Churn Rate: The silent killer of growth
Customer churn can undo even the best new customer acquisition.
Churn Rate measures the percentage of customers you lose within a specific time period. In e-commerce, the definition of 'lost' is often complex: When is a customer considered churned?
Defining churn in e-commerce
Unlike subscription models with clear cancellations, you need to define churn yourself in e-commerce. Typical approaches:
- Time-based: Customers who haven't purchased in X months
- Frequency-based: Customers below expected purchase frequency
- Behavior-based: No email opens, no website visits
Define churn based on your typical purchase cycle. A furniture retailer has different expectations than a cosmetics shop.
The cost of churn
Every lost customer costs you multiple times: First, the foregone future revenue (CLV), second, the cost to acquire a replacement customer (CAC). Reducing Churn Rate by 5% can increase profits by 25-95%.
Churn prevention: The key
The best strategy against churn is prevention. Identify at-risk customers before they churn:
- 1 Engagement tracking: Fewer email opens, fewer website visits?
- 2 Purchase patterns: Longer intervals between purchases?
- 3 Support interactions: More complaints, negative reviews?
- 4 NPS scores: Declining satisfaction in surveys?
Win-back strategies
Not all lost customers are gone forever. Effective win-back campaigns can recover 10-15% of churned customers. Important: Understand the reason for churn and address it specifically. A generic discount code is rarely enough.
Churn Rate is closely linked to Repeat Purchase Rate: Both measure customer retention from different perspectives. Low Churn Rate plus high Repeat Purchase Rate is the goal.