Customer churn (also known as customer attrition) refers to when a customer ceases his or her relationship with a company.
It is an important key business metric because the cost of retaining an existing customer is far less expensive than acquiring a new one.
70% of companies say it’s cheaper to retain a customer than acquire one while the cost of acquiring a new customer can be as much as seven times more expensive.
Example: If you start your quarter with 400 customers and end with 380, your churn rate is 5% because you lost 5% of your customers.
Businesses typically treat a customer as churned once a particular amount of time has elapsed since the customer’s last interaction.
Companies usually make a distinction between voluntary churn and involuntary churn.
Voluntary Churn (Controllable): It occurs due to a decision by the customer to switch to another company or service provider.
Involuntary Churn (Uncontrollable): It occurs due to circumstances such as a customer's relocation to a long-term care facility, death, or the relocation to a distant location.
Prevention of Customer Churn Lean into your best customers: Identify pool of customers that are most likely to cancel, and refocus your efforts to keep them on board.
Be proactive with communication: Reach out to your customers before they need you and get the most out of your product or service.
Define a roadmap for your new customers: A new product or service can be overwhelming for a customer. To ease the transition, it's helpful to set up a new customer onboarding process or roadmap to guide new customers through your product or service's features, functionality, and process.
Offer incentives: Give customers a reason to stick around by offering them something special -- a promo, discount, loyalty program, etc.
Ask for feedback often: Getting to the root of the specific issues plaguing your business requires you to take the time to collect feedback early and often.
Analyze churn when it happens: You should be using data before customers churn in order to build strategies to proactively prevent it.First, start with analysis.
When are customers most frequently churning? Is it 30, 60, or 90 days after they first start using your product or service? Does churn happen if customers go a specific number of days without using the product or service? Stay competitive: Market conditions are constantly changing. Businesses focused on what's next -- trends, technology, and product advancements -- position themselves in a good spot in terms of avoiding disruption or "the next big thing."
Churn Scenario in India Absolute Data claims that in India 6% is the average monthly churn rate for Indian telecom customers.
According to The Indian Express, The telecom subscriber base in the country reached 1,198.89 million in April, 2020.
But the growth continued its downward trend in line with the slower pace of new customer additions by Reliance Jio.
Jio was followed by Bharti Airtel which added 2.85 million new mobile subscribers, BSNL with 0.81 million, Vodafone 0.75 million and Idea 0.68 million.
Tata Teleservices was the biggest loser of mobile subscribers in April. The net subscriber loss of the company was 1.46 million.
Reliance Communications lost 1.32 million subscribers, Aircel 0.33 million, Sistema Shyam 0.27 million and MTNL 2,137 subscribers.
State-run BSNL lost 1.86 million customers followed by MTNL which lost 7,888 customers.
- Problem Statement Companies have been experiencing a high churn rate more than ever due to the rapid change in the development of the technology.
Companies are under more pressure to generate revenue from other areas or gain new clients.
For example, 4G technology has made great impact on the digital life.
Companies have either drowned or shaken hands to survive in such tough competition.
For example: Vodafone and IDEA have made a pact with each other to provide 4G services.
Scenario: Aster Rhino, a USA based company that provides telecommunication services to the customers.
They have been providing 3G services since 2008 and started providing 4G services after its launch.
Due to boom in telecomm industry with 4G technology, it has become pain in the neck for the company to retain their customers.
They are in the middle to set more cell sites of 4G network to improve their 4G services.
It is plausible for customer to choose 4G services over 3G services due to benifits of cost, speed, latency etc.
Till now they have been using manual traditional ways which now has become a problem to handle due to work complication.
They have detailed history of their customers and are looking for an automated solution to identify the likeliness of customer churning from using their services.
In turn, they decided to find more optimistic way and hired a team of data scientists to solve this problem. Consider you are one of them...