Marketing Churn Rate: What Is It and How To Calculate It?

Marketing 19 minute read 23rd February 2023

Have you been experiencing a drop in followers? Do you suspect fewer people are interacting with your marketing campaigns? Then you should start calculating the marketing churn rate for your business.

The number of followers might seem insignificant for a monetary benefit. But these are the people who are going to convert into your customers and buy your products.

So, keeping an eye on your marketing and the results it generates is imperative. In this article, we will discover everything about marketing churn rate. Highlights include what it is, its effects, benefits, how to calculate it, and why it matters.

What Is Marketing Churn Rate?

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The marketing churn rate is the percentage of customers who stop engaging with a business over a specific time due to its marketing. It measures the effectiveness of a business’s marketing strategy in retaining its customers.

Here’s how you can calculate the churn in marketing over some time. Divide the number of customers you have lost by the number of customers you had at the start of said time.

With the help of the right tools, you can easily calculate the marketing churn rate for your business. These include Customer Data Platforms (CDPs), Wi-Fi marketing software, and analysis tools.

How To Calculate Marketing Churn Rate?

To calculate the marketing churn rate:

  1. First, determine the time. Say three months.
  2. Next, determine the number of people interacting with your business at the beginning of those three months.
  3. The third step is determining the number of customers you lost due to marketing issues.
  4. Then use this formula: Marketing churn rate = customers lost / customers at the beginning of the three months x 100

Here’s an example. Suppose you want to calculate the churn rate in marketing from September to November. At the start of September, you had 100,000 customers.

Due to loopholes in your marketing, you lost 20,000 customers by the end of November. Which means now you have 80,000 customers. Now dividing 20,000 by 100,000, you get 0.2. So, your marketing churn rate for those three months will be 20%.

What Is a Good Churn Rate?

A good churn rate depends upon the industry and the nature of the business, as there are various factors in play.

Some business models are more complex than others. For example, subscription businesses may have a higher churn rate, while retail businesses have a lower churn rate. It also depends on the maturity of the product and business.

The more your brand matures, and people start trusting you, the less churn you experience. But regardless of the industry, it is a good idea to keep track of your marketing churn rate, and improving it is a good idea.

Benefits of Calculating Marketing Churn Rate

Anything that gives insights into customer behavior is important for businesses. Calculating the marketing churn rate of your business provides several benefits:

  1. Identifying marketing issues: By calculating the churn in marketing, business owners can identify potential issues with their marketing efforts that may contribute to customer loss.
  2. Understanding customer behavior: Knowing how many customers a business has lost can also determine why they are leaving. This gives insights into customer behavior and helps them cope accordingly.
  3. Retaining customers: Monitor and address the marketing churn rate. It can help you improve your strategies as a business owner. Moreover, it leads to increased customer interaction and reduced customer loss.
  4. Comparing performance over time: It also helps business track their performance and identify trends. This, in return, helps them make better decisions about future marketing campaigns.
  5. Make a schedule to calculate the churn in marketing for your business. This will help you gain updated insights to maximize these benefits.

How Does Churn Rate in Marketing Affect Businesses?

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The marketing churn rate is directly related to a business’s marketing efforts. This means that a higher churn in marketing has adverse effects on it. Some of these effects are

  1. Revenue: A higher churn rate in marketing can lead to decreased revenue. When customers leave a business due to its marketing issues, they may take the business to its competitors.
  2. Customer acquisition costs: Businesses spend money on their marketing to gain customers. If a business has a higher churn rate, it has to spend more money to replace and retain customers.
  3. Brand reputation: Customers may leave a brand due to negative experiences. If a business bombards its customers with poor quality, irrelevant brand messages, they may think of it as unprofessional.
  4. Customer loyalty: A lower churn rate indicates customer loyalty. It means your customers resonate with your marketing and are less likely to go to your competitors.
  5. Future growth: Marketing churn rate can affect a business’s growth. If a business is losing customers, it may have a more challenging time growing and expanding its customer base in the future.

What Is the Average Customer Churn Rate by Industry?

The average customer churn rate by industry depends upon various factors. These are customer demographics, products/services it offers, competition, and economic conditions. But according to honeystack and customerguage, here are some general benchmarks for average customer churn rate by industry:

  • Energy and utilities: 11%
  • IT service: 12%
  • Computer software: 4.79%
  • Industry service: 17%
  • Financial services: 19%
  • Consumer goods: 9.62%
  • Professional services: 27%
  • Telecommunications: 1-2%
  • Manufacturing: 35%
  • Logistics: 40%
  • Education: 9.61%
  • Healthcare: 7.55%
  • Media and entertainment: 5.23%

Although each industry has a standard benchmark, it is important to calculate your churn rates and set a benchmark according to your business model.

What Is the E-commerce Churn Rate?

