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What is Churn Rate? How To Reduce It for Your Ecommerce Store in 2023

churn rate

The term “churn” is the proportion of users that have stopped using the app. It could be a case of customers who have stopped using the app, which means they’re not starting new sessions, or users who have removed the application. The distinction between the two possibilities is defined by churn and is determined by the app’s vertical and business objectives. For instance, the customer churn rate, in particular, is the number of customers who have quit using the app’s services or services. This is especially useful when apps use subscription-based models.

What’s churn in eCommerce?

eCommerce Churn is the term that refers to the number of customers who no longer purchase through your online store. The churn percentage is the number of customers who cease doing business with you after a specified time.

Two kinds of customer churn can directly impact the performance of an eCommerce business. voluntary churn as well as non-voluntary churn.

Voluntary churn happens when a consumer decides not to buy from you. It could be because of dissatisfaction with your service. Involuntary churn is when an inability to pay can cause a customer’s purchase to be canceled. Involuntary and voluntary churn is determined by comparing the churn rate.

Imagine you manage an online store with a subscription model and would like to study your customers’ churn rate over six months. In this case, you’ll examine the number of customers who were unsubscribed to your service in that time and then apply an equation to determine the percent.

To calculate your churn percentage To determine your churn rate, subtract the number of customers you had at the start of the period from the number of customers you had at the conclusion. Then, divide it in half by how many customers you started with, and then multiply your result by 100. An in-depth formula to explain more about this can be found below.

What is a Good customer Churn Rate in ecommerce?

If you’re looking to find out the average churn rate for eCommerce, There’s no definitive or universally accepted answer.

The reality is that it is different between businesses. Therefore, it is important to establish your threshold for profitability and the amount of churn you should permit to get there.

Generally, anything below five percent is a great conversion rate for eCommerce companies. But this isn’t always the situation. For example, certain enterprise businesses may see turnover rates as high as 10% and count them as a great success.

Industry Churn rate

  • Fitness and beauty the churn rate is 62%.
  • Society and people and society: 63 % Churn rate
  • Food and beverages the churn rate is 64%.
  • Health Rate of churn: 65%
  • Literature at Books: 69 % the rate of churn
  • Animals and pets have 70 % of the rate of churn
  • Sports 70 % churn rate
  • Apparel 70 % Churn rate
  • Garden and home 75% the rate of churn
  • Hobbies and toys have a 70% churn rate
  • Shoes: 78 percent the rate of churn
  • Apparel clothing accessories 79 % the rate of churn
  • Consumer electronics: 82% churn rate
  • Special events and gifts the churn rate is 82%.

How to calculate churn rate

Churn is typically calculated every month; however, you can determine it on an annual, daily, or even a year-round basis. The most fundamental calculation of the Churn rate is by dividing your churned subscribers in relation to the number of total subscribers.

Customer Churn rate formula = Churned customers / Total customers. 

The devil lies in the specifics. Calculating churn is connected to how you count subscribers as well as activations. It’s also easy math.

Subscriber formula: End of period subscribers = Beginning of period Subscriber – Churned customers + Customer acquisition. 

How to Reduce Customer Churn Rate of Ecommerce Stores

1. Determine and Analyze Why Your Churn Is Happening

When you encounter churn in your company, there are three basic methods to determine the reason.

  • Give a customer to complete an end-of-day survey.
  • Contact the customer.
  • Send an individual email to your recipient.

Of the three options, calls to the customer are the ideal course of a move. Making a phone call to an unhappy customer signifies your care and concern for your customer.

Contact them and inquire about what they did to make them leave. The answers they provide will help help you determine the problem and what you can do to fix it.

2. Offer Long Term Contracts

Instead of month-to-month contracts, consider creating subscription packages with a longer timeframe. It could be six months or a whole year or more.

Offer long-term contracts at a reduced price. With this approach, customers will be allowed to avail the services or products they need and feel the benefits it can bring to their company and save some money.

Therefore, when they reap the benefits, they’ll be sure to stay for a long time.

