By Margie Zable Fisher

You probably know how many new customers you brought on this year. But do you know how many you’ve lost?

Keeping track of the customers you’ve lost, or churned, is not fun, but it’s important to your business’s profitability. Otherwise, how will you prevent it from happening in the future?

Consider this: Research shows gaining a new customer costs five times more than keeping an existing customer. Plus, loyal customers can help your business grow.

In some industries, even a 5% increase in retention leads to more than a 25% increase in profit.

Ready to retain more customers? Time to undertake a customer churn analysis.

Customer Churn Rates

Before you can start any analysis, you’ll need to determine the extent of your problem.

A good first step is determining the churn rate in your business, or the percentage of customers you’ve lost over a specific time period — usually monthly or annually. This is helpful to understand the magnitude of your issue and compare your churn rate to others in your industry.

The calculation is simple:

(Lost Customers / Total Customers at the Start of Time Period) x 100

Example: 22 lost customers / 116 customers this year = 22/116 x 100 = 19% churn rate

You can use customer relationship management (CRM) software, like Thryv, to quickly pull up the numbers of lost customers and total customers.

Once you have the churn rate, compare it to the churn rate in your industry. You can usually find this information in industry or association reports, or online.

Some types of businesses, such as commercial landscaping companies, have a low churn rate (around 4-5%), and others, such as primary care physicians, lose 48% of their patients every year.

The industry numbers will let you know if you are in step with others in your industry, or doing much better (or worse). You’ll also have a better understanding of what’s realistic.

For instance, if you’re a primary care physician, you may have a goal to keep churn at 30% or 35%, which would still be much better than the industry. However, a goal of 10% may be unrealistic.

On the flip side, if you’re a commercial landscaping company with a 15% churn rate, you might want to not only analyze your customers’ practices, but see what your competitors are doing differently.

Why Customers Leave

Every business will lose customers each year due to natural attrition — clients move away, go out of business, or no longer need your services. This is a normal part of doing business. However, the majority of lost customers leave for other reasons. Here are some common ones:

  1. Bad customer service. This includes everything from rude front desk personnel to long wait times, lack of understanding, difficulty setting appointments, not getting answers quickly and more.
  2. Poor communication. Have you had a customer say the price you’re charging is different than what they thought it would be? It’s very possible a verbal quote or even something in writing was unclear. Do your customers feel neglected after they’ve paid you? These are some examples of opportunities to improve communication.
  3. Expectations aren’t being met. Setting clear expectations with your customers is crucial to their satisfaction. For example, before you do a landscaping job, will customers know exactly what their gardens will look like and what upkeep is required?

    When you set up a whitening treatment, do patients know their teeth will likely be several shades lighter, but probably not tooth model-worthy? Did you agree to a 60-day training plan to get your client ready for a 5K, knowing it would be unlikely?

    Maybe you think any progress is good progress, but not meeting agreed upon expectations is a key ingredient in churn’s recipe.

Analyze Your Customer Churn

Figuring out why you’re losing customers and how to prevent it from happening can be time- consuming. Luckily, your CRM software can make this task easier and faster. Your CRM should be able to offer you:

  • Survey insights.
    Insights from customer surveys are the information gold standard for churn analysis. CRM systems can typically integrate with survey software to send the surveys to your customer base and then receive results. Review and analyze the feedback to learn what customers love and what they’d like your business to do differently.
  • Online review monitoring.
    Every service provider knows online reviews are important. Most CRMs can automatically and quickly find and share client reviews from the internet. You get real-time feedback on any issues, allowing you to fix problems quickly.

    You’ll also be able to view your competitors’ online reviews, helping you learn details about their customer service and communication, and how they meet expectations. Use this information to improve your own operations.

If you use Thryv CRM, you have access to a free Business Analysis Scan. The scan scores your online reputation on a scale from 0 to 100. It uses reviews, online listings, your website and social media to calculate your score, and then provides feedback on how to improve it.
  • Click-through rates.
    It’s easy to pull CRM reports for those customers who don’t open your emails and/or click on links. These people likely would be less loyal to your business, and therefore not where you should focus your efforts.

How to Reduce Customer Churn

First, make it a priority to immediately fix individual problems.

If a customer takes the time to participate in a survey, leave a review, or provide one-on-one feedback, then you should handle any issues quickly and completely.

When possible, let your team members access survey data and online reviews. Then empower them to address issues. When you’re the only one who can make the situation right, carve out the time to do just that.

Second, create a special program for customers you’ve deemed at risk — whether through survey results, online reviews or low click-through rates.

You can create a special group for these customers in your CRM that sends additional personalized online and offline communications. These communications can include special offers, phone calls, even cards. That may provide the extra attention and communication they need to stay.

Finally, once a problem has been identified, make sure to fix it at the source. If someone mentions a rude employee, provide constructive feedback and training if necessary. If a process is broken, don’t just apologize; fix it.

Final Thoughts

If you’re looking to improve your business, consider conducting a churn analysis. Identifying and fixing the reasons why your customers might leave are important steps in creating a healthy, profitable business.

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