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sasha-polishchak
Written by
Sasha Polishchak
Partnerships Manager at Gepard
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customer churn customer retention eCommerce eCommerce Strategy

How To Reduce Customer Churn And Improve Customer Retention Rate

7 min read
July 5, 2022

People come and go, contributing to customer churn. Ideally, you would keep them all, but it’s not possible to retain every single client. But what can you do to reduce customer churn and keep more people using your services?

In this article, you’ll find out what the churn metric means and what you can do to improve your retention strategy.

What Is Customer Churn?

Customer churn, or attrition, is a percentage of people who left your business over a certain period – stopped buying from your store, canceled their subscription, or closed their account. It’s a metric that shows your ability to retain a client base.

How To Calculate Customer Churn Rate

The customer churn formula for calculating the rate is quite simple and requires only two variables – the number of shoppers you had at the start of a period (Y) and how many you lost by the end of it (X):

X / Y * 100 = rate in %

Let’s say you offer a subscription that charges each month but could also be canceled at any moment so it doesn’t renew. There were 100 people who subscribed on May 1, but 8 of them canceled their subscriptions by June 1. In this case, your customer churn risk is 8% (8 / 100 * 100).

What Is A Good Churn Rate In eCommerce?

For this metric, the lower the better, but the number can vary by industry. It also depends on the type of product or service you offer. For example, if you sell goods that people don’t buy often, like boilers, then what exactly are you counting?

Instead, calculating the churn rate makes sense if you offer subscription-based plans like online services or priority shipping. In this case, you’re looking at 5–7% annual or 1% monthly as a benchmark. For SMBs the numbers can be higher and fall between 10 and 15 percent annually or 3–5% monthly.

However, this metric exists so you can track at which rate you’re losing clientele. It will be more valuable if you analyze it against other metrics and activities within the tracking period.

What Is Customer Retention Rate?

Customer retention is the opposite of attrition – it’s the percentage of people that have stayed with your company over a tracking period. This metric shows how well your business and marketing decisions affect your client base. It also shows the level of trust that people have for your business.

How To Calculate Retention Rate

The customer retention rate formula requires three variables – the number of people who still use your eCommerce products or services at the end of a period (X), how many you had in total at the beginning of a period (Y), and the number of new consumers you gained during the tracking period (N):

(X – N) / Y * 100 = retention rate %

So if you have virtual 100 shoppers at the start of a month and 90 at the end of it, but you gained 10 new ones, your rate is 80% ((90 – 10) / 100 * 100). This would be fantastic – if you look at the average customer retention rate by industry, it’s only 63% for retail and 78% for telecom.

Customer Retention Rate Vs. Churn Rate

The metrics are the opposite of each other, but why calculating only one of them won’t necessarily reflect the other? This is because they show different aspects of your business:

  • Customer churn analysis will show whether people are dissatisfied with the product, don’t enjoy using your website, or have found a better alternative.
  • The retention rate will show whether people trust your business, and enjoy the product enough to keep using it. The returning ones comprise the base of your revenue.

Why Do Customers Churn?

Bare numbers won’t show you exactly what’s good or bad, but you can calculate both rates at different stages of the customer journey. For example, you might find that you’re losing clientele because of an inconvenient search since your catalog doesn’t contain appropriate attributes. People simply can’t find what they need and go looking for another website.

Your Strategy To Reduce Churn And Improve Retention

It’s cheaper to retain shoppers than acquire new ones. It’s also at least three times easier to sell to existing ones than to new buyers. So it’s important to make sure you can prevent customer churn at a high rate.

It may be easy to acquire new users in your industry, but it is as easy for the acquisition to flop. And most reasons of customer churn are down to customer service.

Zendesk’s research shows that 61% of people would go looking for another business after just one bad experience. Instead, nine out of ten people would recommend a company after a positive experience. This goes to show that having regulars also works to attract new ones.

Deliver A Great Customer And Product Experience

Since both metrics are interconnected, reducing attrition will increase your retention. If you want to achieve this, focus on delivering a flawless experience from the first to the last step of the consumer journey.

This means that every point of contact matters – ads, web store performance, shopping cart, delivery options, support service, but also the images and product descriptions.

In fact, you’ve got two huge points to consider:

  • How easy it is to place an order or confirm a subscription.
  • How appealing your content is.

