Customer Attrition: The Five C’s- Categories, Causes, Cutting- short, Consequences and Computation
Posted by Epixel MLM software on March 14th, 2024
Defining Customer Attrition
The count of paying customers who stopped purchasing or do not return to purchase the product or service is called customer attrition. It is also known as customer churn or customer turnover. The term “attrition”, “churn”, “turnover” refers to quantifiable rate of change that happens over a predetermined period.
Categories
In direct selling attrition there are two factorsdistributor attrition and customer attrition. Customer Attrition can be categorized into:
Voluntary –Voluntary churn is opted by the customer. The customer may choose to stop buying products or services due to various factors, one such factor is poor customer service.
Involuntary – Involuntary churn happens when the customer is released from the company. This happens when a customer fails to meet the financial responsibilities.
Internal–Internal customer attrition is when a customer chooses to buy another product or service from the same direct selling company. For example, if a customer bought product ‘X’ for a certain period and he/she later switches to product ‘Y’ of the same direct selling company, due to any reason, it is called internal customer attrition.
Causes For Customer Attrition
We have just completed what is attrition and its types, now let's dive and explore the causes of customer turnover.
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Customers might not be happy with the product or services or basically they feel disappointed about the ROI of the product or service.
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Customers realized competitors have better products or services.
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Customers didn’t feel valued.
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Customer support was not satisfactory.
Cutting-Short Customer Attrition
Companies and businesses, despite producing quality products and services, undergo customer turnover. Now that we know the causes, let’s work on how to reduce customer attrition.
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Create a strong rapport – Apart from creating customized products, direct selling companies should focus on creating a strong rapport with customers. By creating a strong communication channel, companies can gain trust and loyalty. Customers will feel valued.
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Put data to good use – Gathering and analyzing data plays another key role in decreasing customer attrition. The data collected can be studied to help take better decisions favoring the customer and company.
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Stay in constant touch – Relations with customers should be maintained. It will help us understand if there is any change in their preferences. It can be maintained through surveys, feedback, and reviews.
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Loyalty and Rewards – Customers will be loyal when they feel valued and rewarded. Loyalty and rewards create a happy feeling in customers.
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Track Fundamental KPIs – As discussed data can play a key role, by tracking fundamental KPIs (Key Performance Indicators) related to customer attrition it is easy to understand CLTV (customer lifetime value), repeat purchase and average order value (AOV). Direct selling business can determine the graph and make quick decisions.
Computation
Customer attritions are caused because of various reasons. In a direct selling business, it is always better to know the numbers to take required actions. The customer turnover rate is calculated within a period, it can be monthly, annually or even quarterly.
Direct selling companies need to understand the negative impacts due to customer turnover. It affects the company’s base and will show a decline in the graph. An unhappy customer is more likely to share their experience, which again has a negative impact. In short, customer attrition can be largely reduced if the customers are happy and satisfied.
