What is customer churn?

As your business grows and becomes bigger and better at what it does, there is one inevitability that is always lurking just around the corner.

You are going to lose customers.

No matter how hard you work or how amazing your product is, at some point people just won’t come back. They will go and buy from someone else.

While this is sad, and in some cases quite worrying, it is absolutely inevitable. No company, no matter how amazing, can avoid losing customers.

It’s what we refer to as ‘customer churn’. Customer churn happens when you lose customers as part of the natural process of running a business over time.

The difference between successful and unsuccessful companies is whether you allow the churn to get out of control.

A definition

Customer churn is best defined as the percentage of customers who stopped using your product or service during a particular time frame.

This means the number of customers you lost during the last financial quarter, as a percentage. Or the lost customers in 2018. Essentially, it’s a percentage figure that gives you an idea of the size of the chunk of customers you lost during a certain time period.

To work out your customer churn, simply divide the number of customers you lost in the time period (say a month) by the number of customers you had at the start of that time period.

Kind of like this, really (with thanks to Adrian Swinscoe)

I am hopeless at Maths, so I found this really handy churn rate calculator, which not only works out the churn, but also how much it costs your business.

So why do this?

It’s easy to dismiss losing a small percentage of income every now and then, but if you continually use a churn rate calculator, as a freelancer or small business, you will soon see how important it is to reduce churn.

I have talked about how important it is to hold onto customers (and that is, basically, what this blog is all about), and customer churn is a great and useful way to highlight the impact of not doing that. Reducing your churn rate is a really big part of your success.

If you have a high churn rate, attached to a significant loss in revenue every month, for example, you’re failing. It means that your work is not good enough to make people keep giving you money for it.

Seriously, that’s what it means.

If you’re a freelance writer and you land a great client that has plenty of work available, and you lose them within a few weeks, what does that tell you?

In addition to that, a high churn rate should be a strong and urgent warning sign for you. It means you have to improve what you do, possibly on a huge scale. People are simply becoming unhappy with your work.

Of course, you could be a freelancer or small business owner who just wants to ‘bag and run’ clients. One shot work, in other words. But is that really what you want? Is that healthy? What happens when your selling isn’t working out too well one month? It’s a good job your customer churn is low, right?

You get the picture.

Why customer satisfaction surveys are important

If a business is to stand out in today’s hyper-competitive marketplace, it has to excel at customer happiness. This builds the foundations of customer retention, and as we all know, this makes running a business a whole lot easier.

A customer satisfaction survey is an effective way to create future customer happiness. The simple truth is that if you know what customers want, and what they don’t want, you have the ability to make more people happier when they buy from you.

A customer satisfaction survey is a doddle to arrange. Even the most basic customer relationship tools (like Mailchimp) have customer relationship survey options. And then you have your dedicated survey platforms (such as SurveyMonkey) that allow you to ask questions on a large scale.

And if you don’t have access to any of that, you can just create a spreadsheet and send out surveys individually.

But creating a customer satisfaction survey is vital for a number of reasons.

Customers are becoming less loyal

Maybe it’s something to do with the fact that there is much more choice these days, but customers are not necessarily going to stay with one provider or manufacturer time and time again. They can always go online and find a similar product or service that is cheaper or is delivered quicker.

If you have a survey, and you are sending it out to customers, you will get responses that give you clues (or clear instructions) as to how you can make your offering more attractive to them.

You can’t keep hold of them all, but some customers will let you know what it takes to keep them. And they will do it through a response to a customer satisfaction survey.

It feels nice

Again, in the huge and often impersonal online world, having contact with a company on a more human level makes a big difference.

A survey is one extra piece of customer-focused marketing. In fact, throw that slightly cynical last sentence to one side for a moment. A survey is one extra piece of human interaction online. And that one extra piece could mean a customer feeling more connected to your company.

And that means that they will be more likely to stay with you.

About that loyalty thing again

The Harvard Business Review undertook some research back in 2014 that showed that a subscription-based business (as in a membership site or club, or a magazine site) can see massive loyalty as long as customer satisfaction is there.

With thanks to HBR

A customer satisfaction survey measures that customer experience you see on the bottom of the table. If you can use a survey to monitor satisfaction, and then implement actions that are informed by your findings, you’re looking at loyalty.

It’s clear that customer happiness and great customer service bring about loyalty from customers. It’s also clear that acting upon what you discover through a customer satisfaction survey can help to build that happiness.

Even if you’re a freelancer, working for yourself, it takes no time at all to create a good customer satisfaction survey, and the benefits can last for years.