What is “loss of a customer”?
Customer attrition is the number of people a business loses over a certain amount of time. It tells much about how customers feel about a business’s goods and services. It’s also called churn or turnover.
Companies need to look at customer loss in two different ways:
There are two types of attrition: voluntary and involuntary. Voluntary attrition is when people choose to leave a business. When a customer leaves because of something that can’t be helped, like a failed payment attempt that leads to cancellation, this is called “involuntary attrition.”
There are two types of customer loss: passive and active. Passive turnover means the customer left without doing anything with the business. A customer is said to be actively attritional when they cancel their contract.
A percentage rate is used to show attrition. Businesses use it to determine how good their goods are and how healthy their customer base is.
A low attrition rate means that the product and market fit well, that there are suitable methods for keeping customers, and that customers are happy. A high rate, on the other hand, means that customers are unhappy or that a rival does it better.
Like words
- Rate of turnover
- Customers leaving
- Customers leaving
Why do SaaS companies keep track of how many customers leave?
SaaS companies use a recurring revenue plan. That means they can count on a steady income, which makes it easier to grow, but it also means they have to work hard to keep each source of income. In the SaaS world, it costs a lot to get a new customer, so it usually takes a few months before a customer starts making money for the company.
Getting rid of customers is the opposite of keeping them. That’s why it’s so crucial for SaaS apps. The business makes a lot of sales but will lose money if customers keep leaving before it becomes profitable.
Here are some other reasons why SaaS companies track turnover. Besides that, it’s one of the best ways to tell if a business is profitable.
Make services or goods better.
When many customers leave a business, it’s generally because the products or services aren’t good enough. Companies that keep track of and study their customer turnover rates will know when to look into something further.
After that, they can ask people who do leave why they are leaving. When you get a few dozen responses, it’s usually pretty clear where the offering falls short.
The product team uses this data to fix bugs in the platform, improve the user experience, and add new features that customers want.
Fine-tune your ideal customer profile.
A business’s ideal customer profile (ICP) guides its sales team. The ideal customer is described in terms of where they live, how big they are, what field they work in, their pain points, and other details.
The ICP is only valid when it gives a detailed picture of the kind of person for whom a product is made. When many customers leave a business, it’s likely not selling to the right people.
If this is true, they’ll need to find things these people have in common so they don’t target those groups again. After that, they can do the same for people who seem ready to stay with them for a long time. As soon as they improve their ICP, they can focus on good users who will likely stick around.
Make marketing campaigns better.
Marketing is an iterative process that needs testing, tracking, and making choices based on data. While the business works to improve its ICP, the marketing team can create better messages to reach the right people.
That’s not the end of selling, though. Companies also look at data on customers who leave to determine which marketing methods bring in the most money. So, campaigns can better use their money and reach people likely to buy.
Overall, keeping track of customers who leave helps marketers avoid wasting time and money on people who aren’t a good fit.
Figure out why customers are leaving.
There are many reasons why customers leave, which are listed below. But figuring out the exact cause takes some hard work. Companies can figure out why customers leave by reading feedback and survey answers.
That will help them figure out how to keep people from leaving in the future. People who have left a specific group of customers may agree that the product can’t do a specific task. If that’s the case, there’s something wrong with the accounts they’re after.
The most common reasons why customers leave
Some customers leaving are out of the company’s hands. Budget issues, repositioning of the company, and changing needs that go beyond what the product can do are all things that happen inside the business.
Here are a few main reasons why companies lose employees that they can control:
Not happy with the goods or services
Unhappy customers are the most common reason people leave on their own. People will look elsewhere when they understand the product or service won’t meet their needs.
Customer surveys and comments can help businesses figure out what’s making customers leave early. Taking care of those issues immediately is necessary to keep present and potential customers.
Not Enough Onboarding
Customer onboarding can make or break a business, especially regarding SaaS goods often used across the company. Staff members will turn down a new tool if they don’t know how to use it. And executives will see it as an expense rather than an advantage.