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The e-commerce churn rate is the percentage of customers a business loses in its online store over a period of time. The method to calculate this is the same as calculating the marketing churn rate.

Determine the number of customers who stopped buying from your e-commerce store at the end of the period. Divide this number by the customers you had before the said period.

To calculate the churn rate of your e-commerce business, you need to have extensive data. This calculation includes buying patterns of your customers, the number of regular and irregular customers, and the number of silent followers.

This rate depends more on the pricing, delivery time, and quality of the products and less on the marketing efforts.

Relevant Metrics Beyond Marketing Churn Rate

The marketing churn rate is undoubtedly an important metric for determining customer retention and loyalty. But several other relevant metrics can provide deeper insights into a business’s performance. Some of these metrics include

  1. Customer Lifetime Value (CLV): This metric estimates the total revenue a customer will give to a business until he remains a customer. It depends on factors like customer acquisition costs, the frequency and value of purchases, and customer loyalty.
  2. Customer Retention Rate (CRR): This metric measures the number of customers a business has retained. Think of this as the opposite of the churn rate! The most common formula to calculate this is: (Customers at the end of the said period – new customers) / customers at the start of the said time.
  3. Net Promoter Score (NPS): It measures customer satisfaction and loyalty. You can calculate NPS by asking customers to rate their recommendation of your business on a scale of 0-10.
  4. Repeat Purchase Rate (RPR): This is the percentage of customers making more than one business purchase over a period. You can easily calculate this by dividing the repeat customers by the total customers you had in the period.
  5. Revenue metrics: Revenue metrics can help you analyze the overall financial performance of your business. These include total revenue, revenue per customer, and revenue growth rate.
  6. Customer Acquisition Cost (CAC): This metric measures the cost of getting new customers, including advertising, marketing, and sales expenses. It can help you determine the most efficient customer acquisition channels.

Combining some or all of these metrics is a good idea to gain the most accurate customer retention and loyalty results.

Factors That Affect Marketing Churn Rate

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Knowing what factors can affect your marketing churn rate is the first step to lowering it. Depending on the industry and the nature of business, several things cause a churn. Some of these factors are

  1. Product or service quality: If a company fails to maintain the quality of its product or service, customers are more likely to leave. This is one of the most important factors regarding customer loyalty.
  2. Customer support: When a company fails to answer customer queries before and after the purchase, they feel frustrated and disengaged. This can cause them to stop doing business with the company.
  3. Price: People are likelier to start doing business with a competitor if they can find a better price elsewhere. Offering competitive pricing and retaining quality can help improve customer loyalty.
  4. Competitor activity: If a competitor offers better products, services, or pricing, customers may switch to that competitor. Keep tabs on competitor activity and adapt accordingly.
  5. Marketing and promotions: Poor marketing and brand messaging that fails to resonate with the customers may lead to higher churn rates. A company that offers no discounts and promotions is also more likely to lose customers.
  6. Changes in customer need or preferences: Customers’ needs and preferences change constantly. Customers are more likely to leave if a company fails to adapt and meet those changing needs.

Working on these factors can help businesses reduce churn. But it is important to note that some churn will still exist. This is because there are factors that are beyond the control of a business. These factors include changes in the economy or industry.

How To Reduce the Marketing Churn Rate?

As a business owner, experiencing churn is inevitable. Over time, you will lose customers, but improving customer experience and getting new customers can help you control this churn. Here are a few strategies to reduce the marketing churn rate:

  1. Improve customer experience: Provide excellent customer service, offer high-quality products and services, and ensure the entire customer journey is smooth and easy. All of this can help you retain customers and decrease churn.
  2. Offer incentives and loyalty programs: According to the psychology of loyalty, offering discounts or rewards make customers loyal to your business. Rewarding customers for referrals or making multiple purchases through loyalty programs can also effectively decrease churn.
  3. Identify and address customer issues: Monitor customer feedback and work toward enhancing their experience. Listen to them and solve their problems to prevent them from leaving your business.
  4. Use targeted marketing: Targeted marketing helps ensure the timely delivery of the right message to the relevant person. Tailoring marketing efforts to specific customer segments based on their behaviors can help you increase engagement and retention.
  5. Measure and analyze churn: Businesses can identify trends in customer behavior by measuring and analyzing marketing churn rates. Use this information to inform targeted strategies for improving retention.

All businesses face churn at some point in the cycle. But ignoring the churn rate in marketing can cause businesses to continue their old ways of operation and lose customers.

Marketing Churn Rate: Conclusion

To conclude, the marketing churn rate is a critical metric that measures the rate at which customers stop interacting with the marketing of a business. High churn rates can lead to significant revenue loss and negatively impact a company’s reputation.

However, businesses can reduce their churn rate. They can do this by understanding the causes and implementing retention strategies.

Improving this data will result in better customer loyalty and a more stable customer base. Moreover, it increases brand reputation and drives sustained growth in the long term.

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