When you look at your churn rate, the percentage of members or subscribers that stop using your service or cancel during a time period, such as a month or year, your CRM should be able to tell you how many people canceled during a time period from the start to the end. There is a specific formula you can use to calculate your churn rate. Take the number of members you lost
divided by the total members at the beginning of a time period and multiply that number by 100.
For example
Members at the start of the year: 900
Members lost in that year: 200
200/900 X 100% = 22.22% yearly churn rate
The first step to determine if you are losing too many members or if you have a high churn rate would be to calculate the churn rate. You can choose to do this by month, quarter, or year. A great churn rate for a recurring membership business would be anywhere from 5-10%. You are doing very well if you can stay under 5%
If you are sitting anywhere above that, there is room for improvement. There are two types of churn voluntary churn, when the member made a choice to cancel or leave your business, or involuntary churn, when a member leaves due to unintentional loss of access. Research shows that payment failures can cause up to 50% of your churn. It is far easier to reduce involuntary
churn than voluntary churn. However, both involuntary and voluntary churn can always be enhanced.
Ways to stop losing existing customers and improve churn:
-Intelligent failed payment recovery: businesses can recover up to 90% of failed payments and stop cancelations to avoid customers churn.
-Account Updater: Proactively update member’s information on expired cards, lost cards. Being proactive with customers leads to increases in customer feedback and can maintain a high customer retention rate.
-Engage with your members: Have a text, phone call, or email service that connects to your members often. Offer surveys and get to know your members on a more personal level so that you can maintain customer retention and reduce customer attrition.
-Improve your customer service: Customer service is key to retaining members who expect quality and loyalty to your business. Poor customer service always leads to churned customers and more and more customers lost.
-Offer incentives or promos: Everyone loves a discount or free gift. It is proven offering upgrades or gifts helps prolong your average member lifetime while opening the door for new customers.
-Use Data and Analytics: Your CRM or payment suite should give you real-time data to better understand your members and why they are staying or leaving. This data can help you pinpoint where some of your churn is coming from.
Measuring Customer Satisfaction and Business Success
Knowing your churn rate lets you see how members value your business and if they stay engaged with you. Knowing how to reduce customer churn and increase your average member lifetime value is essential. Having high churn will significantly impact your business revenue and the perceived value of your product or service. It costs ten times more to gain a new member than to keep an existing member. You do all the work to gain a new member, so keeping that member through proactive customer service, promotion of high customer success, and customer loyalty should be just as important.
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