Got churn? The definitive guide to customer churn (and how to reduce it)

You have a data-backed marketing strategy. Your marketing and sales teams are working in lockstep. Your product solves a real problem. So why aren’t your customers renewing their subscriptions? Customer churn. It doesn’t matter if you bring in thousands of leads and close hundreds of deals if you lose those newly acquired customers after just a few months. Don’t worry—we’re breaking down what customer churn is and serving up strategies to prevent it.

What is customer churn?

Customer churn—or customer attrition—refers simply to customers who leave. More specifically, HubSpot defines customer churn as “the percentage of customers that ended the use of your company’s product or service during a set period” (along with the revenue they generated for your business). 

Understanding churn is especially crucial for subscription-based businesses—like those offering software-as-a-service (SaaS) products—with a recurring revenue model, where customers can churn during every renewal cycle (monthly or annually).

How customer churn impacts your business

What does every business care about most? The bottom line. And customer churn means money lost and a decreased bottom line. While churn decreases revenues, it can also increase expenses—acquiring a new customer can cost 5x more than keeping an existing customer. 

While customer churn is a serious business concern, it also presents an opportunity to:

• Build better products that meet your customers’ needs

• Evaluate whether your marketing accurately explains the benefits of your offering

• Explore the cost vs. value of your product or service

• Look at the quality of your customer service

• Understand why customers are churning

How to calculate customer churn

Your customer churn rate calculates how many customers you lost as a percentage of your total customer base. Some companies measure churn monthly, quarterly, or annually. Before calculating your customer churn rate, determine which timeframe you want to measure, and then follow this simple formula:

Let’s look at ZoDigital—a fictional marketing agency specializing in digital experience, campaigns, and brand strategy. At the beginning of June, the agency had 75 customers. At the end of June, it had 68, losing seven customers. Here’s how you’d calculate its customer churn rate for June: 

(75 - 68) / 75 = 0.093 (x 100) = 9.33% churn rate

While customer churn rates vary across industries and company sizes, the ideal annual churn for established companies is generally between 5–7% and less than 1% for monthly churn. 

How to reduce customer churn

If you’re struggling with high churn or want to decrease customer churn to align with industry standards, we’ve got you covered. We’ve rounded up eight strategies to help you do just that.

1. Create an exceptional onboarding process

Imagine purchasing a product and then fending for yourself. You have to figure everything out on your own, from getting started to turning on features—it's overwhelming. Instead of getting the most out of your new purchase, you're unsure what to do next or how to use the product.

It’s a key driver of a poor customer experience (CX) and contributes to why your customers churn in the first place. But you can build a better CX and reduce churn by designing a proactive and helpful onboarding process for every new customer. Your onboarding process should include:

• An onboarding email sequence that welcomes and guides customers through the product, different features, and how to use it to meet their business goals.

• A resources library that includes how-to guides, demos, FAQs, and interactive tutorials showing customers how to use your product and answer questions.

• An onboarding checklist that encourages new customers to complete various tasks and use the product, like creating their first form or activating a feature.

HubSpot also suggests empowering customers to achieve their goals with tailored resources (think making self-serve effortless). If they feel like they can achieve what they set out to do using your product, they're less likely to churn.

Another recommendation? Collect customer feedback and continue tweaking your onboarding process based on that feedback and data to make it as frictionless as possible.

2. Identify customers most likely to churn

You might not have a crystal ball, but predictive analytics might just be the next best thing in anticipating which customers will churn. Leveraging predictive analytics helps you identify at-risk customers before they churn. Here’s how:

• It analyzes customer behaviors and data from customers who left

• It then identifies trends and patterns from those churned customers

• It identifies similar behaviors or patterns in existing customers to predict who’ll churn

Now that you know who’s at risk, you can course-correct and give customers what they need to stay—tailored resources, proactive customer support, or re-engagement campaigns that encourage product usage.

3. Ask for customer feedback

Feedback is the driver of improvement. Whether you want to build a better product, create a better shopping experience, or prevent churn, there’s no tool more valuable than feedback, straight from your customers. 

Give customers a simple way to share their thoughts with you, like a feedback form or survey. 

It’s not enough to gather feedback—you need to act on it. Analyze the responses and identify areas where you can improve, like:

• Revamping your onboarding process

• Creating more relevant, up-to-date resources

• Setting high-value customers up with a customer success manager (CSM)

• Rethinking your marketing—are you targeting the right people?

