I’m honoured to have been appointed an Executive Director of the Bournemouth Chamber of Trade & Commerce at the @bmthchamber AGM. I’m really looking forward to continuing to connect and support businesses in Bournemouth.
Churn rate is the amount of customers who cut ties with your company during a given time period.
The calculation of churn can be straightforward. Take the number of customers that you lost in a period of time and divide that by the number of customers that you started with in that period of time. The resulting percentage is your churn rate. As an example, a company that started last quarter with 100 customers and lost 3 over the course of the quarter would have a churn rate of 3%. You can also calculate churn based on the number customers lost, the value of recurring business lost, or the percent of recurring value lost.
Regardless of how you choose to represent churn, tracking your churn rate is key. It’s almost always cheaper and easier to retain customers than it is to go through the process of acquiring new ones. Monitoring churn is the first step in understanding how good you are at retaining customers and identifying what actions might result in a higher retention rate
Here’s an example to think through the impact of your churn rate today on your business over the next five years:
If you have monthly recurring revenue of £15000 and that every month you add another £2000 to that. However, you have a churn rate of 3%. If all of that persists for the next 5 years, you’ll end up generating almost £2.6 million. If you’re able to decrease your churn rate by 10%, to 2.7%, that gives you an extra £100,000 in revenue. If you’re able to reduce your churn by 30%, that’s even better. Your revenue goes up to £3 million!
Based on an article by http://www.churn-rate.com/
Do you know what you spend on gaining new customers compared to keeping the customers that you already have? How effective are you at keeping your current customers? With all of the time, resources, and money put into acquiring customers it is important to know that your efforts aren’t wasted when customers don’t remain loyal.
Your customer retention rate is a great way to measure how successfully you are maintaining customer relationships. On a more granular level, you also need to know which types of customer you are remaining loyal and at which point in the relationship a customer leaves, so that you can make the necessary adjustments.
According to a recent study by social media marketing software provider, Flowtown, they found that maintaining existing customers costs six to seven times less than acquiring new customers. A study by Bain and Company reported that increasing your customer retention rates by just five percent led to an increase in profits between 25 and 95 percent.
Calculating your customer retention rates
The first thing you need to do to calculate your retention rate is identify the specific period of time you’re focusing on. Perhaps you’re looking at the last year or maybe the last six months.
Next, you need to know how many customers you had at the end of that period of time. If you’re calculating a current retention rate at the end of the period during which you’d like to measure, it might be as easy as determining how many customers you currently have. This number is represented by CE in the formula.
You also need to know how many new customers were acquired during the period of interest, so that you don’t include them as retained customers in your final retention measurement. This number is represented by CN in the formula. Now you’re ready to do your first calculation: subtract your CN number (new customers acquired during the period) from your CE number (number of customers at the end of the period).
The final number you need to know is how many customers you had at the start of your period of interest. This number is CS in the formula. For your next calculation, you will take the solution to Step 3 (CE-CN) and divide it by how many customers you had at the start of your period (CS). This covers the first part of the equation: ((CE-CN)/CS)
Finally, you want to turn that number into a percentage by multiplying it by 100. Your final number is your customer retention rate for your period of interest. ((CE-CN)/CS)) x 100.
Based on an article by on the socious community blog.
Sounds simple but identify your customers who drive the most profit for your business. Rank them and understand how impactful they are as individuals or as a segment for your business.
Ranking these customers from highest to lowest by Profit or Life Time Value lets you see which individuals or groups drive an outsized portion of your business results. When you can look at a single list and see your main customers you have the power to identify the unique characteristics of this group and work hard to attract more. Is it who they are, where they live, or what they buy?
Knowing that answer can be more valuable than just making the sale. By focusing your customer service, marketing, promotions, and sales offers, you can build the long-term value with these customers and find more existing and new customers who share the same characteristics.