Houston voices

University of Houston expert on feeling the churn of customers and what to learn from it

Customer churn is inevitable, but it's what you do with the opportunity that matters. Miguel Tovar/University of Houston

Think of customer churn as a robust balloon, ready to touch the sky as soon as you let go. Every day you hold on to that balloon, air molecules will diffuse through the knot. Your balloon will become flabby. This exodus of air is known in business as a churn. Customer churn is the amount of customers that your company loses during a specific time frame. Canceled subscribers, dissatisfied clientele, or customers that just found a better alternative. Keeping track of churn is a vital part of your company's continued growth. Doing so will give you the brutal truth regarding customer retention.

It's difficult to measure the success of your startup without keeping track and analyzing your shortcomings as well. Sure, you want 100 percent customer retention. But even a company that has figured out how to stop the aging process will not have such an unrealistic rate. Losing customers is part of the game. However, you don't have to let it kill your company. You can learn from it.

Measuring customer churn rate

You can measure your churn rate by subtracting lost patronage from the number of customers you had to start a period. So, if you started off the month or quarter with 1,000 customers, and end up with 500 at the end of that period, your churn rate is 50 percent. You lost 50 percent of your customers. Ouch. Unless your company decides to go into selling raincoats in the Sahara, it is doubtful your churn rate will be that high. But you understand how it's calculated now.

So, why is customer churn so important? Well, for starters, the cost of acquiring new customers is 25 times higher than the cost of retaining the ones you already have. Further, research has determined that a mere five percent rise in retention rates can boost profits upwards of 25 percent.

Curb your churn

There are a few ways to curb customer churn.

One way is to concentrate on your most loyal customers. One of the biggest gripes against Comcast is that they offer so many special rates to new customers, and almost nothing for their long-time customers. The same was said about Uber until they recently launched Uber Gold. How many "special deals for first time customers" do you see with phone service companies? Tons. It would be more advantageous to focus your resources on your loyal customers. Give them another reason to stay. After all, as we just covered, it's cheaper for your company to retain them than to get new customers.

Another way to reduce churn rates is to track and analyze it every fiscal quarter. This analysis can help you understand why exactly customers are leaving. You can even detect patterns to show at what point in their patronage they are leaving. All this data can be used to make better decisions about improving your company's services or products.

Listen to fleeing customers

Speaking of making better decisions for your company, the best way to do that is to talk to the customer. When you were in high school, you probably had "intel" on your crushes to see if they liked you back. You probably spent months agonizing over what they meant by this text or that comment. In retrospect, you probably now know it would have been so much easier to just ask. Letting the customer be your compass will steer your company in the right direction. Lapsed customers will almost always be honest with you. What have they got to lose? They will tell you straight up what they didn't like and why they didn't like it. With a large enough sample size, you'll soon have a good idea about what you could be doing better to keep your current customers from fleeing your company like it's Blockbuster. No offense to Blockbuster.

In summary, keeping the customers you have is just as important as winning over new ones. It's harder to put air into an already knotted balloon than it is to just keep the air it already has inside. If you focus on keeping your customers, much like that air-filled balloon, sky's the limit.

------

This article originally appeared on the University of Houston's The Big Idea.

Rene Cantu is the writer and editor at UH Division of Research.

Trending News

Building Houston

 
 

A Rice University scientist will be working on the team for NASA's latest Mars rover. Image courtesy of NASA/JPL-Caltech

A Rice University Martian geologist has been chosen by NASA as one of the 13 scientists who will be working on a new Mars rover.

Perseverance, the rover that launched in July and is expected to land on Mars in February. It will be scouting for samples to bring back to study for ancient microbial life, and Kirsten Siebach — an assistant professor of Earth, Environmental and Planetary Sciences — will be among the researchers to work on the project. Her proposal was one of 119 submitted to NASA for funding, according to a Rice press release.

"Everybody selected to be on the team is expected to put some time into general operations as well as accomplishing their own research," she says in the release. "My co-investigators here at Rice and I will do research to understand the origin of the rocks Perseverance observes, and I will also participate in operating the rover."

It's Kirsten Siebach's second Mars rover mission to work on. Photo courtesy of Rice University

Perseverance is headed for Jezero Crater, a 28-mile-wide area that once hosted a lake and river delta where, according to scientists, microbial life may have existed over 3 billion years ago. Siebach is particularly excited hopefully find fossils existing in atmospheric carbon dioxide dissolved in water — which usually exists as limestone on Earth.

"There are huge packages of limestone all over Earth, but for some reason it's extremely rare on Mars," she says. "This particular landing site includes one of the few orbital detections of carbonate and it appears to have a couple of different units including carbonates within this lake deposit. The carbonates will be a highlight of we're looking for, but we're interested in basically all types of minerals."

Siebach is familiar with rovers — she was a member of the team for NASA's Curiosity rover, which has been exploring Mars since 2012. For this new rover, Siebach knows what to expect.

"Because there is only one rover, the whole team at NASA has to agree about what to look at, or analyze, or where to drive on any given day," Siebach says in the release. "None of the rovers' actions are unilateral decisions. But it is a privilege to be part of the discussion and to get to argue for observations of rocks that will be important to our understanding of Mars for decades."

Siebach and her team — which includes Rice data scientist Yueyang Jiang and mineralogist Gelu Costin — are planning to tap into computational and machine-learning methods to map out minerals and discover evidence for former life on Mars. They will also be using a Planetary Instrument for X-ray Lithochemistry, or PIXL, to analyze the materials.

The return mission isn't expected to return until the early 2030s, so it's a long game for the scientists. However, the samples have the potential to revolutionize what we know about life on Mars with more context than before.

"Occasionally, something hits Mars hard enough to knock a meteorite out, and it lands on Earth," she says in the release. "We have a few of those. But we've never been able to select where a sample came from and to understand its geologic context. So these samples will be revolutionary."

Trending News