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Smart CRM Basics: Intro to Customer Churn Prediction and Prevention

Watch: Reducing churn is a key goal of every online business. So, how do you define, predict, and prevent it from happening to you?

Customer churn is a topic that should be on every CRMer’s mind – all the time. Those who pay attention to churn know that different customers exhibit different behaviors and preferences – and therefore churn for different reasons.

That’s why it is critical to know which marketing action will be the most effective for every single customer – ahead of time. Getting to know your clients in each of your lifecycle stages can decrease your churn rate by 20% and generate more loyal, long-term customers, too.

So, don’t let your customers churn on you! Watch the video or read the text below it to learn more.

Download the Guide: How to Keep Your First-Time Customers Coming Back >>

What is customer churn, and how do you define it? 

Customer churn refers to when a customer (player, subscriber, user, etc.) ceases their relationship with a company. The opposite of churn would then be retention.

In the digital world, businesses typically segment a customer as churned once a particular amount of time has elapsed since their last interaction with your site or service. (the exact period changes from business to business and from industry to industry. Sometimes, from customer segment to customer segment)

Defining churn – the motivation:

  1. Create indications in the data for smart segmentation
  2. Act upon the indications – create a designated strategy
  3. Keep monitoring the KPIs and test the strategy

How can you predict churn?

To accurately predict which customers will churn, you need to calculate customer lifetime value (CLTV) for every single customer. At Optimove, the approach combines a unique predictive behavior modeling system and continual dynamic micro-segmentation.

Predicting churn is essential only to the extent that action can be taken to retain the customer before it is too late.

Here are a few pointers:

Remember – it is always more difficult and expensive to acquire a new customer than retain a current paying customer!

Is there any way you can prevent churn entirely?

The short answer is: no.

But, there are many different approaches to limit churn significantly – in ways that will favor your bottom line revenue numbers considerably. For instance, you don’t want to wait for a customer to be at risk of churn to take action.

Instead, send personalized communications right from the beginning of their journey with you – from their first interaction with your brand.

You can also implement predictive models to identify warning signs and increase offerings and attention when risk increases – like send enhanced, more attractive promos.

Finally, try not to push for upsells or cross-sells when your customers have been segmented as At-Risk.

So, are you ready to predict and prevent customer churn? Talk to us today or request a demo!

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Tanya Szwarcbard

Tanya is a data enthusiast with a passion for applying data insights to marketing challenges. A veteran Marketing Data Scientist, Tanya works closely with CRM executives of top online entertainment and e-commerce businesses on building their retention marketing programs, better understanding their customers, and taking their CRM methodologies to the next level. She holds a BSc in Industrial Engineering and Management.