What is the Churn Rate? How to create effective Churn Surveys

Guides

3 Apr 2024

What is the Churn Rate? How to create effective Churn Surveys

What is the Churn Rate? How to create effective Churn Surveys

What is the Churn Rate? How to create effective Churn Surveys

Implementing a churn survey in your product is one of the most effective ways to improve customer retention and satisfaction. While acquiring new customers is important, understanding why existing customers choose to leave is the key to unlocking remarkable growth and profitability. In this blog post, we will learn what churn rates are, see some examples, and learn how to create churn surveys and act on them.

What is the Churn Rate?

The churn rate is a metric that measures the percentage of customers or subscribers who cancel or do not renew their subscriptions with a company over a specific period, such as a month or a year. 

While it’s normal to have some customer churn as part of the business cycle, having a high churn rate is detrimental to your business. Calculating the churn rate enables you to identify the causes of churn and take corrective actions to prevent excessive churn.

Calculating the churn rate helps pinpoint the reasons for customer attrition and implement retention strategies.

Calculating the churn rate helps pinpoint the reasons for customer attrition and implement retention strategies.

Customer Churn Formula

Calculating your churn rate is critical for success. Before diving in, here are three key factors to consider: 

  • The time period can be monthly, quarterly, or annually. 

  • The number of customers you had at the beginning of that time period. 

  • The number of customers you lost or churned over that time period. 

You can calculate your churn rate using the formula: (Lost Customers during Time Period ÷ Total Customers at Start of Time Period) x 100. 

Calculating the Churn Rate using the formula

Calculating the Churn Rate using the formula

To help you understand the formula for calculating the churn rate, let's consider an example. Suppose we had 100 customers at the beginning of a quarter, and we lost seven of them by the end of that same quarter. Applying the formula (7/100 x 100), your customer churn rate would be 7%. Reducing the customer churn rate will lead to improved revenue stability, increased customer lifetime value, and boosted revenue. 

There is no single magic number that applies to all businesses and industries. The acceptable churn rate varies depending on the business and industry. In most industries, a rate of 2-8% is considered good or at least acceptable.

Most common reasons behind high churn rates

Although there are many different reasons for customer churn, the following are the most common:

Poor customer service

If your customers do not receive enough support when they encounter an issue or a question, they are more likely to turn to your competitors. Brands have to provide excellent customer service not only to new customers but also to loyal ones.

Lack of customer understanding

As your customers' needs and preferences may change over time, businesses need to stay up-to-date with the latest trends by regularly asking for product feedback. Customer surveys help you better understand your customers' requirements and adjust your products and services accordingly. 

Brands need to listen carefully to customer feedback and expectations to reduce the churn rate and build better products.

Brands need to listen carefully to customer feedback and expectations to reduce the churn rate and build better products.

Lack of pricing optimization

If your prices are too high, your customers may seek cheaper alternatives, leading to churn. Therefore, it is vital to ensure your pricing strategy aligns with your customers' expectations. 

Poor product-market fit

If your products do not cater to your audience's needs and preferences, or if you are targeting the wrong audience, then your churn rate will increase. To prevent high churn, create a product roadmap and collect feedback to ensure your products and services align with customers' needs.

Lack of engagement

Customers who use your product/service sparingly will likely churn. Therefore, it is crucial to engage your users to reduce churn. To increase engagement and decrease churn, implement marketing strategies such as offering cross-channel messaging, providing personalized customer experiences, and ensuring consistent after-sales care.

How to create effective churn surveys

High churn poses challenges to a company's growth. Proactively addressing customer satisfaction is pivotal for maintaining and enhancing company expansion. In this context, churn surveys are invaluable.

What are Churn surveys?

Churn surveys are a type of micro-survey sent to customers who have decided to cancel or downgrade their subscription plan. The purpose of churn surveys is to collect valuable feedback and discover insight into customer dissatisfaction. Armed with this information, companies can take action to improve the user experience and products to reduce the churn rate.

Churn surveys help brands prevent churn before users take action by collecting insightful feedback on customer issues.


Churn surveys help brands prevent churn before users take action by collecting insightful feedback on customer issues.

What churn survey questions are used to collect feedback?

Asking long-form questions may be great for collecting user sentiment, but it's not ideal for keeping a customer from churning. Instead, churn surveys should be designed to look like a natural part of the canceling process, without adding any unnecessary friction. Typically, there are three kinds of questions to ask within a churn survey.

1. Multiple-choice questions: These questions are commonly used as they require minimal effort from users and allow for automated responses based on given answers. For example, "What is the main reason for you canceling your account?" or "Why did you decide to cancel your subscription?" or "What made you cancel your account?".

Example of Multiple-choice Questions

Example of Multiple-choice Questions

2. Open-ended question: Open-ended questions discover why users are churning and reduce churn by improving the product and experience. The questions can be the same as in the multiple-choice survey, but this time users can provide reasons using their own words.

Example of Open-Ended Question

Example of Open-Ended Question

3. Mixed questions: This option is a combination of the previous two survey types - add a response box under the multiple-choice question. Make sure mixed questions are optional, as your main goal is to collect answers to the multiple-choice question.

Example of Mixed Questions

Example of Mixed Questions

How can I create a churn survey?

To create a customer churn survey, you can either code it inside your product or use a no-code tool such as Formo to build it. Formo allows you to collect and analyze responses - all in one place. With Formo, you can: 

  • Build in-app churn surveys without coding. 

  • Customize surveys for your brand.

  • Automate responses based on answers. 

  • Test different surveys to understand which has the highest engagement.

  • Analyze survey responses over time

How to manage your Churn Rate

1. Analyze to improve customer service: 

Use customer churn as an opportunity to learn why users are leaving. Analyzing the churn rate provides valuable insights to better enhance customer support performance, compare your product and service against competitors, and improve the customer experience.

2. Revamp the onboarding process: 

Enhance your onboarding process to reduce the churn rate during the customer sign-up step. Provide a welcoming experience, offer personalized onboarding, and create educational content to help customers derive maximum value from your products. 

3. Track churn rate regularly: 

Continuously monitor your rate to identify trends, patterns, and areas for improvement. Regular tracking allows you to stay proactive in addressing the churn rate and implementing strategies to reduce it over time. 

Monitoring enables you to proactively manage churn rates and implement effective strategies.

Monitoring enables you to proactively manage churn rates and implement effective strategies.

4. Segment customers for analysis: 

Conduct cohort analysis by segmenting customers based on different criteria like age, subscription length, or usage patterns. Analytics helps you understand how different customer groups behave and churn, enabling targeted strategies to reduce the churn rate effectively. 

5. Focus on customer retention: 

Develop strategies to enhance retention, such as loyalty programs, personalized communication, and proactive customer support. Building strong relationships with customers increases loyalty and reduces churn rates.

Drive better retention with Formo’s Form Builder

The most effective approach to reducing churn is to focus on enhancing the customer experience. Formo's Form Builder is a comprehensive customer experience solution designed to help Web3 brands conduct surveys. Formo empowers brands and creators to understand in-depth insights into their customers, providing delightful experiences that come with lower churn and foster greater long-term loyalty.

Build better products and enhance customer loyalty with Formo’s Form Builder

Build better products and enhance customer loyalty with Formo’s Form Builder

No company is immune to churn. Proactively conducting a well-structured churn survey enables brands to uncover valuable insights into the reasons why customers leave behind high churn rates. Formo makes it easy to plan your next survey to prevent future churn.

Ready to boost product retention? Sign up for Formo now to get started!

Back to Blog

Share this post on:

Back to Blog

Share this post on: