What is the customer attrition?

Holding on to your customers and managing their customer experiences are the smartest, safest, and most cost-effective options any business has. It provides many benefits in the long run, such as budget efficiency, since retaining customers is cheaper than acquiring new ones, and creating a stable and loyal customer base.  

Businesses that are successful benefit from a positive growth rate. What needs to be clear is that having a customer base comes with no guarantee over the customer retention numbers. When customers decide to stop taking advantage of your services and quit doing business with you, it’s called that you are dealing with customer attrition. The rate at which customers leave your business is called the customer attrition rate – also known as customer churn rate. For your company to keep thriving, you eventually have to start reducing your customer attrition. To do so, you must work to improve customer relationships and increase customer satisfaction.  

The customer attrition rate is expressed as the division of the customers you lost by the customers you had at that certain point. If all possible customer needs would be satisfied the customer attrition rate would be a flat zero. This is an ideal scenario, however. There are always customers who will be lost due to various reasons. 

Now that you have a grip over what customer attrition means, you need to better understand how to calculate it.

How to calculate your customer attrition rate 

The customer attrition rate varies with industry. Some businesses have a higher default rate, others have a lower one. It’s impossible to deduct a one-size-fits-all attrition rate, but it’s very feasible to calculate yours. Regardless of the result, however, never consider that a “bad” attrition rate is something you can’t work at. There are always already proven successful methods to reduce customer attrition, but we’ll talk about those in a dedicated section further on.

First, to reduce the attrition rate, you have to gather some data. What you need is the percentage of customers that terminate their contracts with your company within a given timespan. You then take the number (or percentage) of leaving customers and divide it by the number (or percentage) you had at the start of the timespan.

  • Track your total number of lost customers OR
  • Track the percentage of lost customers

The customer attrition rate can also be deducted based on your revenue, which is a typical for businesses that work with subscriptions (or Monthly Recurring Revenue. 

  • Track your lost recurring business revenue 
  • Track the lost percentage of recurring revenue

By calculating your customer attrition rate, you will be able to understand if your company’s tendency is growth or loss. As stated, a higher growth rate is beneficial. If the attrition is higher, you should start employing strategies to reduce it. 

The benefits of tracking your attrition rate  

To put it simply, if you track and then start reducing your customer attrition rate, your revenue will be visibly higher and your growth rate will be helped to stay positive. Besides directly tracking attrition, there are other factors you could take into account:

  • How much do your customers spend on products/services?
  • What could make customers respond positively to further customer retention?
  • How much will customer retention cost you, as a business?

Beyond knowing your customer attrition rate, understanding why customers stop taking advantage of your products and services is just as important. Reducing the attrition rate has to be a priority for any long-term successful business that wants to benefit from the highest possible revenue. 

In the next section, we will discuss the most efficient methods to prevent customer attrition by improving customer relationships and increasing customer satisfaction.

How to reduce your customer attrition rate

The strategies you can employ to reduce customer attrition rate after a period of keeping track of it and getting insights regarding the reasons your customers decide to leave form a customer attrition strategy: a set of actions your business can take to help retain more customers. More often than not, the department you will be putting more effort into will be the customer service one, but there are other places to start with. To get an idea about where to start cutting down on the attrition rate, you have to start doing actionable research. 

Actionable research will greatly help reduce customer churn rates by predicting customer attrition. Since you will gather more valuable data about how customer relationships affect your attrition rate, you will be able to avoid the negative patterns that lead to high rates in the first place. In the long run, getting customers to swear by your company is the harder-to-achieve ideal here, but retaining them will certainly be more feasible through actionable attrition analysis. 

1. Provide better customer service and employ reward loyalty reward systems 

The first thing to do is usually to focus on customer service – companies that don’t direct enough resources towards this vital department will tend to fall short on customer expectations. Bad customer service hurts business in the long run as it plays customer satisfaction down. Always listen to your customers’ demands and remember that you have to invest less to retain customers than to acquire new ones. Spending more to hire or train expert customer service departments will pay off. 

After you start providing quality customer service, you have to go further, but keep the focus on your customers. To maintain clients, employ a customer loyalty program. Try offering them a bonus from time to time, especially if they are long-time customers. Loyalty programs are one of the best ways to reduce customer attrition rate. Having a loyalty program will also encourage your customers to spend more money in order to be eligible to access those bonuses. 

2. Take advantage of the possibility of proactive communication

Failing to deliver on what was promised will hurt your growth and increase attrition immensely. As a company, you have to meet your customers’ expectations as often as possible and even exceed them, in order to improve customer relationships and create customer satisfaction. To truly get accustomed to these expectations, proactive communication must be employed regularly. Knowing what type of product or service their loyalty lies is an important piece of data regarding reducing the customer attrition rate puzzle, but how this data is gathered should be left at the customer’s convenience. Some will prefer a simple SMS, some a detailed email or direct phone calls. Regardless, having access to this information will enable help you to:

  • Send reminder alerts about sold out products that are back in stock
  • Better understand your customer’s journey through more spot-on surveys
  • Promote products or send details about promotions  

After making you feel you finally got in touch with your customers’ desires, you can go well beyond that and start: 

  • Showcasing product or service features and guides
  • Send product encouraging newsletters 
  • Invite your customers to relevant events

But remember, none of this can help reduce customer attrition rate if you are seen as not completely sincere about fully delivering when it comes to your array of products and services

3. Overdelivering can help and is certainly most welcome by customers

Overdelivering sometimes is a very good customer attrition rate reducing strategy, especially when used during the first times a customer encounters your products and services and he isn’t entirely sure he will stick by them for long. Offering more than what’s officially advertised (or more than your competition offers for the same price) will increase customer satisfaction, improve customer relationships and make them more open towards your alternative.  It will make them abandon their attempts to “look for better” much sooner. Winning customers during the first encounters will also benefit them, your company being remembered as the company that enhanced their overall customer journey in search of a good product or service. Overdelivering greatly reduces the chances that customers will be added in the future to your attrition rate calculus. 

Furthermore, if you preemptively provide basic support for your customers, they will feel even safer when using your products, as it shows them you are secure about what you have to offer and got nothing shady to hide. A tutorial, a free trial, a beginner’s guide, is more than welcome and greatly helps reduce customer churn rates. If customers are made to be truly interested in what you have to offer and are also safe while using it, their loyalty will probably not falter in the near future. Your growth rate will remain stable – or even increase – and you will certainly reduce customer churn. 

Regardless of the strategies employed (there are far more than the ones we talked about, these are just the generally accepted as being “the best”), your goal remains the same: encourage customer retention by adding value and/or quality to your offers. High attrition rates are to be avoided by any business that wants to consider itself truly successful and efficient. Always remember to be in tune with your customers: inquire about feedback and create generous offers and solid loyalty systems. 

You should also always have in mind that customer retention is cheaper than the acquisition of new ones. Improving your customer relationships and customer satisfaction will lower your attrition rate and will impact your revenue maximization positively. It doesn’t come for free, but investing a bit in reducing attrition will create a loyal customer base and a customer base with great customer experiences are the bread & butter of any successful company.

A man sitting in a chair using a laptop.
Reveal by omniconvert.

Become a Master of Retention!

Know, predict & accelerate your customers’ moves!

60+ reviews on Shopify

Available for all platforms:

All platforms Gif