Hopefully, you won’t have to renew your customer base too often. But the reality is different if your churn becomes too high and customers don’t stick around!
Why churn is a huge problem for your subscription business – and how to fix it
If you run a business based on subscriptions or service agreements, you’re probably already aware that there’s a lot to keep track of. The amount of data you can draw from your business is vast, and opinions on which data points to analyze often vary greatly. I believe it’s possible to keep subscription and service agreement management simple while focusing on a select few essential data points. You can read more about my recommendations for the most critical metrics for subscription businesses if you’d like. Anyway. You need to find new customers, ensure they stick around, and keep your business running smoothly. But there’s one factor that’s often overlooked and can be a hidden pitfall for your success. That factor is your churn. Churn, in its simplest form, is about how many of your customers are saying goodbye. While it might seem like an unavoidable part of doing business, it’s actually something you can—and should—manage. In this blog post, we’ll explore why churn is so important, how it affects your business, and what you can do to keep your customers happy and loyal so they don’t head for the exit.
What is churn really, and why is it so important?
Let’s get the definition straight first. Churn, also known as attrition, cancellations, or terminations, is the percentage of your customers who drop off within a given period. Churn is typically measured monthly or annually. These are the customers who cancel their subscriptions, stop paying for your service, and essentially say goodbye to your product. “Okay, but isn’t that just part of the game?” you might think. Yes, it’s true that some customer churn is natural, but that doesn’t mean you should just accept it without question. Churn is one of the most direct indicators of how well your business is performing. A high churn rate means you’re losing a lot of customers and need to spend significant energy finding new ones. Let’s say you have a churn rate of 2% per month. That’s 24% in a year, meaning you would need to replace your entire customer base every four years. This can be quite critical if acquiring new customers takes a long time or if you operate in a niche industry with a naturally limited customer pool. It’s almost always more expensive to acquire a new customer than it is to retain an existing one. That bears repeating: It’s almost always more expensive to acquire a new customer than it is to retain an existing one. Put simply: Once you’ve brought a customer in, it’s vital to keep them. That’s why churn can be a massive burden on your subscription business if you don’t actively work to keep it low.
The real value in holding on to your existing customers
When we talk about churn, it’s crucial to understand why your existing customers are so valuable. Newer businesses often focus on acquiring new customers – and that’s obviously important. But the customers you already have are worth their weight in gold. They know your product, they’ve gone through the onboarding process, and if they’re satisfied, they’re much more likely to stick around and keep paying. Think of it this way: If you’re constantly losing customers and replacing them with new ones, you’re essentially just treading water. It’s like filling a bathtub without a plug – you’ll never get the tub full. By focusing on reducing churn, you can build a stable customer base, which is much easier to grow over time.
Hvordan måler man churn?
Churn is actually easy to measure. There are several ways to do it, but here’s a simple formula for calculating your churn rate: Churn rate = (Number of customers lost / Number of customers at the start of the period) x 100 For example, let’s say you start the month with 100 customers and lose 5 of them. That gives you a churn rate of 5%. It might seem small, but if you have a churn rate of 5% every month, you’ll have lost half of your customers in under a year. And you’ll need to completely renew your customer base within two years. Once you’ve got a handle on your churn rate, you can start using it as a KPI for your business. If you notice a rise in churn, alarm bells should ring, and it’s time to figure out what’s going wrong.
How do you reduce churn?
Enough about what churn is. Now we know what churn is and why it matters. So let’s talk about what you can do to reduce churn and keep your customers happy.
How Alunta helps you manage churn
And now to the important question: How can Alunta help you tackle churn? First, I’ll be honest—reducing churn is hard work. It takes time and often requires a personal touch. But Alunta is your best friend when it comes to managing all the practical aspects of subscriptions and service agreements. You likely have plenty of customers paying month after month, and the last thing you need is a billing error or a customer forgetting to renew their subscription. With Alunta, everything is under control. The system keeps track of when a customer needs to renew, sends you reminders, and ensures invoices are sent on time. This means you don’t have to worry about customers dropping off due to billing issues or forgotten renewals. Everything runs automatically—just as it should. You can also read about how you can automate bookkeeping with e-conomic. Additionally, with our integration with ChartMogul, you gain deep insights into customer behavior and churn patterns. This allows you to take proactive steps before it’s too late and make an extra effort to retain customers who might be on the verge of leaving.
No more practical challenges – Alunta keeps track of the renewals
When you automate your invoicing and bookkeeping with Alunta, you eliminate the worry of whether your customers will remember to renew their subscriptions. Our system ensures that everything related to renewals runs smoothly, and no customer is overlooked in the process. It’s not just easy—it’s essential to prevent churn from creeping up and disrupting your business. In other words: Let Alunta handle the boring and practical tasks, so you can focus on delivering excellent service and keeping your customers happy. That’s where the real work of tackling churn lies. The longer they stay with you, the better it is for your business—and with Alunta, retaining them becomes much easier.