“Reach the customers that have shut down their accounts, and inform them about your long-term deals. To get the best results, customize the message as much as possible. It is also possible to consider contract lifecycle management programs that will help you make creating and signing contracts easier. Employing a subscription management company such as Chargee can help you reduce the churn rate and also help you to expand your subscription model.

customer value
churn rate analysis

3. Always remind your customers of the value you provide.

If you’re trying to reduce the number of customers who leave your company, you need to put in the effort to keep your customers informed of your unique value proposition now and again. You must take the necessary actions to be at the forefront of their mind.

  • When you send an automated email, make sure that you highlight the top characteristics of the software.
  • When you announce any new feature, make sure that you inform all your users about the new feature. Then, you can offer them free use for a couple of months.
  • It’s a great idea to send some examples to your customers periodically.
  • In addition, you must develop infographics and instructional videos, which will let customers know how valuable your product is.

4. Ask For Customer Feedback

Ask your clients for feedback. Find out what they like about them. Once you’ve identified it, take it to heart, and persevere. This is how you can build an ongoing customer base.

A review section on your site is an excellent method to gather feedback from those who have terminated their contracts or are current customers.

Responding to reviews with an individual email can encourage people to share their feedback with you.

5. Surprise and delight your customers

Small gifts for ‘just because’ or some recognition for customers through a digital certificate, for example, anything that can put smiles on the customer’s faces, will help decrease the number of customers who leave your store.

A Reddit user was sent an email with a thank-you note from a company they’re a subscriber to (as a customer). So they logged into the Reddit profile to post their story and excitement.

6. Build a community around your product

Build a community

People love feeling like an integral part of a community. The desire to be part of a community is part of our nature. So one way to reduce customer churn rate is to make them feel like part of your company.

Moz hosts a guest-post-driven blog open to anyone in the community who can submit guest posts. Their discussion forum is also extremely active and often very informative.

Using online communities in this manner assists in educating and engaging users while keeping the brand in mind.

7. Recognize high-risk customers

When a customer cancels the subscription or ceases buying from you, there are various indications that they will continue to sell. Be on the lookout for red engagement signals, such as a decrease in website visits. For instance, customers might change between using it daily to weekly and monthly. Yelo and Panther’s automatic mailers are designed to reconnect entire groups that have been unable to participate and reduce the rate of churn. This is not about trying to deliver a “we miss you” email to those who haven’t checked for long. Instead, it’s an issue of observing the decrease in use across a whole group and then delivering re-engagement letters to the users.

8. Market actively to existing customers

If you have an abundance of content, like eBooks and blog posts, that your current customers would like, make use of it to improve retention of customers and cut down on the rate of churn. Do not devote all your marketing efforts to getting new customers. Spend time promoting other aspects of your products or services by email and social networks.

Churn Rate Examples

Many SaaS businesses, particularly in the B2C sector, post their churn percentages to demonstrate how they keep customers. Take these examples as a guide to your understanding of your Churn Rate -what is the ideal churn rate for your company, and where do some of the most famous companies sit in the middle of the spectrum?

Netflix: 3.3% Monthly Churn Rate

Netflix is among the lowest rates of churn in the industry of streaming video. The churn rate for its monthly subscription is shockingly low at 3.3%, meaning less than 96% of users decide to stick with Netflix. Its reasons may be related to its extensive collection of shows and its established brand voice.

Disney+: 3.7% Monthly Churn Rate

Disney has never been an integral part of other streaming services. Hence, it has launched its streaming service to broadcast its shows on the internet. People flocked to it upon introducing Disney+ in 2019, and very few have quit. So it’s no surprise that the monthly churn is just 3.7 %.

Apple TV+: 15.6% Monthly Churn Rate

The churn rate for Apple TV+’s month-long subscription is 15.6 %. A few outlets have reported it’s even higher than 20 %. A tech writer called Apple TV the most unloved of the Apple platforms. Another is arguing that its catalog can be described as “tiny” and that the content is not original. In addition, many Apple users were using an unpaid trial, and Apple was expanding promotional times from the time it was launched in the first place, which could be the reason the churn rate of its customers is higher than its rivals.

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