Are Your Customers Just Looking, Buying or Leaving Forever?

We’ve all tried a new product, service or website only to then slowly drift away from it and forgotten it altogether. You may have unsubscribed or simply stopped visiting the site. In analytical speak, this translates to you having churned, unsubscribed and/or abandoned your cart – never to return again. Let’s examine some of the sometimes confusing terminology around your customers looking, buying or leaving forever.

Churn Rate

Churn Rate is interesting terminology. For some people, it brings up images or revolving doors while others thing of fresh butter being made. In our instance, Churn Rate means the annual percentage rate at which customers stop subscribing to a service. Essentially how many potential customers are ‘swiping left’.

So, how on earth do you go about figuring that percentage out? Your Churn Rate can be calculated simply by adding up the customer base in the current month versus the previous month. This rough calculation will tell you how many people canceled their subscription. For example, if you had 100 customers last month and 84 customers this month (4 new customers) than 20 people have disappeared. Your churn rate is 20/100 = 20%. Boom. Easy as that!

When it comes to sporadic buying in e-commerce businesses, the most reliable metrics that relate to Churn Rate you want to look at Repeat Customer Rate and Abandon Cart Rate.

Repeat Customer Rate

Repeat Customer Rate is similar to Churn Rate as it relates to the closest customers that consistently buy from you aka your repeat customers. For example, a sign your that your Churn Rate is high would be when your repeat customer rate takes a dip, month over month. This indicates that customers who bought more than once, didn’t continue buying from you, and a habit was not formed.

Abandoned Cart Rate

A simple way to combat Churn Rate is by keeping track of your Abandoned Cart Rate. This represents customers that hit your checkout page but don’t complete their purchase. This could be due to any number of reasons and therefore it’s incredibly important to audit your checkout process to better understand where customers are falling out.

Customer Retention Rate

Let’s look on the bright side of things. You should also calculate how many of your customers are staying through the customer retention rate formula: number of customers at the end (84) minus number of customers lost (20) divided by numbers of customers at the start (100) = 64%. This is your retention rate, the ideal percentage largely depends on your industry.

It is crucial to keep track of these metrics as they directly correlate with the behavior of your customers: are they coming, going, or staying? This should lead you to question – why? What is causing this behavior? Perhaps, you started a new Facebook ad campaign, have a complicated checkout process, added new products, or created a habit forming service. Then, you’ll be able to gauge how your customer base reacted to your action. Some examples:

• A complicated checkout process would lead to a high Abandoned Cart Rate
• Creating a habit-forming product or service will increase your Repeat Customer Rate
• Facebook advertising will lead to more visits to your website

Next time you wonder how many people left your store, think about tracking the average Repeat Customer Rate over a span of a few months. Look at your Abandoned Cart Rate month over month. Tie a metric to a specific marketing action will help you really understand your business and what’s driving your ROI.