In some sectors, customer turnover, or “churn”, is as high as 40 percent a year. This is especially true in sectors where competition is fierce and it is easy to switch suppliers, such as in the telecommunications sector. Many companies are so busy identifying and attracting new customers that they don’t realize an equally important business strategy is minimizing customer loss and increasing the lifetime of each customer.
The cost of attracting a new customer can be five times as high as the cost of retaining an existing customer. When you lose a customer, it is important to understand what type of customers choose to leave and why in order to minimize the risk of it happening again. A churn analysis can give you the answers to these questions, providing a clearer overview of the risk among your existing customers and what types of customers you should prioritize in future prospecting.
By working strategically with insights on which customers are likely to defect and which are most profitable over time, you can adapt your communication and offer to establish a long-term relationship with the customer profiles who have the highest customer lifetime value (CLV).