Let’s say your website works like a Swiss clock and you never had a failed transaction. But can people find what they need? This isn’t only about search and filter options. Since you can’t touch and feel a digital item, a lot of the time, it’s the product description and tags that substitute senses.

Read more about improving product experience:

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What would constitute a positive product experience? The content about an item:

  • Follows a storyline;
  • Shows its values from different angles in text and visual formats;
  • Offers all the specifications that help build a clear image of a person using it.

What Is A Good Product Content?

In this case, it’s most likely that the customer will get exactly what he/she imagined and you will retain a buyer. This is because such transparency builds trust for a brand and a desire to come back.

Otherwise, people will keep searching for other vendors if some sellers can’t even get a high-resolution image of a product on their websites or efficiently describe the purpose of the item along with its dimensions.

How A PIM Can Reduce Churn And Improve Retention

Product and consumer experience can help you retain shoppers or make them leave. One way to improve it and make sure people keep using your services is using a product information management (PIM) solution.

Here’s how PIM software, such as Gepard, can help you reduce customer churn and improve your retention strategy:

  • Improve product data organization. The tool acts as one true source of information about your goods. It unifies your product catalog and helps describe how each item can be used, its size, color, benefits, and other specifications.
  • Improve the shopping experience. PIM ensures consistency across all positions in your catalog so it translates to the sales channels you use. It also ensures that people can get all the essential and current information about each product. Together, these aspects help make a decision they will be satisfied with.
  • Enrich and personalize product content. Gepard PIM offers a feature for enriching product content. Together with well-structured data, this helps implement personalization tactics and further improve the experience.

Read more about personalization in eCommerce:

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  • Integrate with other tools. Gepard PIM can be integrated with DAM (digital asset management) tools, which makes it easier to manage different types of media files that relate to your products. But it also integrates with a variety of eCommerce platforms, so you can distribute the information to several places in one go.
  • Track the quality of product data. PIM solutions should help ensure that your product data isn’t just structured, but also accurate. Gepard generates reports about your items so you can see if any information is missing.

How To Reduce Customer Churn With The Help Of PIM?

As a quality PIM solution, Gepard helps structure, enrich, and improve product information. This leads to more consistency and transparency across all platforms you use. As a result, you’ll be able to provide a better and more personalized experience, thus reducing attrition.

Customer Churn FAQ

What Is A Good Customer Retention Rate For An eCommerce Business?

The higher the better, and if you can get a 100% that’s fantastic. But the benchmark depends on the industry average. For example, IT, insurance, and media companies show over 80% retention, while in retail, 63% is a more achievable result.

What Is A Retention Strategy?

A retention strategy is how you plan to encourage people to keep shopping with your website and become loyal to your brand. It’s a combination of methods and tactics for reducing the number of people who leave your business, such as content and product information improvements.

How Does Shopify Calculate Churn Rate?

Shopify doesn’t offer any special formulas for calculating churn rates. However, it does generate reports with figures about your first-time buyers, returning shoppers, and at-risk ones (those who haven’t placed an order in a while). These figures help calculate the rate with a standard formula: dividing the number of churned consumers by the total and multiplying by 100%.

Reduce Churn Rate With A Good Retention Strategy

The churn and retention metrics give an insight into how your eCommerce business is performing. It is normal that consumers leave a business, but if the rate is high or growing, you need to find ways of improving your retention strategy.

The shopping experience is a make-it or break-it factor in maintaining a solid client base. This is where PIM solutions come into play. They help consolidate, structure, and enrich data to help buyers find what they need.

Gepard PIM can help you with this. It serves as a single database with relevant information about your products and offers validation and enrichment features to improve the value of the product data you provide. Plus, it integrates with popular eCommerce platforms, so you can provide your customers with a unified experience across all channels.

Want to learn more about the capabilities of Gepard PIM in improving customer experience? Schedule a demo.

How To Improve Customer Retention With The Help Of PIM?

sasha-polishchak
Written by Sasha Polishchak
Partnerships Manager at Gepard
Account and Partnerships manager with extensive experience in sales, business development, and communication. Working with Gepard, the product information management & syndication platform, helping to centralize diverse product data and deliver complying content to sales channels.

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