Customer Attrition

Category: Marketing KPIs.

Customers don’t always stay with a company forever. For multiple reasons, they leave, and you are left with fewer customers than before. There is a way to measure the rate at which customers leave. It is called customer attrition.

If you’re on this page, you probably want to find out more about it. So, let’s get started and see why it’s important.

Definition and Interpretation

Customer attrition is basically a rate that shows how many customers choose to put an end to the relationship with your company. Most of the times, a company classifies a client as churned after a certain amount of time, when the customer had no interaction with the site and no purchases.

Usually, service-based businesses such as internet service providers that are largely driven by promotional offers are the most affected by the customer attrition. Still, every business that is dependent on revenue from constant customer relationships should take this metric into account.

When companies analyze the data and using it to predict future behavior of the market, companies make distinctions between involuntary and voluntary attrition. They basically show whether a customer gave up on your online shop due to dissatisfaction or not.

Involuntary attrition happens when customers have personal reasons for leaving, such as deaths, health problems or relocation to another area. Voluntary attrition occurs when the client leaves in favor of other company. Most times, businesses focus on voluntary ones when analyzing attrition.

Leaving Customers and Ways to Reverse It

Let’s face it: companies can make the worst assumptions when customers leave, and they may become desperate and fear that the business will die. A big contributing factor in a client’s departure is the lack of communication between the parties.It allows businesses to overlook certain realities when it comes to attrition:

Customer Experience Should be a High Priority

Customer feedback is important and should be taken into consideration. Therefore, businesses should really think about it and encourage the team to answer to customers and solve any problems.

Dissatisfaction Builds Over Time

Companies usually believe that there is a certain event that caused customers to leave. Most of the times, though, whereas events may trigger it, it can only happen after a long chain of dissatisfactions.

Every Problem Should be Fixed

Many businesses think that solving one problem that causes the downfall will magically close that door and open one that only brings sunshine. However, there may be multiple problems causing it, and each one should be taken care of.

How is it Measured?

Churn can be measured in multiple ways. Some businesses focus on net attrition while analyzing, and others measure the gross attrition. Some ways to measure it include:

-Calculating the churn percentage against the whole customer base

-Calculating the churned percentage of the business on a repeating basis

-Counting the number of lost customers

Final Thoughts

Losing customers is never pleasant, as it can have a bad impact on your company. For this reason, customer attrition should be used. Measuring the number of customers you lose can help you reverse the process because you find out you have to solve problem areas.

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