Is Your Retail Churn Rate Above Average?

Your Source for Restaurant Marketing & Retail Marketing Best Practices

Posted by Robin Johnston on Mar 27, 2018 7:00:00 AM
Robin Johnston

Churn rates are one of those metrics we dread. But the number of customers leaving your company in a given month or year is just as important as the number of new customers obtained. Are you clear on your retail churn rate? And do you know where you stand compared to others in your industry?

How to Calculate Your Churn Rate

If you don't already know your churn rate, it's not difficult to calculate. Just divide the number of churned customers by your total number of customers. What can be difficult is figuring out when a customer has churned. For the purpose of this calculation, pick an objective standard to determine your number of churned customers. You might consider:

  • Length of time since last visit
  • Length of time since making a purchase

Take into account your average customer's behaviors and choose a length of time from there. While some businesses see frequent visits, seasonal or luxury retail businesses will differ.

Customer Churn Calculator

Top Churn Rate Statistics

A generally recommended retail churn rate is between 5 to 7 percent per year. Less than 5 percent is a great goal, but a churn rate over 10 percent is cause for concern. Even as you acquire more customers, your business can't grow unless you have a greater volume of incoming customers than outgoing ones.

Satisfying existing customers is actually more profitable than obtaining new ones.

  • It costs 5 times more to obtain a new customer than it does to retain an existing customer.
  • Decreasing your churn rate by 5% increases profits 25 to 125%.

The majority of customers churn because of bad service, not dissatisfaction with a product.

  • 66% of customers leave because of poor customer service.
  • 68% leave if they believe you are indifferent toward them.

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Tips to Decrease Your Retail Churn Rate

Reach Out for Feedback

You can prevent 11 percent of unhappy customers from leaving by simply reaching out to them. But it's not enough to wait until you know a customer is unhappy. Only 1 out of 26 customers complain when they're dissatisfied. The rest just leave.

So when you do have a customer complaint, you've been given a chance to save a customer from churning. Respond quickly and do everything in your power to resolve it.

But don't stop there. Instead, make it a regular habit to follow up with customers, even in automated form, to ensure they had a good experience. Customers are more likely to bring up a complaint when they're given an easy platform to do so.

Resolve Issues Quickly

Among customers who have left a company, 67 percent said they would have stayed if the issue was resolved the first time. The moral of the story for retail businesses? Don't let the problem drag on or do just enough for a one-time solution.

Response time is equally important when addressing an unhappy customer. A quick public response can work wonders, not just for the customer in question, but to maintain your public image. For example, if a customer leaves a nasty complaint on social media, no matter how unconstructive it may be, give a polite public reply on the platform, but be sure to redirect them to a private channel, such as message, email or phone, to actually resolve the issue.

Ensure Fairness

American consumers value companies with a reputation for fairness and honesty. 93 percent of consumers surveyed said honesty in a company was "very important" to them. And when dealing with an issue, 60 to 70 percent of consumers would stay with a company that resolved problems fairly even if the result was not in their favor.

But don't brush this point off as easy. Everyone wants to be fair in theory, but when business picks up or customers misbehave, deciding what's fair in the moment may not be the best policy. Instead, establish a system to ensure fairness.

While personal judgment can certainly trump systems in a unique situation, having pre-established policies in place will keep your business address complaints without disruption. Systems to ensure fairness can be as simple as an upfront policy on returns and exchanges to an established chain of command for addressing customer complaints. Consider what issues are common for your store for address those.

Use a Proactive System

Today systems like wi-fi marketing and analytics have the potential to significantly reduce churn rate. This kind of software doesn't simply report your churn rate after your customers have already left. They can identify customers at risk of churning and take immediate action. Reminding customers of your business with sales and promotions, offering exclusive perks to existing customers, and even sending "we miss you" emails can encourage at-risk customers to return.

Customer Churn Calculator 


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