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A Basic Thought on Churn Analysis

  • By admin
  • October 10, 2012
  • 23 Views

Churn is an event in business when a customer stops buying or availing services of a company. It is also known as lapsing or defecting behavior. So, Churn Analysis is a computation of the rate of attrition in the customer base of a company or the number of consumers who are tending to discontinue buying products and services from a firm. The calculation is mainly done for designing a company’s customer retention strategy.

Basic Concept!

The computation is very important as it costs less to retain an existing customer than to acquire a new one or procure an inactive customer again. The Churn computation aids in understanding the behavior of customers who terminate services of a provider and go for its competitor instead.  When the percentage of customers who are likely to discontinue services of a company where a defined time period is known then detained analysis on what causes the customers to defect can be carried out aptly. The calculation can forecast the chances of occurrence of such an event and can also be used to estimate attrition in a firm.

The prime challenge with Churn Analysis is identifying the time when the customer will stop buying. To make this estimation simpler, most organizations define a period of non-purchase for customers, depending upon the nature of their product or service. However, this is not the best solution to the problem. Each customer behaves in a different way. Thus, setting the same time period for all customers is not feasible.

But with Churn modeling, this technique can be applied on an individual basis too. Generally, if Churn probability and Lifetime Customer Value is calculated for every customer’s purchase history then their purchasing behavior can be categorized into different segments like high, medium and low. Thus, each customer can be targeted according to their categorization in this churn matrix. Marketing communication and promotions can be timed better with this analysis.

Where can churn matrix be applied?

Churn Analysis is primarily done for industries catering to subscription services. Companies that generally use this computation are magazines and long distance phone services. Potential service providers do churn analysis to design solutions successfully for various companies. Consequently, it helps to devise customer retention strategies for companies and charities in the communication sector. The companies apply definitive processes to provide effective solutions. These are Churn investigation, Multivariate modeling, Churn monitoring and Anti churn offer strategy.

The activity of retained and lapsed customers is compared in Churn investigation to isolate reasons which causes customers to discontinue services. Multivariate modeling applies techniques like propensity modeling to estimate the rank and magnitude of triggers, which cause customers to revert. Identification of triggers that make customers discontinue services along with implementation of measures to prevent this scenario is taken up in Churn monitoring.  On the other hand, anti churn offer strategy includes testing as well as execution of services which will bring about customer retention. This generally comprises strategies like product or service enhancement and price promotions.

Market Quotient does Churn Analysis for vast variety of clients. So, if you want to avail our specialized services on this, do get in touch with us by writing to us at contact@marketquotient.com