Our understanding of how our customers interact with us has grown massively thanks to the prevalence of transactional data from websites, emails, loyalty cards and other touchpoints. Yet despite this, often the reason customers stop spending with brands is unclear. It’s something that they may only realise weeks or months after-the-fact and may never get a concrete reason as to what made them leave.

Having the right insight is crucial in identifying customers at risk of churn, employing strategies to prevent this and in better understanding our relationship with our customers as a whole.

How do I know if I have a problem with churn?

While every brand will encounter some level of churn, here are some signs that you may have a problem concerning customer retention:

Churn outpaces acquisition – If your business is losing more business than it keeps, this is a potential red flag. This is not always true though; many established businesses don’t have capacity outside of their regular clients and so you may see a higher Churn Rate here where the business takes on less regular jobs from other clients. Generally speaking though, businesses want to grow their customer bases whilst reducing their churn.

Churn rate is above 10% – Whilst it is incredibly difficult to get accurate baseline figures for any industry, 5-7% is often quoted as being an “average” churn rate for established businesses. We would never advise using broad metrics to measure performance, but if you are in double digits this may be a sign that some part of your process isn’t working.

Lifetime value shrinking – Typically the longer a customer stays with you, the higher their lifetime value as a customer will be. Where the customer lifecycle shortens or more customers are leaving, it will impact this number.

Cheaper alternatives – A lot of brands employ a ‘light’ or cheaper versions or their product, used as a hook to get people through the door and slowly build them up onto their full offering. In this model, brands want to see more upgrades than downgrades, but where the opposite is true it’s likely there’s an issue with churn that needs to be addressed.

Increased customer complaints – Probably the most visible way in which you may see a potential problem is through the collection and analysis of customer feedback. If you notice a rise in negative reviews, that are from genuine customers, this is an opportunity to stop the rot.

Customers ghosting you – This one is the most difficult to detect, but where you have customers that are normally highly engaged, perhaps they are frequent visitors to your store, or they open every email, react to every social media post etc, and you see a drop-off of this activity, then this may be a sign they are churning. Where you are seeing this at scale then it may mean that it is time to refresh or update your marketing or may be a sign of a bigger problem.

Social Media – You might do everything right 99/100 times, but that 1 time your team doesn’t deliver, you can rest assured that the customer will let everyone know online. Social Media can be difficult for any brand to navigate as it is somewhat likely you’ll see more negative reviews than positive. With the rise in fake profiles, and the possibility that a review is just your competition looking to throw some virtual shade on your brand, how serious should you take this? Most advice on dealing with negative social media reviews is to see it as an opportunity to save that relationship, address concerns and realise that you are not really addressing that 1 customer but all the others who might be reading. If you see trends or spikes in negative feedback, this might be cause for concern. If you see accounts who were once pro-active fans now criticising you, then you should definitely take this into account, but overall it is not the most crucial of factors to consider.