Understanding Churn Rate and Five Tips to Retain Engagement

Customer acquisition is one of the most important components of a successful business. Finding and attracting new customers is the only reliable way to sustain and expand a business’ performance. But what happens to customers after you have made a successful sale?

Customer retention is the second half of business success. Being able to retain customers can make the difference between spending all of your time and money on acquiring new customers and using your resources in other areas. It is also something that business owners can easily ignore if they are too focused on just customer acquisition.

Businesses often fail to retain customers for a variety of reasons. Sometimes, the business model itself doesn’t make it easy for customers to repeat their business. Other times, a sole focus on customer acquisition leaves retention neglected.

Regardless of the reason, a lack of returning customers leads to a higher churn rate which can harm the business performance. Thankfully, customer retention is easy to manage with the right understanding and strategies.

What Is Churn Rate?

Simply put, the term “churn rate” is a measurement of how many customers a business loses over a given period of time. In other words, it’s the number of customers that fail to buy more products and services or to further engage with the business.

Measuring churn rate is rather simple. First, you have to select the given period of time you will measure. A week, a month, or a year all represent common time frames that you can work with.

For any given time frame, you have to take the difference between the number of starting and finishing customers. This answers the question, “How many customers did you actually lose in this time?”

The higher the rate, the more customers you lose over time. It is common for a business to have a churn rate in double digits. If it is over 50 percent, however, it may be a sign that improvement is required. Using the right strategies and methods, you can work to reduce this rate without harming your customer acquisition process.


There are several techniques you can mix and match to increase customer retention over a given period of time. All of these techniques have one important thing in common: they all increase value for the customer. Customers will rarely stick around if they have no reason to keep doing business

This is the very reason you acquire customers in the first place. Something about your products, services, or overall business experience attracts new customers. After the initial sales period is over, customers will decide whether to stick around or return in the future.

Added value is the key to customer retention. Anything you can do to keep customers returning time and time again will help with this endeavor.

Strategy One: Diagnose the Problem

Before you can actually lower your churn rate, you have to determine what exactly is causing the loss of customer retention in the first place. Since there can be a plethora of reasons for a high churn rate, you have to diagnose the problem using the information you have available. Common sources of information include physical and digital interaction, customer information, and sales histories.

A customer database full of important personal, demographic, and sales information is your friend in this task. If you can keep track of the last time a customer purchased a product or service, you can immediately see how many customers you lost during a specific period of time.

Customer information may also reveal potential reasons for the high churn rate. If a certain product or service isn’t selling as well as others, sales histories will reveal this.

Communicating with existing customers can also help. Getting feedback on your business, products, and services will provide valuable information that will reveal hidden issues quantitative information alone can’t. Speak with customers through your website, social media, and physical locations if you have them.

Strategy Two: Engage With Customers

Quite often, customer loyalty is more than just finding value in the products and services of the business. Many customers are attracted to businesses that offer communities and relationships.

Just think about the last time you went into a retail store with friendly customer service. The engagement and communication can create a positive experience that promotes future business.

If you have a physical storefront, make sure your customer service is warm and inviting. Use customers’ first names, if possible. Have casual conversations to inquire about their likes, dislikes, and daily happenings.

Online, use social media and your website to engage with customers. You can communicate current store news through mediums, such as social media and email. You can also interact with customers through social media, as long as the content is appropriate for your business.

Strategy Three: Offer Unique Promotions

To increase customer retention for specific products and services, you can use the tried-and-true method of the promotional deal. Whether it takes the form of an extended promotional campaign or simple coupons, deals offer extra incentive for returning customers. This is where many businesses make a crucial mistake.

Business owners will sometimes use incentives like deals and promotions to attract new customers. For example, a certain product may be 25 percent off if this is your first time in the store. While this can be effective for customer acquisition, it can have an adverse effect on customer retention.

These types of deals often discourage customer loyalty. Over time, returning customers begin to expect greater rewards and treatment for their loyalty. Reward programs that fail to meet these expectations won’t be as successful in the long run.

Divide these incentive programs up so you can target both new and returning customers in different ways. Email marketing is a great way to tackle both groups of customers.

Strategy Four: Memberships

To take incentive rewards up to the next level, create a membership program for returning customers. This can be as simple as signing up to a subscription list or membership online or in-store.

Membership programs tend to offer extra value to returning customers through exclusivity. Particularly if membership is free or earned through customer loyalty, this will create a unique experience for returning customers. It also creates more incentives for new customers to stay on board for the long haul.

The trick to a good membership program is clarity and simplicity. Don’t bog down potential and existing members with an overwhelming amount of incentives.

Ideally, tailor the extra value they will receive to the interests of the customer. Analyze what products and services they are typically drawn to for a start.

Strategy Five: Expand Your Value

Sometimes, customer loyalty and retention can be increased through something completely unrelated to your products and services. For example, content marketing has become a popular form of customer retention in recent years.

Originally meant for customer acquisition marketing, content marketing offers potential customers additional information and stories to consume. Just like a popular website, this type of information attracts customers by offering them something they cannot get anywhere else.

Content marketing is also a good way to build your business brand. The trick is to provide content that is both interesting to the customer and related to your business.

In other words, you don’t want to provide information that is completely disconnected from the types of products and services you offer. If you have an existing brand, the content should also fit to avoid any confusion.

You can provide additional content in any number of ways. Digital channels like your website and social media platforms are common for content marketing. You can also provide this information in-store, through mail, email, or any other means of communicating with customers.

Lowering the Churn Rate

True success relies on a strategic approach to increasing your customer return rate. It isn’t enough to offer a few deals here and there without understanding the core problem. This means you have to approach the process step-by-step.

Start by understanding the problem areas. Why are customers leaving your business? Once you begin to identify these issues, you’ll have a better understanding of how to approach the problems overall.

Second, think about what types of strategies and approaches will help solve the problems. Is customer engagement an issue? If so, increase your customer service efforts online and in store.

Do customers like specific products and services you offer? If not, focus on more successful offerings or increasing the attractiveness of the problematic ones.

Finally, keep up the effort. Lowering your churn rate won’t happen overnight. Sometimes, the best you can hope for is retaining future customers.

Other times, it may be possible to bring back old customers or to keep the ones you have. The important part is to keep at it and change things that aren’t working as time goes on.

Jim Rulison

Jim Rulison serves as the CEO for Media Loop LLC (formerly the National Center for Pain Inc). Jim oversees the day to day operations for all lead generation accounts, with a concentration in the healthcare industry. Before joining Media Loop, Jim was the CEO of PME Home Health and was the founder of one of the nation’s first virtual call centers. He lives in Rochester New York area where he and his late wife raised their two children. Jim spends his free time with his family and enjoying cooking and his two dogs.

The post Understanding Churn Rate and Five Tips to Retain Engagement appeared first on Torque.

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