Why Tracking Churn is Vital to a Business – Trajan King

Why Tracking Churn is Vital to a Business

In any business, it’s easy to be focused on sales because that’s what obviously brings in the money.  Many people love the thrill of the sale and bringing in new business. After all cash flow is the lifeblood of any business. We have sales and marketing budgets to support the teams that generate advertising ideas, write copy, and produce advertisements. There are sales forces to knock on doors and make phone calls. Most businesses have partnerships where companies collaborate to generate more sales. All of this is very important and should be a focus for any business. However, tracking churn may be even more vital.

What sometimes gets overlooked in our focus on sales and marketing, however, is the churn – how long clients are staying and how often they leave.  It’s important to understand churn and LVC (lifetime value of the customer) so you can increase your revenues and also the firm value if you’re looking to sell it at some point.

It’s much more profitable, and usually less work, to keep your customers happy than to generate new ones. In fact, it’s 5-7 times more costly to acquire a customer than to keep one and existing customers are 50-70% more likely to buy from you.

Take a look at these interesting findings of a survey of CEOs: 1

  • 44% of companies have a greater focus on customer acquisition vs 18% that focus on retention
  • Only 40% of companies and 30% of agencies have an equal focus on acquisition and retention
  • 89% of companies see customer experience as a key factor in driving customer loyalty and retention
  • 76% of companies see CLV as an important concept for their organization
  • Only 42% of companies are able to measure CLV accurately
  • Existing customers are 50% more likely to try new products, and spend 31% more than new customers
  • Email marketing is reported to be the most effective marketing tactic for customer retention
  • Increasing customer retention by 5% increases profits 25-95%

The longer a customer stays and the more they buy from you, the more revenue is generated. The value of your company is the sum of the LVC of all your customers, so it’s in your best interest to track that number and increase it as much as possible.

The Lifetime Value of the Customer can be calculated easily like this:

LCV = monthly customer spend * how many months they remain a customer

Putting a number on the value of your customers may give you incentive to track churn and put more of a focus on keeping customers happy. Quantifying it gives us insight into why tracking churn is vital to a business. We’re literally losing money by not focusing on it.

How to keep customers

Additional ideas are to do everything you can to foster a personal relationship with your customers because people buy from other people much more than they buy from companies. Having a relationship increases the chances they’ll stay with you, so personalize everything as much as you can.

Ask for feedback

You can’t keep a customer happy if you don’t know what they want. Surveys are one of the best ways to get to know customers and to get an idea of how well you’re delivering on your vision, values, and goals.

Many email providers allow you to add notations that classify subscribers by their interests. This makes it easy to segment your list and send specific information to customers only about what they’re interested in.

Related articles:

Using feedback to your advantage
5 best ways to get feedback from your customers
Taking criticism happily

Focus on customer service

In a post called “Don’t make it difficult for people to give you their money,” I talked about how I find it interesting that when you call most big companies, it’s so much easier to talk to a salesperson than a customer service person. That’s because companies are focused on making the sale so they ensure salespeople are ready and available to take your call. You can get right through. Customer support takes a back seat so you want on hold 5, 10 or 90 minutes to talk to someone.

U.S. companies lose $138 billion from customers just switching to another company, which is why tracking churn is to vital to any business.2


  1. https://www.getelastic.com/customer-acquisition-vs-retention-infographic
  2. https://www.liquidweb.com/woocommerce-resource/customer-acquisition-cost/

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CFO & former Wall Street analyst helping your reach financial independence.

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Trajan King

Hey hey. I'm Trajan. I'm a minimalist entrepreneur who loves exploring the world (42 countries), learning new things (7 languages) and trying to get better every day (working on my backsquat).

I write about entrepreneurship and building an optimized and happy life through systems, good habits and scientific research.

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