Customer turnover, or customer churn, is the rate at which a business loses customers. It is important to keep track of your customer turnover, because if it exceeds 5 per cent annually, it can be problematic. According to Alexander Hiam, author of "Marketing for Dummies," exceeding this turnover rate usually means that you have customer service problems that need to be addressed. Calculating your customer turnover is a very simple process that can be done in three basic steps.
- Skill level:
Write down the number of customers you have had in the present period, excluding new customers. The period can be any span of time chosen by the business, such as a year, financial quarter or month. For example, if you had 100 customers in the period, you would write that number down.
Write down the number of customers from the previous period. Make sure that you are using the same time period. For example, if you used the number of customers in the present year for step one, use the number of customers in the previous year.
Subtract the number of customers in the current period from the previous period, to determine how many customers you lost. For example, if you have 100 customers in the current period (excluding new customers) and you had 150 customers in the previous period, then you would subtract 100 from 150 which gives you the result of 50. This means you lost 50 customers.
Divide the number of lost customers by the number of customers in the previous period to get the customer turnover. For example, if you lost 50 customers and the number of customers in the previous period was 150 then you would divide 50 by 150. This would give you a result of 0.33, meaning that you have a turnover rate of 33 per cent.
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