Customer Churn Rate in Advertising
The churn rate is the percentage of users that convert through ads but do not stay. They may purchase or subscribe to your product or service, or download your app, before canceling the relationship.
It measures the number of clients who convert but then leave your company, similar to a typical churn rate. On the other hand, your churn rate looks at clients who convert as a result of watching your ads. The churn rate is the opposite of the retention rate.
In marketing, the number of users that continue to cooperate with your company or brand over a set period is known as the retention rate. It's a crucial indicator for businesses because it reveals the level of user engagement, interest, and loyalty. Customers that interact with your products or services on a regular basis have a high retention rate, which means your business has a low churn rate or the percentage of consumers who stop interacting with your company.
Calculating Customer Churn
To reduce customer churn, you must first identify your starting point, which requires measuring your current churn rate. You may need to calculate churn monthly, quarterly, or annually, depending on your business and client volume. If you have thousands of clients, for example, you should calculate churn more frequently than if you only have a few dozen.
To calculate the churn rate, use the following formula:
You may calculate a percentage by dividing the number of clients lost during a period of time by the number of customers at the start of the period. This essential percentage provides an overview of your business performance over a specific time period.
Churn rate can then be used to calculate:● Number of customers lost● Value of recurring business lost● Percentage of recurring revenue lost
For example, if you want to calculate the churn rate for your 500,000-customer business and you know that 15,000 customers left in May, your churn rate would be:
At first look, a 3% monthly churn rate may not seem to be the reason for concern. Your churn rate may vary from month to month, or even campaign to campaign. If your churn rate remains at 3% per month, and your acquisition rate remains constant, your churn rate will be 36 percent each year, or 180,000 clients lost. That's a big number of clients leaving your business, resulting in a significant loss of revenue.
Churn prevention using retargeting
Churn occurs. That is a proven fact. The best way to avoid users becoming inactive is to engage them from the beginning and encourage them to interact with your company. Retargeting can help you in achieving just that: keep your daily active users coming back more frequently and engaging with your service or product.
One of the marketers' objectives is to increase retention rate, retargeting is an excellent ally because it allows you to put ads in the eyes of users before they become inactive.
Let’s take an online casino as an example. You can use retargeting ads to prompt players to return to the site, providing new games from well-known software developers. Moreover, you may enhance your catalog: add titles that are popular in your market, keep up with your providers' scheduled releases and diversify your offer as much as possible. This retention effort helps to reduce the churn rate.
By the way: statistics show that if a gambling company increases the retention rate by at least 5%, its profit can grow by up to 95%.
Retention is a long-term strategy that requires a sharp eye for data. Retargeting is a great approach that keeps the rest of your plan running smoothly. Early analysis of the user churn rate allows marketers to better understand their customers' behavior and track their progress. If marketers can uncover the probable causes of a high churn rate, they can better plan to tackle the issues, change strategy, or optimize early on.
The way forward is to focus on understanding the core reasons for inactivity and churn, then tailoring a well-thought-out retargeting strategy to each of them.
Let’s continue with the example of an online casino with a segment of users that have placed their first bet but then left. A retargeting campaign can address this situation. It is possible to cater to the creatives used to incentivize the users to come back to the casino. That can be done by offering a “deposit match”, giving “free bets” or any other offering that can create a sense of urgency and curiosity. Users will feel encouraged to engage and be challenged as a result of this strategy. Marketers can implement retargeting to ensure that these messages reach their users at the proper time and frequency.
Want to explore essential tactics that can help your company successfully implement a retargeting strategy? Check out the free Ultimate Guide to Retargeting Ads.
Customer churn is an important metric, but being able to predict customer churn rate gives marketers significant benefits. Knowing which clients are most likely to churn and when to do so allows marketers to react more quickly when trying to retain them.
It's crucial to remember, though, that the best strategy to deal with customer churn is to actively work to prevent it, rather than simply sending a win-back offer at the right time. Customer churn is, in the end, a quantitative indicator that occurs for qualitative reasons.
This emphasizes the significance of knowing your customers, recognizing the typical reasons they leave, and taking proactive steps to avoid it. Predictive models and algorithms are excellent at identifying patterns, but it's up to the marketer to figure out what those patterns mean in the long term.
Finally, whether you can eliminate or reduce churn comes down to whether your customers are satisfied. Are you doing all possible to keep them that way?