The Importance Of Keeping Customer Churn Rates Low As Possible

Customer Churn Rate (CCR) is one of the most important metrics when it comes to determining where a company is at currently, and where it’s very likely heading in the near future.

Meeting with existing client

Easy Definition of CCR

CCR, in the most basic of definitions, is the rate at which current, formerly loyal customers are choosing to leave your business and go elsewhere.

Your churn rates will tell you a lot about how the company’s doing, and which areas can stand for the most improvement:

  • What products customers like most.
  • Identify products that have become outdated.
  • How your value-added-services stack up against the competition.
  • Competitiveness of your customer service and sales staff.
  • The effectiveness of your marketing efforts.

There is, of course, many other things your churn rates can tell you. That is, if you’re able to tap into those customers who’re leaving and get them to tell you what made them make the decision to go.

For instance, look at how fast most cable, Internet, and mobile service providers flood your mailbox with special offers and survey requests after you leave – even when it was frustration with their products or support that caused you to go in the first place.

New customers Lego
photo credit: Stavos / Flickr

What Makes for a Good CCR?

It’s great to set goals for keeping your CCR levels as low as possible. Zero would be a great number to shoot for, but all but impossible to achieve. Unfortunately, there’s no way for me to tell you where those levels need to be for your specific company. Some industries experience terribly high churn rates, others are fairly low by comparison when quality and service levels are kept in check.

Some examples by industry:

  • Credit card companies, banks, and cellphone providers regularly have churn rates of 20 – 40 percent.
  • Newspaper, magazine, and other media subscription services can experience churn rates of over 50 percent.
  • SaaS companies typically have some of the very lowest churn rates of all businesses, at just 7 or 8 percent.

Businesses who have a good corner on their respective market will enjoy lower churn rates, but competition moving in will almost always cause massive CCR increases – at least temporary customer migrations, until they test the waters and find out they were happy where they were originally.

Customer Churn Rate graph (CCR)
via Smart Insights

3 Tips to Reduce Churn Rates

The best way to reduce customer churn rates is to be proactive. Don’t give them a reason to leave in the first place. It costs somewhere in the neighborhood of 4 – 10 times more capital to acquire new customers, versus hanging on to existing ones (source). When it comes to getting migrant customers back, it’s obviously going to cost you money in most cases, to properly incentivize those customers.

Even when a customer leaves to test a new competitor, it’s still up to the business to get that customer back. For instance, they might have been happy with the product, but not the service. In such cases, even though you have a superior product, the customer will be hesitant to return, meaning you have to “wow” them back with an exceptional offer of some sort.

So, being proactive is the best plan to reducing CCR…

Here’s a few ways to get it done right, the first time round with a customer:

1. First impressions last forever

Those first few minutes with your product and/or staff are paramount to solidifying a long-term relationship with each customer. Make sure everything, products or services, work flawlessly, and that everyone on the front lines with those customers understands how to provide exceptional service and guidance for your products.

2. Always exceed expectations

This includes not creating expectations that you can’t deliver on each and every time. Salesmen are guilty of this, particularly if they have quotas to meet and the product isn’t rock solid to begin with.

Regardless the scenario, always give more value once a customer has signed on. This includes freebies like limited time discount offers, free consults and other products, and regular follow ups to get invaluable feedback for improving your products and the overall customer experience.

3. Ongoing customer service is the most important

Bringing it all together customer service-wise is vital. Do this right and you’ll keep your CCR as low as the industry you’re in will allow. Every time a customer calls or visits you, the goal needs to be 100-percent First Time Resolution (FTR). This is a relationship management metric used by call centers all over, but it isn’t limited to that industry.

You’ll get stumped, don’t get me wrong. For instance, some customers are just bent on getting way more than they paid for, and will challenge your service staff to the ends of the Earth to get more and more – sometimes you’ll eventually have to politely say “no”.

Just don’t ignore any fair request, and absolutely do not leave a customer feeling like they wasted their time inquiring about something that confuses or bothers them.

For instance:

  • Forcing them to bounce around a phone cue several times to get the appropriate agent to help them.
  • Making them wait more than 5 minutes at the business to speak to someone about the product or service.
  • Ending the communication by telling them there’s nothing you can do to help them any further (there’s always something you can do, including freebies like replacements and service do-overs).
  • Making the customer feel like they’re the source of the problem (they bought from you to solve something, right?)
  • Telling the customer there’s plenty of people doing what you’re doing and they should go there (the competition) if they’re so happy.

Loyalty program for customer loyalty


Never allow yourself to become so comfortable that you think a customer will never leave. It doesn’t matter how good your product is. People are complicated and you need to do everything possible to cultivate and maintain their loyalty.

Churn rates won’t control themselves. A poor CCR and will make or break your business, at any time.