Stop the Churn: Find and Fix the Problem of Customer Churn

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Find and Fix the Problem of Customer Churn

Understanding your organization’s employee and customer churn rates can help you find and fix the problems that are hurting tour business and slowing its growth.

The Problem of Customer Churn

A high staff or customer churn rate may reveal deficiencies in your operations and give you the opportunity to fix them before they do any more damage to your business.

It’s not enough to know how to get new customers or recruit new talent for your organization. A high customer or employee churn rate may reveal deficiencies in your operations and give you the opportunity to fix them before they do any more damage to your business.

Does your business have a revolving back door?

If you feel like you constantly need to bring new customers in to account for customer defections or find that you frequently need to recruit for a certain position or department in your organization, over time you will expend a significant amount of time, money and other resources to do so.

Tracking customer churn – also referred to as attrition or turnover – in these two areas could help you identify problems in your organization that are causing customer or employee defections – defections that are hurting your business.

What is Customer Churn?

Customer churn rate (or customer base churn rate) is the percentage or proportion of customers or subscribers who leave during a given time period. High or increasing levels of customer churn may well indicate customer dissatisfaction, but may also be caused by obsolescence, customer indifference (or boredom), the emergence of new or lower-priced competitors or other factors.

What is Employee Churn?

Employee churn rate (or employee turnover rate) is the percentage or proportion of employees who leave during a given time period. High or increasing levels of employee turnover could indicate employee dissatisfaction with the company overall, or dissatisfaction within a department or with a manager or co-workers. Employee turnover may also be indicative of an inadequate employee screening, orientation or training process, or lack of career development or advancement opportunities.

In either case, it’s important for you to determine how you will measure and track customer churn and employee turnover, including establishing baselines and the level of turnover that will trigger a more in-depth internal query.

The Hidden – and Not-So-Hidden Costs of Employee and Customer Churn

High levels of customer churn can damage business in many ways:

  • High cost of acquiring new customers to replace defecting customers (customer acquisition can cost up to 10x as much as customer retention)
  • Lost revenues (repeat customers spend 2.6 times as much as first time customers and tend to spend more per visit than one time customers)
  • Lower profit margins (little-to-no cost associated with a repeat customer compared to high cost of customer acquisition for a new customer)
  • Lack of (or negative) word of mouth marketing from defecting customers
  • Low levels of customer satisfaction
  • Low levels of customer loyalty and brand advocacy
  • Loss of market share to competitors
  • Damage to your reputation / cost of reputation repair
  • Costs of fighting negative reviews or ratings

It’s difficult to understand why, despite the fact that customer retention efforts generally cost far less and also bring the added benefits of higher revenues and profits for a business, many businesses focus marketing efforts solely on customer acquisition strategies.

With high employee turnover, comes high organizational costs, including:

  • Help wanted and digital media position listings
  • Background checks and drug tests
  • Time spent evaluating applications, researching candidates, interviewing prospective new hires and processing all of the paperwork
  • Potential damage to employee morale and perceptions
  • Potential damage to business reputation (from defecting or current employees)
  • Employee stress
  • Inability to cover workload for unfilled positions (which can also mean poor customer service or lost business)
  • Cost of temporary help or interim employees
  • Fees charged by recruiting firms
  • Time, money and other resources needed to orient and train new employees
  • Learning curve of new employees / lower productivity while learning

When you begin to tally up all of the direct and indirect “costs” associated with high employee turnover in even one position within your business, it’s easy to see that preventing unnecessary employee churn should be a priority.

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If you need working capital to implement changes that will improve your churn rates, we can help!

Your business may need working capital to implement new customer and employee retention programs or engage in employee recruiting, employee development, employee training or in customer acquisition marketing. Gain access to working capital through receivables financing, business loans, cash advances and equipment financing so that they can grow from where they are today to where they want to be tomorrow.

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  1. […] and turnover isn’t just a problem when it comes to customers; employee turnover can keep your business from reaching its full potential as well. Much attention is paid in […]

  2. […] rate of customer churn – how many are leaving and how long on average they stay – may well be indicative of problems […]

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