What is Customer Churn?

Customer churn in ecommerce is the rate at which existing customers stop doing business with a company. Customer churn is a crucial metric for measuring customer loyalty and satisfaction. It is also an essential indicator of a company’s success in retaining customers and maintaining customer relationships.

Factors causing customer churn

Poor customer service: Poor customer service is one of the most significant factors in customer churn in ecommerce. Customers expect fair and speedy treatment; if they don’t get that, they may be more likely to take their business elsewhere.
Lack of engagement: Customers want to feel heard and valued. If a company does not try to engage with customers or takes too long to respond to customer inquiries, customers may be more likely to churn.
Poor product/service quality: If a product or service doesn’t meet customers’ expectations, they may be likelier to abandon the company and look for alternatives.
High prices: Customers may be more likely to churn if they feel they are paying too much for a product or service.
Bad website experience: A website should be easy to navigate and provide customers with their desired information and products. If it doesn’t, customers may be more likely to churn.

How to measure churn rate?

Churn Rate Formula:

The churn rate is calculated by dividing the number of customers lost during a specific period by the total number of customers at the start of that period. You then multiply the result by 100 to express it as a percentage.

Step-by-Step Calculation:

Identify the Number of Customers Lost: Count how many customers stopped using your service during the time period you’re analyzing.
Determine the Starting Number of Customers: Find out how many customers you had at the beginning of the same time period.
Divide and Multiply:
- Divide the number of customers lost by the total number of customers at the start of the period.
- Multiply the result by 100 to get the churn rate as a percentage.

Example Calculation:

If you started with 1,000 customers and lost 50 customers during the month:

First, divide 50 (customers lost) by 1,000 (customers at the start).
This gives you 0.05.
Multiply 0.05 by 100 to get a churn rate of 5%.

So, your churn rate for that month would be 5%.

There are several other methods to gain insight into customer churn, including Cohort Analysis, Recency-Frequency-Monetary (RFM) Analysis, Customer Retention Rate, and Net Promoter Score (NPS).

How to prevent and reduce customer churn?

Offer excellent customer service: Strive to provide excellent customer service that is fast and reliable.
Engage with customers: Make an effort to engage with customers and make them feel heard and valued.
Improve product/service quality: Ensure that products and services are of the highest quality.
Keep prices competitive: Strive to keep prices competitive and in line with the market.
Improve the website experience: Make websites easy to use and navigate.
Segment your customer base: Use audience segmentation to ensure that you are targeting the right customer with messaging that resonates.

How to increase customer retention and loyalty?

Personalized customer experience: Personalization is critical to building customer loyalty based on preferences, browsing, and purchase history.
Rewards program: Implement a rewards program incentivizing customers to return with discounts, free shipping, and exclusive promotions.
Customer service: Excellent customer service is crucial for customer loyalty. Ensure that your customer service team is knowledgeable, responsive, and helpful.
Quality products: Ensure that products meet or exceed customer expectations.
User-generated content: Encourage customers to share their experiences with your brand on social media and review sites.

Best practices for customer service

Omnichannel support: Offer customer support across multiple channels like email, phone, live chat, social media, and chatbots.
Quick response time: Aim to respond to customer inquiries quickly.
Personalized service: Collect and use customer data to tailor your support services.
Empathetic communication: Train your customer support representatives to listen actively and show empathy.
Knowledgeable support team: Equip your support team with extensive product and policy knowledge.
Efficient issue resolution: Focus on resolving customer concerns during the first interaction.
Proactive support: Monitor customer feedback and analytics to identify common issues and concerns.
Collect and act on feedback: Encourage customers to provide feedback on their support experience.
Offer self-service options: Provide customers with self-help resources, such as FAQs, knowledge bases, and chatbots.
Measure customer satisfaction: Track metrics like Customer Satisfaction (CSAT) scores, Net Promoter Score (NPS), and Customer Effort Score (CES).

Implement a post-purchase platform like Shipped Suite to automatically process customer support requests related to lost, damaged, or stolen packages.

The goal of these best practices is to create a customer service experience that meets and exceeds customer expectations, increasing loyalty, positive word-of-mouth, and higher revenues.