There are many strategies, tools and techniques to combat churn, but ultimately there is only one approach that really works: a great product and happy customers.
How do you measure customer satisfaction? A proven and widely used method is the net promoter score (NPS). The core of NPS is the question:
The respondent can answer this question with a number between 0 and 10. Based on the given answer, three different profiles of the respondents are now created:
0-6 score: detractors (dissatisfied, disloyal)
7-8 score: passives (fairly satisfied, but not a 'fan')
9-10 score: promoters (enthusiastic about product or organization)
A red doll with a broken heart on the table.
Photo by burak kostak via Pexels
NPS has its shortcomings , but it is an easy-to-implement methodology to keep your finger on the pulse of your customer satisfaction. And therefore a valuable addition to any subscription provider's dashboard.
6.Customer lifetime value (LTV)
Books have been written about the concept of israel telegram data customer lifetime value (CLTV or LTV) and how to ideally measure it. In essence, LTV represents the financial value that the customer represents, looking at the duration of his contract. In its most basic form, the LTV of an individual customer can be captured in the following formula:
LTV = ARPU x customer lifetime
A simple example: if a subscriber earns €15 per month and stays for 24 months, then his LTV can be calculated as follows: 15 x 24 = €360.
It is a choice whether you also take the costs of the customer into account when calculating LTV . You can think of the costs to acquire a customer ( customer acquisition cost ) or to service the customer ( cost to serve ). The advantage of this is that you get a more accurate picture of the 'net' contribution of a customer. However, the complexity of a net LTV calculation can create a barrier.
There is of course a relationship between (volume) churn and customer lifetime: the higher the churn percentage, the shorter the lifetime of a customer (group). You can easily derive the average lifetime from the churn percentage with the following formula:
Lifetime = 1 / churn rate
So let's say your annual churn rate is 14.5%. The expected lifetime of your customers is then: 1 / 0.145 = 6.9 years. If after hard work you are able to reduce the churn to 8%, the average lifetime increases to a whopping 12.5 years.
7. Customer acquisition cost (CAC)
We just spoke about the concept of customer acquisition cost (CAC). The CAC shows which recruitment costs can be related to bringing in a customer. In formula:
CAC = Total Acquisition Cost / Number of New Customers
So let's say we acquire 50 new customers with a marketing campaign that cost €10,000, then the CAC is 10,000 / 50 = €200.
Here too, you can choose whether only directly related costs are included, such as online advertising, or also overhead, such as marketing salaries. Whatever choice you make here, it is important to work with consistent definitions, which are applied uniformly in the various departments in an organization. Avoid departments such as finance and marketing using different definitions and thus speaking a different language.
