long-term financial sustainability of the company”, he points out.

For this reason, constant monitoring allows managers to identify problem areas and develop specific strategies to improve customer retention. “It is critical that organizations implement efficient management systems, such as CRMs, to properly track the history of purchases and interactions, enabling a more accurate analysis of churn rate and its causes”, evaluates the expert.

Marcus points out that there are several types of churn rate that must be analyzed to obtain a comprehensive view. “There is the volunteer, which is the most common type, referring to those who choose to cancel or abandon the service of their own free will, and the involuntary, which occurs when the customer interrupts the relationship with the company ndout wanting to‘ card expires or when the customer forgets to renew the’ contract, he points out.

Revenue churn (revenue churn) indicates how much revenue the company no longer earns from customer evasion. “This modality can be divided into gross revenue churn (gross revenue churn) and net revenue churn (net revenue churn). Early churn focuses on customers who leave the company early in the relationship, which may indicate problems in the onboarding process or in the initial delivery of value. The negative churn represents a favorable result, showing that revenue increased even after the evasion of some customers within a specific period, details the expert in business management.

How to calculate churn rate

The simplest and most widely used formula for calculating churn rate is to divide the number of customers lost in a specific period by the total number that was at the beginning of that same period, multiplying the result by 100 to obtain the percentage. Mathematically, the formula can be expressed as follows: churn rate = (number of customers lost / total number of customers at the beginning of the period) x 100.

Some of the main advantages of using specific tools to do this calculation include automating the data collection and analysis process, generating custom reports and interactive dashboards, integrating with other customer management systems (CRM), being able to segment data by different criteria (customer type, subscription plan, etc.), and automatic alerts for significant rate variations.

It is important to emphasize that, regardless of the method or tool chosen, the most important thing is to maintain consistency in the approach over time.“This allows companies to compare the results of different periods accurately and identify relevant trends for strategic decision-making”, Marques evaluates.

Revenue loss

The most direct and detrimental effect of a high churn rate is decreased revenue.For companies that rely on subscription or recurrence-based business models such as software, streaming services, and subscription clubs, losing customers has a direct impact on monthly recurring revenue (Monthly Recurring Revenue (MRR). This reduction in revenue can compromise the financial health of the company and hinder investments in improvement and expansion.

In addition, customer loss also negatively affects customer lifetime value (Lifetime Value (Lifetime Value & LTV). The higher the churn or dropout, the lower the LTV will be, as customers stay less time in the company and generate less revenue throughout their lifecycle.

Damage to brand reputation

When many customers break off the relationship with a company, this can be interpreted as a sign that something in the offer is not suitable. This negative perception can spread quickly, affecting not only current but also potential new customers.

To mitigate these negative impacts, companies need to identify the underlying causes of customer avoidance and implement proactive retention strategies. In this way, it is possible to reduce the negative effects and create opportunities to improve their products, services and customer experience, strengthening their position in the market and promoting sustainable growth.

Churn's main causes

Churn is a complex phenomenon that can be triggered by several factors. Understanding the main causes that lead customers to abandon a company is essential to develop effective retention strategies. “One of the main causes is customer dissatisfaction with the product or service offered. This can occur when the product does not meet the expectations created during the sales process, the solution does not follow the market evolutions, losing in quality and functionality, the customer can not perceive the value of the product or service in relation to the investment made, or there are recurring technical problems or difficulties of use that frustrate users”, points out Marques.

To reduce churn rate and keep customers engaged, companies need to adopt effective strategies that put the consumer first. Customer experience has a direct impact on churn rate, and to ensure that the entire process is positive, it is essential to listen carefully to feedback to identify potential issues and areas for improvement, as well as implement a customer-centric culture across the company, not just the customer service team.

Investing in an efficient onboarding process that helps new customers understand and use the product or service appropriately, and providing agile and effective support at all touchpoints are ways to prioritize the satisfaction of all those served by a particular service. “In this way, companies can increase satisfaction and reduce the likelihood of” cancellations, advises the expert.

A well-structured loyalty program can also be a powerful tool for reducing churn rate.Some strategies include creating a rewards system that offers unique benefits to frequent customers, developing partnerships with other companies to offer additional advantages, implementing a points or tier system that encourages ongoing engagement, and offering discounts or special promotions to loyal customers.

Personalizing communication can also be a powerful tool in this process.“Customization has become a strategy to engage and win over consumers, and for this it is necessary to collect data on preferences, behaviors and purchase history and use this information to create targeted and relevant messages and offers. Implement personalized email marketing strategies, considering the history of customer interactions”, he concludes.