Dezember, 2009

Archive for Dezember, 2009

How 1% less in churn will bring you 6% more in reveneue

If your business is subscription based you’re always driven to get new customers to replace those ones who dropped out or “churned out” and of course to grow. Churn Management is an huge tool to improve your business. Reducing churn has an impressive impact to your business and when using the correct churn methods you can make with 80%-90% less than you spent for aquiring a new customer6% more in revenue. Got you curious? Good, so let’s start!

What does “churn” mean?
There is no shame if you now asking: “What the bloddy hell does “churn” mean?”, because “churn” is a made-up word which is a mix of the words “change” and “turn”. For example the “churn rate” describes the loss of customers in a specific time period. If you are loosing 5% of your customers a month you have a monthly churn rate of 5%.

Ok, let’s image that you have an offer where user can subscribe to. You have 10.000 customers at the beginning of the year. The monthly fee is 5,- EUR (that make the caculations easier). The service can be determined by the user monthly. I know that’s unusual, at least in Germany, but for this example we are fine with that.

If you have an annual subscription business model for five bucks a month this model also works for you, because it’s just a shift in time. With an annual subscription model you will have the churn problem also latest in the second year of your business and then also ongoing. Let’s say you have a monthly churn of 8%. So you’re loosing every month 8% of your customer base. Of course you’re not stupid and have a smart marketing which brings you a lot more of new customers than you’re loosing customers each month. Otherwise you wouldn’t have this business for long…

Let’s see how a lower churn can effect