Customer Churn Rate in Retail: What it is, and how to use it

by: Robin Johnston On: November 3, 2016
3 min read

No business wants to lose customers, but it happens. People unsubscribe from your mailing lists, stop visiting your store, and return your products. It is a fact of business. However, if you aren’t tracking those instances, you are missing out.

Defining Loss

When a customer ends his relationship with your store, it’s called “churn,” and it’s usually represented as a percentage called the “customer churn rate.” There are lots of different churn rates. Some include the present value customers bring, while others refer to the lifetime value of a customer. Examples include the percentage of customers who don’t come back, the percentage of sales you lose from those customers not returning, the percentage of people who unsubscribe from your email list, the percentage of people who unlike your Facebook page, and the percentage who stop following your company on Twitter or Instagram, but there are many more. And it all matters.

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The Importance of Churn Rate

Churn rate matters for several different reasons. For one, there is the cost of acquiring a customer to consider. Marketing can be expensive. If you are losing customers soon after acquiring them, you may not be seeing a return on your marketing investment dollars. You also have to remember growth. Simply holding steady on revenue means that you will eventually go in the red as your expenses increase with inflation and the general cost of living in your area. Lastly, and perhaps most importantly, tracking your churn rate helps you spot issues before they become problems.

what is customer churn in retail

Using Retail Churn Rate

This last one is extra important in retail. You can use your customer churn rate in a couple of ways. You can use it to see whether you are meeting customer expectations — that’s a given — but you can also use it to see whether the efforts you are taking are successful. For instance, if you change the format of your email newsletter and your customer churn rate increases, it is a giveaway that your subscribers are not a fan of the new format or content.

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Difficulties With Churn

However, there are some difficulties in using churn rates in retail. Unlike some other businesses, tracking your customers can be tricky. For example, certain types of businesses have account managers and sales people who have direct relationships with clients. In these cases, you have a point of contact for discussing what your customers like about your business or what efforts you could take to retain the business of a customer getting ready to churn. Most retail businesses do not have this luxury.

Depending on your business, you could have a large amount of foot traffic or customers who pay cash. As such, in order to use churn rates in retail, you must rely on different sources of business intelligence information, such as having staff survey visitors or more subtle ways, such as complimentary Wi-Fi.

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Solving the Retail Churn Dilemma

When you use an intelligent business service like Bloom Intelligence to provide complimentary Wi-Fi service to your customers, you get a range of marketing and analytics tools that are perfect for brick-and-mortar locations.

The Bloom Intelligence dashboard displays a wealth of information including how often customers visit, how long they stay, and what time of day they shop by Wi-Fi logins. It also includes a Churn Rate Indicator. Monitoring customer churn and ensuring that the rate stays low is one way to ensure that your customer base grows and adds to sales and profits in each successive period.

 

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