If You Don’t Know Your Churn Rate and Customer Segments, You Don’t Know How to Keep Your Customers

churn rate and customer segments

You may know how winning a new customer is inherently more costly than retaining an existing one. Depending on the industry you work in, new customers carry a price tag of 5 to 25 times more expensive. *Gulp*. What’s the customer retention solution?

You can’t manage what you don’t measure. If you’re aiming to retain customers (which increases profits as much from 25%- 95%), what’s your measurement tool of choice?

The churn rate measures the percentage of customers that terminate use of services with a business.

The rate is examined on a monthly, quarterly, or yearly basis. This depends largely on your industry and the product your selling. Selling monthly subscriptions, like a beauty box service or gym membership? Recurly Research has already calculated the average churn rate for you, if you do subscription-based or service-on-demand models. For small business owners, examine your churn rate every month for immediate feedback.

Use this simple equation to easily calculate your own churn rate:

Customer Churn Rate = (Customers beginning of month – Customers end of month) / Customers beginning of month

Using churn rate to measure customer loss means asking the right questions. Even questions you may not like the answer to. Take a deep breath. Remember your goal is to grow your business, not defend your ego. If customers are heading for the door, what are the reasons they are leaving? Be open to picking up patterns. Are they having a conflict with an employee? Was there a miscommunication about pricing on the website? Beyond examining a particular occurrence, think of divvying your customers into segments for an optimal customer retention solution.

By segmenting your customer, you’ll be able to focus on the needs of that particular audience. The more you know about them, the better you can address their goals and perfect your own marketing efforts to align with their needs. Think deeply on the types of customers you attract or wish to gain. Can you divide customers into age, gender, or whether they have specific goals? Another way to think about them is what marketers call “descriptors”.

Descriptors are the characteristics that define a certain group of customer.

They empower you to delve into customers’ profiles so you can carefully determine who your own audience is. Again, when you truly know your customers—or the audience you wish to reach, you’ll be optimizing the churn rate.

infografic how you segment customers

The infographic shows the various segment descriptors to jumpstart your preparation process. You don’t have to use all these groups, but it’s helpful to know all of them as you build your business.

Customer retention demands careful planning and organic growth. Keeping customers is more of an art than a science. By paying attention to the questions you ask, you’ll know your customers more intimately and therefore, decrease the churn rate.

Shore manages your day-to-day business, giving you the freedom to service your customers.

We handle the daily, so you can focus on the grind.