How to Calculate and Reduce Churn Rate for Your Ecommerce Website?
As an e-commerce business, you need to think of so many different aspects of your business. From increasing sales to improving your digital marketing strategy, it all makes a difference. And, another super-important factor that you need to keep track of is your business' churn rate.
Simply put, churn rate is a business metric that tells you how many people left your business over a certain period. To make sure this number is not growing strong, you need to learn how to calculate the churn rate, and how to reduce it. Below, you'll find everything that you need to know about the churn rate for your e-commerce website.
1. Why Does Churn Rate Matter For E-Commerce?
Ecommerce is the type of business that relies on online shoppers and customers. That means that you strongly rely on your online subscribers.
Those are the people who regularly shop on your e-commerce, read your content, and are a part of your email newsletter.
That's why, when they start to leave you, you need to start worrying. So, churn rate will tell you:
- how strong is your customers and subscribers base
- are you doing everything right
- should you be worried
Therefore, churn rate can signal you that something is wrong with your overall strategy and you need to introduce changes. And, in case you need help putting together churn rate reports, you can check out GetGoodGrade that can help you out.
2. How to Calculate Churn Rate for E-Commerce Website?
Calculating your churn rate is actually quite simple. It requires a few steps of preparation:
- choosing a period to calculate the churn rate for
- calculating the number of subscribers at the beginning of that period
- calculating the number of subscribers at the end of that period
Once you know these details, you'll be able to use the following formula.
This simple formula is everything you need to do in order to calculate your churn rate. Now let's check out how it works with actual numbers.
Let's say this is your case:
- you had 2350 subscribers at the beginning of October
- you have 2200 subscribers at the end of October
Here's what your churn rate for October would be:
People have different opinions on what is a "good" or "acceptable" churn rate for an e-commerce website. Some argue it's around 3% while others consider 5% fairly good.
However, if your churn rate is increasing, even though it's around 3%, it's not a good sign and you need to do something about it.
That's why, if you've calculated your churn rate for previous months you can see whether it's increasing or reducing. In case it's increasing, you need to think of a strategy for reducing it.
3. How to Reduce Churn Rate?
Reducing your churn rate is a challenging task since it requires some serious planning, analyzing, and strategizing.
There are several steps in this process that you simply have to cover. Here's what you need to do, step by step:
See Why Customers Are Leaving You
If there's something that's making your customers leave, you need to know about it. This might be the hardest step in the process.
You can conduct surveys with existing customers or those who churned, asking them for their opinion and feedback.
Learning about your mistakes or ways to improve is crucial.
Simplify Customer Experience
One of the most common reasons for customers churning is the complicated process of onboarding, and getting around your website. And, if your customers aren't doing it with ease, they might leave you and turn to your competitors. This is why you have to:
- create a simple UX
- write a clear UX copy
- provide proper guidance, tips, and help along the way
This might help you reduce your churn rate and get back on your feet.
Track Customers' Journeys
Another surefire way to prevent your churn rate from further increasing is to keep track of your customers' and their journey with you.
You have to pay attention to:
- their shopping habits
- the last time they bought something
- whether they're reading your emails
- whether they're using the discounts you're sending them
And, if you notice that a customer hasn't been active for a while, you need to find a suitable solution to get them back on board.
Calculating churn rate for an e-commerce website should be a regular habit since it can tell you so much about your current status and relationship with customers. That's why you should calculate it regularly and compare it to previous periods.
Hopefully, the tips we've shared above helped you understand the importance of calculating and reducing your churn rate. Make sure to pay attention to these metrics and use it to improve your e-commerce website.
This guest article was written by Jessica Fender, a copywriter and blogger with a background in marketing and sales. She enjoys sharing her experience with like-minded professionals who aim to provide customers with high-quality services.