Loud Thinking

Avoid Common Traps When Measuring Customer Turnover

Acquiring new customers is expensive, which is why you want to attract and keep the right customers. One way to measure whether you’re doing this is to calculate your customer churn rate — just make sure you avoid these common mistakes:
Don’t look at churn as simply a number or metric. Think about the behavior behind the number. Ask: What are we doing to cause customer turnover? What are our customers doing that’s contributing to their leaving? How can we better manage our customer relationships to make sure it doesn’t happen?
Don’t believe there’s a magic number. What’s acceptable varies by business model and depends on how quickly and efficiently a company can acquire customers and how profitable they are in the short and long term.
Don’t assume you have a retention problem. Often, a high churn rate is because you’re attracting the wrong kinds of customers in the first place.

Adapted from “The Value of Keeping the Right Customers” by Amy Gallo.