Business Tips & Tools — Africa

What Is Customer Churn?

Customer churn is the number of customers businesses lose who once bought goods and never returned.

Customer churn is the number of customers a business loses who once bought goods and never returned for an extended period. The more your clients leave, the more your company is most likely to suffer revenue losses, which will be bad for you businesswise.

In this article, we are giving you a walk through of customer turnover and how it came to be.

  • Why do customers churn?
  • Customer churn survival analysis
  • Customer churn analysis and how they work
  • How to calculate customer churn
  • Benefits of analyzing customer churn
  • Disadvantages of customer churn
  • How to reduce customer churn
  • Types of customer churn
  • Conclusion

Why do customers churn?

There are many reasons that may push a customer to interact with your company and lose interest in the process and this is why;

  • Pricing factor

Customers' intention when they are in your shop is to buy. Are the products you are selling worth the money you are offering them for? If not, there is a high chance they won't return because you have overpriced products compared to other stores. 

  • Quality

Have you ever bought something and felt it was worth the spending? Customers will choose quality over quantity and if your products don't meet their expectations, they will opt out.

  • Poor customer service

Customers will feel unmotivated and unappreciated to associate with your business if they feel unwelcome. Your job as a business person is to give them the best experience regardless of your mood.

 Customer churn survival analysis

Customer churn survival analysis is a term used to describe how researchers collect and analyze data to determine how long customers will take before they churn. With possibility of these analyses, it can help a business improve its customer acquisition and retention strategies by foreseeing the probability of a customer who might churn.

How to use survival analysis tactics to solve customer churn

  1. Start by determining the churn survival time you want to study and predict. While at it, consider figuring out how long it takes a customer to churn.
  2.  Confirm to check if you have accurate data before proceeding with the analysis.
  3. Research the type of survival analysis model you want to use, then proceed.
  4. Based on the survival model that you've chosen to analyze, determine the survival function which will be helpful when it comes to identifying your survival curve with other survival curves.
  5. Confirm the survival results by comparing them with the actual churns.

Customer churn analysis and how they work

When a business is experiencing customer churn, it will only make sense for them to analyze the rate at which customers buy once and never again. This will help enterprises figure out why customers are leaving and find measures to retain them. 

The analysis enables a company to follow through with its CRM system and check the rate of customers leaving. Through analyzing, you can find reasons for clients' actions and devise solutions to stop them from leaving.

While it's easy for small businesses to track their customer churn, it's a different process for large companies. You are running a big business platform and need systems that detect these churns through your different departments. With the analysis possibility, you will easily track your churn rate and find solutions.

How to calculate customer churn rate

You can conduct your analysis by calculating the number of people you had at the beginning of your business divided by the number of customers that churned multiplied by 100. Through this formula, you will get your customer churn percentage.

Benefits of analyzing customer churn

It is always good to check regularly the number of times your company is undergoing churn and here is why.

  • A company will improve its products and services through customer churn to keep clients.
  • Churn helps customers have a good experience while buying goods from a business. A happy customer will always come back for more, and a keen entrepreneur will look forward to retaining customers. 
  • With the help of analysis, your business will be able to benefit as you are providing for more customers and their numbers are increasing. This means more money for your company.

Disadvantages of customer churn

  • As a business, you won't be able to determine the type of customers you are losing. The analysis rate is set only in such a way that it can tell you about the percentage and not the numbers left. It cannot be determined whether it's an old or new customer.
  • Customer churn can not be able to differentiate whether it's a new business or an old business that's facing customer attrition. It will only rate based on the recent turnover faced by the company.

How to reduce customer churn

  • Engagement

As a business person, you should actively engage with your customers to know their needs. Ask them questions and suggestions to give them ideas on what they want and how to use them. Try following up and see how your products help them. Be strategic with your plan so you may not become annoying to them.

  • Good customer service

Always ensure to keep your customers interested in your business through good PR. Make them feel welcome. Sometimes while they wait to be served, offer them your company's brochures to let them know more about your products.

  • Remain competitive

You should always aim higher and keep in-store products your customers might be interested in. To be competitive, update and refill what's depleted instead of turning down customers because you are out of stock.

  • Be active

Customers need immediate responses when asking questions or calling. Get them a system such as IVR responsible for such tasks.

  • Introduce coupons

Offer your customers good service treats, such as discounts and vouchers based on your budget. It can be a new product you want people to try and see how much they would like them and whatnot.

Types of customer churn 

  • Revenue churn

Revenue churn happens when a company loses money within a given period. This can be caused by a customer purchasing a cheaper product or stepping down for a low status subscription, and your business will get a low income.

  • Voluntary churn

This type of churn happens when a client volunteers to terminate their subscription with a company. It can be products or services they might have paid monthly subscriptions for that do not meet their needs as expected. They would then opt to terminate the subscription. Some customers may also do that for various reasons, such as wanting a break from your services.

  • Involuntary churn

If a business faces involuntary churn, it means a customer has terminated your services due to bankruptcy or card expirations. A company may try to avoid that by giving customers constant reminders to update their subscriptions in order to continue enjoying their services.


Checking your customer churn rate enables businesses to keep a hands on track record of their customers and performances. Ensure customers' needs are met and in case of anything regarding your products, let them know that you can offer assistance. Always remember to analyze and set KPIs that will keep your business on point.

NOTE: Check this cool short YouTube video made on the customers churn.

Last updated
June 12, 2024
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