Customer churn and CLV: all you need to know
For any business to thrive, a business owner or manager must understand customer churn and customer lifetime value and how they affect the business positively and negatively. Over the years, diverse marketers have written on the importance of customer lifetime value and why every business owner must utilize it. However, this is still one of the most underutilized marketing strategies.
Customer Churn refers to the estimated rate at which customers stop transacting business with an organization. It is often used to explain the number of subscribers that stop their subscription at a given time.
Customer Lifetime value refers to the estimated worth of a customer to a business or establishment during their business relationship. It explains how valuable a customer is to a brand or business. CLV, as it is often called, lets business owners know how important a customer is to their business.
Importance of Customer Churn rate and Customer Life Time Value and How It Affect Profit
You may have heard of customer retention, but you don’t know what it means or how to achieve it. Customer retention is the ability of a business or brand to retain customers and prevent them from switching to their competitors. Customer retention is one of the top strategies that drive sales for any business or brand.
Reasonably, one of the ways a business or organization can maintain customer retention is by placing value on their customers. Customer lifetime value assists a brand or business place value on their customers based on their worth and importance to the brand. Marketing research has shown that customers like to be appreciated. When a business can know the worth of a customer to their establishment, it helps them place a value on the customer.
The market space is a saturated one, the probability of selling big to a new customer is pretty low due to numerous competitors. It explains why companies must retain their customers and make them repeated buyers of their products and services.
Also, understanding the churn rate will help business managers to ascertain if their products or services have been meeting the needs of their customers. It shed light on what a business should do for customer retention.
How Companies Can Reduce Churn Rate and Increase CLV
If a business remains in the market, the churn rate must be reduced while customer lifetime value must be significantly increased.
Companies can reduce Churn Rate by adopting the following means:
Customer Engagement
Customer engagement is a real knack. It helps a company improve its customer service. When customers are engaged, it helps ascertain why the business has been experiencing a considerable increase in churn rate. The customers will relate their experience with the brand for possible improvement.
Customer engagement could mean educating the customers on the products and services and having a smooth experience. When customers feel that their opinion matters to a brand, it gives them a sense of belonging and further intensifies their business relationship. Furthermore, it helps businesses to know what’s needed to be done for customer satisfaction.
Businesses can increase their customer lifetime value through the following means:
- Giving listening ears to customers
- Build and sustain a working relationship with the customer
- Build engaging content for customers
- Be deliberate about Customer Service
How Data analytics and machine learning can help reduce churn
Data needs to be analyzed to understand the behavioral pattern and response of customers to a product or service. Meanwhile, analyzing the data of every customer can time consuming, even if you have on-field data analysts. This is where machine learning would save the day. It is an automated process that analyses consumer behavior to identify the reason for churning or why they have remained loyal to your brand.
This is a fast means of making an analysis. It uses math, statistics, and probability to determine the connection among different variables. With this, you can quickly identify why your customers are switching to other brands, and this will help you make amends in a quick time.
Conclusion
Understanding customer churn and churning patterns as well as knowing the customer life time value can help your business focus on the right initiative to keep customers and detect early on the signs of defecting and take adequate measures to change the outcome.