Retention is most commonly associated with reducing customer churn. Many strategies exist such as continually improving User Experience to optimize for better customer value. A more data-driven approach is to detect and predict where and when customers are most likely to defect. We have to ask questions like who are these customers and how can we retain them?

Why do customers churn in the first place?

Could be:

• Lack of Engagement with the product.
• Poor Product-Market Fit.
• Poor Product quality (bugs, bad UX etc.)
• Lack of Proactive Support

So, what’s the key question you should be asking if you are considering going down the path of reducing churn?

Is this [churn reduction] effort worth the time and investment?

Let’s look at a quick insight: according to a famous Gartner study, on average 80% of a company revenue comes from 20% of their customers. According to Bain & Co. even a 5% increase in customer retention can increase a company’s profitability by 75%. It increases referrals, upsell revenue, LTV, creates new acquisition channels. [1]

Yet most companies value acquisition much more than retention. One reason could be that acquisition campaigns yield quicker, more measurable results than customer retention campaigns.

ROI for acquisition is calculated by comparing marketing cost versus how many customers made a purchase. In contrast, customer retention takes into account the potential value of a customer over time, based on their behavior and purchase habits, rather than solely focusing on the results of one transaction.

Mostly, solving customer churn comes down to measuring customer health by mapping and tracking their journey- it’s a combination of both transactional (check-ins, interactions, last activity date) as well as behavioral data (number of sessions in a period, activity time, etc).

But the single most effective way you can avoid customers slipping away is by talking to them. If analyzing retention, cohorts, or LTV gives you results that you didn’t expect or can’t explain, then you should be talking with your customers more often.