How to Improve Customer Retention With Churn Analytics

Analytics opened on a MacBook which shows the sales and customer retention

So we all know that acquiring a new customer is not only resource extensive but also costs you way more. 

For example, according to Invespcro, it costs five times as much to acquire a new customer as it does to retain an existing one.

Therefore, customer acquisition cost (CAC) tells us that it’s expensive to onboard a new user/customer. Whereas it’s much cheaper to make the old ones stay. 

This is why we are going to talk about churn analytics which can improve your customer retention. 

Before that, let’s understand a bit about churn analytics. 

What is Customer Churn Analytics

Churn is the term used to describe when a customer cancels their service with a company. 

The term comes from the idea that by canceling, the customer has “churned” through the service provider and is no longer receiving any value from them. 

A churn rate is usually expressed as a percentage of customers canceling each month.

Let’s say the average churn rate for a cell phone company is about 10%. That means that for every 100 customers they have, 10 of them will cancel service each month. 

Therefore, churn analytics is a way of measuring how successful you are in keeping your customers happy. It’s calculated by measuring how many customers leave your business over a certain period of time.

In simple terms — we can say that churn analytics allows us to understand why some customers are leaving, and how we can prevent it. 

Ways to Improve Customer Retention Using Churn Analytics

1. Define Your Metrics and Churn Types

You need to define what metrics & KPIs you want to track. A metric is anything you measure, such as monthly revenue or average revenue per user (ARPU).

Metrics are important because they tell you how well your business is performing and whether there is any room for improvement. 

For example, if you’re tracking monthly revenue but it’s steadily decreasing over time, that could mean that your customers are churning out faster than the new ones coming in. 

If this happens too often, then the company won’t survive long enough for its cash flow problems to resolve themselves. 

To avoid this and ensure that everyone is satisfied with their services/products, defining metrics ahead of time ensures that everyone knows exactly what needs to be improved before attempting anything more complicated. 

2. Start Tracking Churn to Create a Baseline Benchmark

You’ll see a lot of churn statistics thrown around, but it’s important to first establish a baseline benchmark. 

Once you have that in place, you can use your churn data to make improvements and conversions.

Churn is calculated by dividing the number of customers who canceled their accounts by the total number of customers at the end of a period. 

To show it, we’re going to calculate net new customer acquisition and cross-sell/upsell churn:

  • Net new customer acquisition: Number of customers acquired through marketing efforts (paid ads) divided by the total number of purchases during a given period
  • Cross-sell/upsell churn: Number of customers who purchase additional products or services from your company divided by the total number of purchases during a given period

3. Use First-party Data to Track Customer Behavior Over Time Across All Your Channels

It’s important to use first-party data to track customer behavior over time across all your channels. 

With the help of churn analytics, you can get an accurate picture of your customers and their behavior. 

First-party data is information that you collect from your own customers, like their names, email addresses, birthdays, and other details.

By collecting this type of information about your clients, you can see what they have been doing with the product or service for which they are paying (or not paying). 

You will be able to determine if there is a need for improvement in certain areas or if there are any problems with either the product or the service itself.

Also read: How to Get Maximum Sales by Predicting Consumer Behavior

4. It’s Important to Learn What Your Customers Want & How They Behave So That You Can Keep Them

Customer retention is an important part of business growth. In fact, it can be the difference between being successful and struggling to thrive. 

It’s important to understand what your customers want and how they behave when you’re trying to keep them as well as attract new ones. 

But here’s where things get tricky: not all customer data is created equal, so it’s important that you collect the right kind of information from the start if you want your churn analytics strategy to be effective.

Once you’ve got a good handle on what type of customer data will help improve retention rates. And how customers interact with your company in general — you’ll need some sort of system or platform for storing this information (think Excel spreadsheets or Google Sheets). 

From there, there are two ways forward: either hire an analyst who can interpret all this data (this can get expensive), or create machine learning models that predict which customer segments are most likely at risk of leaving based on their activity over time (this takes more effort up front but saves money down the road). 

Also read: How to Leverage Historical Data & Predictive Analytics to Improve Customer Experience

5. Churn Analytics Can Help You Understand Why Your Customers Are Leaving & How to Improve Your Customer Retention Efforts

Churn analytics are used to identify the best ways to retain customers by analyzing data from various sources such as CRM, billing, and support systems. 

This information can be used to help you identify the best ways to retain customers by providing insights into what factors affect churn and how different types of customers react differently.

The main advantage of churn analytics is that it provides an unbiased view of why your customers are leaving which gives you insight into where you should focus your efforts when trying to improve customer retention rates.

Also read: 7 Ways to Turn Data Into Actionable Insights

Summing Up 

With these tips in mind, you’re ready to get started on your customer retention strategy. 

If you have any questions about the analytics process, just let us know — we understand that it can be tricky! 

But most of all, we hope you keep churn in the back of your mind as a business owner. Because churn can seriously impact your bottom line, and it’s not something to be forgotten. 

By making use of analytics in this area, you can truly maximize the lifetime value of your customers and keep them around longer than ever before.