How to Fix Your Churn Problem Using Data Intelligence

Updated: Sep 30, 2021


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Customer retention is the pillar for growing your business.


Customer retention is particularly important in the SaaS (software as a service) industry, where millions of businesses are fighting to provide consumers with similar cloud-based apps and software solutions.


Email, calendaring, and financial office tools are common software services that consumers purchase through an ongoing monthly subscription.


Consumers are free to select any product or service from a wide range of software providers. These software providers, however, could lose out on a lot of customers if they don’t analyze their churn rate.


What is Churn Rate?


A company’s churn rate is the rate at which customers are leaving your business to spend their money elsewhere.


Your customer churn rate can increase for several reasons, like if you neglect your market or raise your prices. On the other hand, a high churn rate with no explanation also indicates that your company has a churn problem.


Churn Analysis Meaning


Businesses analyze their customer churn for new strategies on how to reduce it.


A churn analysis uses data intelligence to increase your customer retention rate, but there are many other insights that a churn analysis provides businesses with.


Analyzing churn data helps your business keep track of KPIs, establish customer behavioral patterns, segment your market, enhance your customer touch points, among other observations.


Analyzing your customer base allows businesses to give their markets a better customer experience.


Regularly assessing your product through a churn analysis will maintain your churn rate and add to your bottom line.


Why is Customer Churn Important?


Every business should take advantage of analyzing their annual churn rate to reduce churn.


Analyzing your customer success rate helps businesses address root problems that are deflecting valuable customers.


Other advantages of analyzing churn include:


Lower Customer Acquisition Costs (CAC)


Churn leads to higher CAC because acquiring new customers costs more than maintaining existing ones.


Despite whether you have the strongest marketing strategy or most effective approach to new leads, every customer costs money to obtain.


The higher the number of customers that you churn, the more money that you spend to compensate for the loss of business with new ones.


In addition, concentrating on new customers neglects other parts of your business that could drive revenue.


Actively analyzing your churn simultaneously decreases CAC and increases your earnings.


Focus on the Areas Where You’re Losing Customers


Expanding your business with new customers is great for any company. On the other hand, neglecting to maintain your existing customers contributes to your churn rate.


Instead of putting your efforts towards new customers, you should be maintaining your old ones. Finding new ways to improve will enhance the overall performance of your product.


Customer service has a lot to do with retaining customers, and your markets will notice that in the long term.


If your current customers are satisfied with your product, your new ones have no reason not to be, too.


Obtaining new customers before improving your process ultimately risks a spike in your churn rate.


Reasons for Customer Churn


Customer churn happens for a variety of reasons:


Cancelled Subscriptions


Customers will cancel their subscription with your business if your product was a poor fit, lacked functionality features, or failed to achieve the objective.


Switch to a Competitor


The purpose of churn data is to analyze your own company’s operations over a period of time. However, you should compare yourself to the competition when your churn is high.


Consumers typically switch to competitors for apparent reasons like price changes, deals, packaging, innovation tactics, and so on.


Whether your competition offers your product at a better price, or is more responsive to the changing needs of your customers, your rivals could be the cause of a high churn rate.


Lack of Subscription Renewals


Churn isn’t always the result of direct dissatisfaction with a product or service.


Less subscription renewals per month indicates that your customer is losing interest in your product. When a customer drifts away from a product or service, it is likely because of the lack of communication between them and the provider.


Closing an Account


Even if a customer is leaving your business fulfilled with the services you’ve provided, it’s still a form of churn.


Closing an account is seen as an opportunity loss and expense because you have to pay to find new customers to replace them.


Churn Indicators


Here are some indicators that you may have a churn problem:


#1. Unpredictable Churn Spike


Your company’s churn rate should be predictable each month. If your customer turnover is unexpectedly high, that indicates a problem. Whether your marketing lacks brand awareness, or your competitors offer better pricing, abrupt churn spikes are a red flag.


#2. Pricing Change Causes More Churn


If less customers are renewing your software after you implemented new pricing, the value of your product has shifted for them. An abnormally high churn rate indicates that you misread your customers, their values and what they can afford.


However, a B2B churn analysis can help your business pinpoint why customers discontinued their relationship with you, and what you can do to retain the ones you still have.


#3. Sales Team is Struggling to Sell


Your sales team tells you that they’re struggling to sell your product, yet your business strategy hasn’t changed. Churn problems aren’t always at the end of the customer lifecycle and oftentimes, can be foreshado