No matter how easy or complicated, there should be the right amount of onboarding materials for every company’s product. This could be a how-to video and an instruction booklet emailed to the customer for a simple consumer product. Everyone might need to be trained in person for enterprise software before they can use it.
Not Good Customer Service
Not being able to help customers is something that everyone hates. People would leave a business for it 96% of the time. A lot of them would leave after just one time.
Businesses are under a lot of pressure to continually provide excellent customer service. This means responding quickly to questions, fixing customer problems quickly, and giving helpful answers in a friendly way.
Going to Work for a Competitor
A customer might switch to a different business for many reasons, some of which have nothing to do with the business itself.
- They work better with different sellers’ goods.
- They got better customer service somewhere else.
- They left because of sales and discounts.
- Someone made a new offering that looks better.
A business can’t keep all of its customers. Other businesses use many different sales and marketing plans, and some of them are sure to work. Even so, you need to know why a customer picks one product over another to determine how to make yours better and stand out.
Problems with billing
Most people who are let go are let go because of billing. Customers may unintentionally cancel their subscriptions if the payment system fails. In turn, this means the business loses both present and potential customers.
Some common payment problems are:
- Cards that have expired
- Payment information that is out of date
- ₷Not enough money
- Wrong customer contact information
- Not managing subscriptions well enough
- Bills that were late or lost
- Wrong charges
Billing problems can cost you more than the lost customer because of chargebacks, returns, and extra customer service costs.
How to Find the Customer Attrition Rate
The rate of lost customers is shown as a number. This formula is used to determine how many people leave a business over a certain amount of time, usually once a month or yearly.
This is how the basic formula for the buyer attrition rate looks:
The customer turnover rate equals the number of lost customers divided by the total number.
To find out how many customers are leaving:
- Find out how many customers there were at the start of the day.
- Figure out how many customers you have at the end of the period. This is the total number of customers you have at the end of the period.
- Take the difference between the last and first numbers of customers. This tells you how many people you lost during that time.
- Split the answer by the number of people you had at the start. This will show you the rate of turnover as a fraction.
- To turn the fraction into a percentage, multiply it by 100.
Say a company has 500 customers at first and loses 50 customers in a month. The turnover rate would be:
Rate of Loss = (50/500) x 100 = 10%
Process for Analyzing Customer Losses
Customer loss doesn’t tell you much about a company’s health. A business needs to look at other factors to figure out how the loss of customers affects the business and why customers leave.
- Collect facts. Getting information from all sources is the first thing that needs to be done to study customer losses. Some of these are customer polls, billing records, and logs of how products are used.
- Look for trends. Once you have all the information in one place, look for patterns between things about the customers (like their age, gender, how often they use your products and their tastes) and the ones who leave.
- Look at the results. You can determine why people leave your service based on the trends you found in step two. If these findings come from what customers say and how they use the product, they should be correct.
- Look at revenue churn to give it more meaning. You should know how much the people you’re losing are worth. Theoretically, you can simultaneously have a high attrition rate and low income churn. Of course, the other way around is also possible.
- Do something. Now that you know why and how customers leave (as well as how much they cost you), you can take steps to cut it down. This could mean starting a loyalty program, improving the tools for new employees, or changing the way customers feel in some other way.
Metrics for Analyzing Customer Attrition
When you look at how many customers are leaving, you should also look at other measures that show how healthy your customers are. To do this, you must look at both your returning and new customers.
The following measures will help you figure out why customers are leaving:
- The customer retention rate (the opposite of customer attrition) is the number of people who stay with a business after a specific time.
- Rate of customer loss—In your CRM, this may be called “churn rate.”
- Customer involvement rate: How often and for how long do people use your product and marketing materials?
- A customer satisfaction score (CSAT) is a number that shows how happy your customers are with your product or service. It is based on a poll and is found by taking the mean of all the answers.
- A customer health score is a general way to determine how well your ties with your customers are going. It takes into account things like keeping customers and keeping them interested.
