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.

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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.

Through increasing awareness, affordability, and accessibility, the city of Houston hopes to grow the number of electric vehicles on Houston roads by 2030. Courtesy of EVolve Houston

The city of Houston has taken a major step toward reducing carbon emissions caused by its estimated 1.3 million vehicles that drive the city's streets daily.

Mayor Sylvester Turner announced a new partnership between the government, local businesses, and academic leaders that has created EVolve Houston. The coalition is aimed at boosting electric vehicle sales to 30 percent of new car sales in Houston by 2030.

"This new partnership will help solidify Houston's success as a leader in transportation technology and it will help improve air quality for the citizens of Houston and beyond, by reducing reliance on vehicles powered by carbon-based fuels," Mayor Turner says in a release. "Houston will now have a dedicated resource working to increase the adoption of electric vehicles, wherever it makes sense to do so. Nearly half of the greenhouse gas emissions in Houston come from transportation. Shifting to zero emission forms of transportation is a key strategy to help us meet our ambitious climate goals and improve our regional air quality."

EVolve Houston, which will contribute to the city's Climate Action Plan that was announced in July, will focus on increasing awareness, affordability, and availability of electric vehicles. The coalition's founding partners include the city, CenterPoint Energy, the University of Houston, NRG Energy, Shell, and LDR.

"Houston has bold goals to improve air quality and reduce greenhouse gas emissions. To do that, we must make a major impact on one of the largest sources of emissions, which is transportation" says Dr. Ramanan Krishnamoorti, the chief energy officer at University of Houston.

The partners will focus on launching pilot projects as well as hosting demonstrations and awareness activities to promote EV adoption, according to the release.

"At CenterPoint Energy, we are committed to making a positive difference in the communities we touch, and environmental stewardship is an integral component of our overall corporate responsibility approach," says Scott Prochazka, president and CEO of CenterPoint Energy, in the release. "I am proud to partner with Mayor Turner and other founding members of EVolve Houston to help accelerate clean transportation for Houston."