Analyze your customer retention rate

1. Calculate churn by dividing the number of customers who left your product over a specified period of time by the total number of customers you had during that same time period.

Define the moment of churn as the end of the customer’s subscription or term when they choose not to renew, rather than the time of cancellation. Do not include trialers or customers that are expected to be seasonal or episodic.

2. Use a tool like Optimove or CleverTap to identify customer segments that churn differently, and analyze them separately.

A high growth self-service segment may acquire customers much more rapidly and churn many more customers than an enterprise segment. Depending on the composition of your customer base, aggregating them together may skew your churn rate overall and cause you to miss or misidentify problems. Optimove combines a unique mathematical intensive predictive behavior and continual dynamic micro-segmentation system. The tools can help you determine when and why a customer may churn. CleverTap automatically ranks down your entire audience into specific segments based on frequency, recency, and monetary value score. It then groups them into at risk, hibernating, and can’t lose them segments.

3. Pinpoint where in their customer journey customers churn and evaluate why through surveys, customer interviews, product feedback, and internal interviews with sales and customer success teams.

Look for patterns that show commonality in the points at which customers churn or their reasons, to assess what interventions, marketing or other ways, may reduce churn at these points. For example, if customers struggle to complete a fundamental onboarding step necessary for experiencing value, such as pixel placement for a retargeting solution, then subsequently churn, creating additional video and help center resources to get them through this crucial step may positively impact churn.  Similarly, if customers churn shortly after a handoff from sales to customer success, it may be a sign that expectations set during the sales process were not communicated internally before that handoff. Finally, if customers with many unanswered customer support tickets or product requests churn, this may indicate an increased need for responsiveness to customer feedback.

4. Deploy retention improvement tactics that address your most common reasons for churn to improve retention rate.

Prioritize retention improvement efforts that are likely to have a larger impact on your churn: Improve the onboarding experience and resources, and measure improvements in onboarding completion and satisfaction. Create retention incentive structures for every customer facing team. Engage customers across channels, including email, in-platform messaging, and social media, and at critical points in their customer journey where they are likely to churn. Offer a two-way value exchange for longer commitments and repeat purchases.

5. Repeat your churn analysis quarterly to quantify the impact of retention improvement techniques.

6. Collect and analyze NPS, CSAT, and product usage data to identify early signs of disengagement or opportunities for expansion.

7. Prevent involuntary churn by proactively prompting customers to update payment information well before expiration and renewal.

8. Reduce the number of customers acquired who are unlikely to succeed.

Work with marketing and sales to identify customers who are unlikely to be successful and reduce acquisition efforts geared towards those profiles. For example, if your churn analysis indicates a particular vertical has a very high likelihood of churn because product gaps exist for that vertical, you may advise marketing to exclude that vertical in their paid advertising. If you have two or more sites, select the one you intend to analyze.