Feedback is crucial for reducing customer churn, but asking for feedback early—on and often—can help you resolve issues long before customers consider leaving. An added perk? It shows your customers that you care about what they have to say and want to get better.

4. Prioritize and support your customer service team

We've all had frustrating customer service experiences, like being put on hold for 20 minutes only to get passed to yet another agent. Or requesting support and never hearing back from the support team. It's annoying, frustrating, and exactly how your customers feel when you don't provide proper support.

Here's why that matters:

• According to Zendesk's 2023 Customer Experience Trends Report, 73% of consumers will switch to a competitor after multiple bad experiences with your brand.

• Research from Zendesk shows that 30% of customer service agents say they can't access customer information, leading to frustrated customers.

• Four in 10 agents say that when customers can't complete tasks on their own, they get angry (another reason to optimize your onboarding).

Instead of leaving customers annoyed and ready to leave, give your customer service reps everything they need to provide exceptional support, like access to customer data so reps can offer assistance quickly and get accurate context.

Other ways to make customer service a priority (and reduce customer churn) include:

• Providing proactive support

• Giving customers different channels for support, like live chat, email, and phone

• Offering 24/7 customer service

5. Implement customer retention strategies

Opposite to customer churn is customer retention, or keeping customers. There are dozens of customer retention strategies, but some of the best center around loyalty programs, building community, and celebrating customer milestones.

Loyalty programs reward customers for making purchases with things like:

• First access to new products

• Exclusive access to events

• Discounts

• Personalized offers

• And more

It's about expressing appreciation for their continued business. And it pays off: a 2024 report from Merkle shows that a quality customer loyalty program has an 84% impact on a consumer’s decision to continue business with a brand.

Another retention strategy? Building community. Customers are loyal to brands that have built a community around their products or customers, like an ambassadors program. The key with these communities is consistent communication and engagement with members.

HubSpot sums it up best:

When you create a community, customers tend to stay more loyal and it'll reduce the likelihood that they'll churn when something goes wrong.

Top brands like Starbucks and Apple have built their entire brands around community. But any business with exceptional products can—and have—established and grown successful communities, like:

• Figma

• Notion

• Nike

• Superpath

We've even got a thriving community here at Typeform!

6. Incentivize loyalty

Loyalty programs are a solid way to build brand loyalty over time. But when you're about to lose a big customer and need something fast to get them to stay, there's nothing better than an enticing incentive.

HubSpot suggests keeping the customer's timeline in mind—is their contract about to end and you need to motivate them to renew? If so, a discounted rate could be just what they need. And if you've got a tiered offering, a complimentary upgrade from the Business to Premium is also an attractive incentive to prevent customer churn.

7. Put your data to use

We already discussed tracking customer behaviors that might indicate they're about to churn. But you'll also want to look at the data when a customer actually churns. Why? It can help you identify whether customer churn increases seasonally, if churned customers share similar usage rates, or if there's an industry that churns more than others.

Use customer churn data to ask questions and uncover hidden insights, like:

• When do we see customers churn the most?

• Do our customers churn after a month, a quarter, or another time?

• Are their CSAT and NPS scores an accurate indicator of churn?

• How do their usage rates look when they churn?

The data should reveal what you need to know to prevent future churn.

8. Roll out the red carpet for your VIP customers

While extraordinary customer service is the standard for all customers, your high-dollar VIP customers deserve a little more. Assigning customer success managers to your best customers makes sure they're taken care of and can accomplish their business objectives with your product.

A CSM:

• Acts as the main point of contact at your company, allowing them to build stronger relationships with your customers

• Provides guidance on how to get the most out of your product—helping them meet their goals, which can reduce customer churn

All of these strategies can help you get customer churn in check—but only if you use them as more than a one-and-done process. Measuring churn every so often isn’t enough. Treat it as a vital part of how you measure the health of your customer experience. 

Likewise, you’ll need to evaluate whether your churn reduction strategies are effective. Review them frequently and make any necessary changes to optimize for retention. 

Ready to retain more customers?

Whether you’ve got a customer churn problem or are proactively trying to prevent one, these strategies are a good place to start. Not only does reducing churn help with your bottom line, it gives you the opportunity to do better—better offerings, better service, better customer experiences. 

Along with data, customer feedback is one of the best ways to understand why your customers churn. Gathering, listening to, and implementing feedback shows customers you value their input and are dedicated to doing better. And it can reduce churn.

Make it quick and easy for your customers to share their thoughts with one of our customer feedback forms. Sign up for Typeform and start collecting the feedback that’ll reduce churn.