From the English “Churn Rate”, the Turnover Rate or Cancellation Rate is a metric that indicates the percentage of customers who abandoned the subscription of your product in a period. That simple.
In e-commerce, the Churn Rate is important especially when the business is based on product subscriptions or with recurring purchases and recurring payments.
In these scenarios, knowing the Cancellation Rate helps the manager to assess whether or not the company is losing market share. If this indicator exceeds acceptable limits, then it's time to take action.
By identifying a turnover rate much higher than expected, the manager can verify the causes, as well as develop and put into practice strategies to reverse the situation.
HOW TO MEASURE YOUR CHURN RATE
The first step to measuring churn rate is to have customer relationship management (CRM) software integrated with your e-commerce platform. This will allow you to track your customers' history more easily.
The measurement can be done by applying a simple formula. Simply divide the number of customers who unsubscribed during a period, which can be a month or a year, for example, by the number of customers at the beginning of the same period. Then just multiply by 100.
As an example, let's say that at the beginning of June you had 853 customers who made recurring purchases. Of these, 79 canceled the purchase subscription. So, applying the formula we will have 79 divided by 853 times 100, which gives a result of 9,26%.
HOW TO DECREASE
You will always want your e-commerce Cancellation Rate to be as low as possible. So the first thing to do is monitor it. Check it periodically.
Try to understand the reasons why customers are choosing to cancel recurring purchases and subscriptions. Have their needs changed? Or did you change the layout of your store and it ended up losing some of its usability? Research, that is, ask your own customers.
Another important point is to establish a Key Performance Indicator (KPI), that is, a goal to be achieved in a period. For example, you can describe a KPI like this: “decrease Churn Rate from 9,26% to 7% in July”.
Just below the KPI description list the actions you will take to reduce the churn rate. Put the actions into practice throughout the month and, at the end, take a new measurement. Do this every month and continually improve!
As soon as you can, click on " Bounce Rate " and find out what it reveals about your e-commerce.
