Understanding Customer churn in 2023

In today's world, customer churn, (also known as customer attrition or customer turnover), is a major concern for companies across all industries. Customer churn refers to the rate at which customers stop doing business with a company, and it can have a significant impact on a company's revenue and profitability. While churn affects all industries, this post will explore customer churn in the telecom industry and eCommerce specifically, discuss the reasons why customers will churn, and define the term customer churn.


Customer Churn in the Telecom Industry

The telecom industry is one of the most competitive industries in the world, and companies are constantly vying for customers' loyalty. However, despite the fierce competition, the telecom industry also has a high rate of customer churn. According to a study by the Harvard Business Review, the telecom industry has a customer churn rate of around 15-45%, with some companies experiencing rates as high as 75%.

One of the main reasons for the high rate of customer churn in the telecom industry is the abundance of options available to customers. With so many companies offering similar products and services, customers have the ability to easily switch providers if they are not satisfied. Additionally, the telecom industry is characterized by long-term contracts and high termination fees, which can make it difficult for customers to switch providers even if they are not satisfied.

Another reason for high customer churn in the telecom industry is poor customer service. According to a survey by J.D. Power, poor customer service is one of the main reasons why customers switch providers. In fact, the survey found that customers who have a problem with their service and do not receive a resolution are more than twice as likely to switch providers than those who receive a resolution to their problem.

Customer Churn in Ecommerce

E-commerce is another industry that is characterized by high customer churn. According to a study by Invesp, the average ecommerce store has a customer churn rate of around 20%.

Similar to the telecom industry, eCommerce also suffers from high customer churn due to the abundance of options available to customers. It is easy for customers to find other similar products or services with a single click, thus creating an environment where loyalty is hard to establish.

Another reason for customer churn in eCommerce is poor delivery and returns experience. Customers in eCommerce expect fast and timely delivery and easy and hassle-free returns. If these expectations are not met, they are likely to take their business elsewhere.

Why Customers Will Churn

There are several reasons why customers will churn, including:

Lack of value: Customers may feel that a company's products or services are not providing them with the value they need.
Poor customer service: Customers may be dissatisfied with the level of service they receive from a company.
High prices: Customers may feel that a company's prices are too high compared to competitors.
Lack of innovation: Customers may feel that a company is not keeping up with the latest trends and innovations.
Better offers from competitors: Customers may be enticed to switch to a competitor that is offering a better deal or more attractive products or services.
Lack of personalization: Customers may feel that a company is not catering to their individual needs and preferences.
Product malfunctioning: Poor quality product and faulty products will also be a reason for customers to churn

Customer Churn Definition

Customer churn refers to the rate at which customers stop doing business with a company. It is typically measured as a percentage and is calculated by dividing the number of customers who have churned by the total number of customers a company has. For example, if a company has 100 customers and 20 of them stop doing business with the company in a given time period, the customer churn rate for that period would be 20%.

It is important to note that customer churn is not the same as customer attrition, which refers to the overall loss of customers over time. Customer churn specifically refers to customers who have actively chosen to stop doing business with a company, whereas attrition can also include customers who have simply not renewed their contracts or lapsed in their engagement.

Here are 6 more resources to learn more about Customer churn

  1. The Harvard Business Review has a number of articles that discuss the concept of customer churn and strategies for reducing it. One of the most popular articles is "The Truth About Customer Churn" by Fred Reichheld.
  2. The marketing research firm Marketing Metrics has published a white paper on customer retention that provides a comprehensive overview of the subject, including the financial impact of churn and the key drivers of customer retention.
  3. The blog of the customer relationship management (CRM) software company Salesforce contains a number of articles on customer churn and how to prevent it.
  4. The online course "Predictive Modeling for Business" offered by Coursera, provides a detailed look at various machine learning techniques that can be used to predict and prevent customer churn.
  5. The book "Predictive Analytics for Dummies" by Anasse Bari and Mohamed Chaouchi is a good introduction to the field of predictive analytics and how it can be used to predict and prevent customer churn.
  6. "Customer Churn Prediction and Prevention" by Xiaofei Liu, provides a good understanding of the customer churn problem with detailed case studies, insights and explains various machine learning models and how they can be used to predict and prevent customer churn.

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