- The Net Promoter Score (NPS) determines how likely a customer is to tell a friend, family member, or coworker about your product or service.
How to Keep Customers From Leaving
There are a lot of things businesses can do to keep customers from leaving. What their main problems are will determine what to do.
- Talk to Customers Who Are At Risk
- If a business wants to keep customers from leaving, at-risk customers are easy to get. There are a few ways for businesses to spot them:
- ₷Not good customer reviews
- Not interested in the product or company content
- Support tickets that are made a lot
- Having a low NPS or CSAT score
Customers about to leave can be kept from leaving for good if you reach out to them first. It can also help you figure out why people aren’t interested in anything in the first place.
Make services or products better.
As you might expect, the user experience is significant when losing customers. People will not hesitate to buy from someone else if they find your product or service hard to use.
To find weak spots, a full UX audit that includes user testing and customer feedback is an excellent place to start. Focusing on making the product easy to use, ensuring that critical features are easy to get to, and ensuring no bugs will usually make a big difference.
Better help for customers
Customers are more likely to trust a business if they can ask for help. Offering vital customer service (for example, through live chat, phone, or email) lowers the chance that they will leave because they can’t get in touch with you or wait too long for an answer.
Customer service is accessible with helpdesk software and an AI robot. Chatbots take care of simple customer service problems without needing a person to help. This frees up customer service teams to handle more complicated problems quickly. The helpdesk program keeps everything in order.
A better way to welcome customers
The hiring process tells you if a customer will be happy with your service or product. Customer loss will happen if the hiring process isn’t done well.
To make a good onboarding experience, you need the right mix of technology and human elements:
- Canned emails
- Product walks with a guide
- Messages and help bubbles inside the app
- Documentation and user guides with your brand on them in PDF format
It’s a good idea to let customers get information by email to make the onboarding process better. These could be how-tos, tips on improving business processes using your product, or changes to features already there.
Improve pricing
Getting price optimization right is not always easy; most businesses don’t get it immediately. But it’s important to do because it can help make your product or service more appealing and keep customers from leaving.
It would be best to look at market trends, what your competitors are selling, and customer feedback when you decide how to set your prices. Are the prices you’re charging now too high? Are people moving because of it? Does the price of your product now represent how much people think it’s worth?
Actively talk to your customers.
This kind of customer service goes both ways. It’s possible that some customers aren’t engaging because they aren’t getting the suitable material (if any at all). To keep your customers interested, you can send them weekly emails, blog posts, and webinar invitations and hold events just for them.
It’s essential to answer immediately after someone contacts the customer success team. You should set up a service system that immediately answers all support requests. After that, you won’t have to worry about leaving someone open.
Keep adding value.
During the whole customer journey, businesses need to add value. Companies must keep up with customer feedback and trends as part of this ongoing work.
Value-adding usually happens at the same time that a company grows. Some of the things it has are:
- People can get new material that helps them use the product, run their business, or live better.
- Research and market facts that are made public and show customers what’s going on in their field
- New parts or functions that make the thing better or more complete
- Buying things that help the business offer a more comprehensive range of products
- Partnerships for integration that help some customers improve their processes even more
- Price cuts or discounts that reward customers who stay loyal
Getting to know and building ties with your customers is critical to keeping them. They will only stay with you if you work to make them valuable and unique.
Ask Customers What They Think
The best way to keep track of people leaving is to talk to them. Even if people are happy, they will still want something to improve. You should put the wants and needs of all your customers first, not just those likely to leave.
Businesses should pay attention to a few key areas when asking for customer feedback:
- Service: How helpful were the people who helped with customer service? Did they quickly answer your questions?
- Communication: How was it for people to talk to the business? Did it make them feel important or ignored?
- Ease of use: Is the item simple to handle? Was the process of getting started quick and easy to understand?
- Content: How helpful are the blogs, emails, and other content? Did they tell you anything useful?
- Value: Do clients think they’re getting good value for their money? Would they tell a friend or coworker about your product?
