Many brands pour resources into attracting fresh faces, seeing it as the key to an effective growth strategy. A home appliance company might roll out a flashy summer sale on its website, while a trendy athleisure brand blankets social media with influencer marketing collaborations. Make no mistake, both can be winning strategies for attracting new customers.
But you might find more value in dedicating your money and time to reducing customer attrition rather than solely pursuing new leads. Keeping the existing customers you have builds a foundation for sustainable growth.
Here are the ins and outs of customer attrition and the best strategies to keep your customers around.
What is customer attrition?
Customer attrition, sometimes called customer churn, is the loss of customers over a given period. It’s measured as the percentage of customers who stop returning to purchase from your company within a set timeframe. In other words, if your customer retention rate trends downward, you’re experiencing customer attrition.
Customer attrition is most often associated with software-as-a-service (SaaS) businesses operating on monthly or annual recurring revenue models—like Spotify, Mailchimp, and Shopify—though it’s also relevant for ecommerce and brick-and-mortar retail businesses. For instance, a wellness brand like Moon Juice, which sells supplement subscriptions for skincare and stress management, needs to keep customers coming back to maintain steady revenue.
Active vs. passive customer attrition
There are two types of customer attrition:
1. Active customer attrition
This occurs when a customer deliberately chooses to end their relationship with your company. For example, they cancel their subscription to your meal kit delivery service because they find the recipes repetitive.
2. Passive customer attrition
This happens when a customer gradually disengages from your company without formally terminating the relationship. They might stop spending their dollars on your footwear because of lifestyle changes or they find a preferable alternative.
What causes customer attrition?
Understanding why customers leave your business can help you plug the drain. Although some factors are beyond your control—like a loyal customer moving away from your local shop or a new vegan losing interest in your gourmet cheeses—you can address many causes of customer attrition.
Here are common issues that could be driving customers away:
- Your pricing isn’t competitive enough. If customers consistently find better deals elsewhere, they’ll be tempted to jump ship—even if they like your products.
- Your product quality isn’t meeting expectations. When items arrive damaged, wear out quickly, or don’t perform as advertised, customers lose faith in your brand.
- Your customer support experience needs improvement. Long wait times, unhelpful responses, or difficulty reaching a real person can frustrate customers to the point of leaving.
- Your competitors are offering better alternatives. If rival brands are innovating faster or providing unique features you lack, customers may be lured away.
- Your offerings aren’t keeping up with market changes. Failing to adapt to new trends or technologies can make your business seem outdated and less relevant.
- Your brand values don’t align with your customers’ values. Buyers often seek brands that share their ethical, social, or environmental concerns and may leave if they perceive a mismatch.
How to calculate customer attrition rate
Knowing your customer attrition rate can help you understand how well you retain customers. The measurement can help you answer questions like: Is my attrition rate seasonal? When do my customers typically leave? Which products keep my customers around longer?
Use this formula to get a quantitative answer to these questions:
Attrition rate = (Customers lost during period / Customers at the start of a period) × 100
Let’s say you run a candle-of-the-month subscription service. At the start of January, you had 1,000 subscribers. By the end of the month, 50 people have canceled their subscriptions. Here’s how to use the formula in this case:
(50 / 1,000) × 100 = 5%
This means your business lost 5% of its customers during January. With this figure in mind, you can conduct customer attrition analysis, evaluate your customer retention efforts, and come up with new strategies to keep your customers buying candles.
What is a good customer attrition rate?
A good attrition rate depends on your industry, business model, and ideal customer profile. Set a realistic goal based on your context rather than fixating on a “good” number. What’s considered acceptable in one sector might be alarming in another.
For example, a high-end jewelry store might expect a relatively high attrition rate because customers often make large, infrequent purchases. For this type of business, it makes sense to focus on generating positive new customer feedback to help bring in a steady flow of clientele.
On the flip side, an online grocery delivery service might aim for a much lower attrition rate—maybe below 5% monthly—because it relies on frequent, repeat purchases to maintain profitability. Maintaining a steady, loyal customer base has the added benefit of helping you save on customer acquisition costs.
How to reduce customer attrition
- Focus on winning the right customers
- Perfect your onboarding process
- Build loyalty and referral programs
- Remind customers that you exist
- Survey customers who churn
There are various strategies for tackling customer attrition. Mixing and matching methods—like ad retargeting and automated email sends—can produce a winning formula that keeps retention high and attrition low. Here are some tips to get you started:
1. Focus on winning the right customers
While it might be tempting to cast a broad net, attracting the right audience fosters more meaningful engagement and higher conversion rates. Tailor your customer acquisition efforts to reach customers who need and value what you offer.
Create an ideal customer profile for your business by pinpointing your most valuable customers’ characteristics, behaviors, and needs. Include customer data like demographics, psychographics, buying habits, and pain points that your product solves.
Use this persona to guide your acquisition efforts—from email campaigns to influencer partnerships. For example, if your high-end cookware brand caters to passionate home chefs, you don’t need to advertise in a coupon-clipper magazine or target college students living in dorms.
2. Perfect your onboarding process
Imagine buying a state-of-the-art smartwatch but struggling to set up basic fitness tracking or subscribing to project management software without knowing how to create a kanban board. If a customer doesn’t know how to get value from your product, they’re bound to bounce.
A guided onboarding process can make all the difference. Once you’ve won over a customer, kick off an educational experience with clear instructions and guided tours so that customers hit the ground running.
Bruvi, a company that sells eco-conscious single-serve coffee machines, has extensive onboarding resources to help customers brew the perfect cup from day one. The brand’s YouTube channel features a tour of the machine while the Customer Care page features articles and videos on “Using Bruvi,” “Brewer Care,” and the brand’s “B-Pods.”
3. Build loyalty and referral programs
Loyalty programs can be game-changers for reducing customer attrition by rewarding repeat purchases and fostering a sense of belonging. These programs build customer relationships by providing exclusive perks, early access to new products, or personalized discounts, making customers feel valued and more inclined to stick around. Referral programs turn satisfied customers into brand advocates, encouraging them to bring in new business while strengthening their own connection to your brand—a win-win situation that can lower attrition rates.
STARK, a renowned luxury carpet and rug company, has a rich history spanning more than 85 years. Founded by the Stark family, the business is now led by third-generation cousins Ashley and Chad Stark. While trying to embrace a direct-to-consumer (DTC) model, the STARK team also made strategic decisions to retain their valuable interior designer clientele. The brand adopted a commission protection program that ensures designers receive a 25% commission even when homeowners purchase directly.
“That is not a policy that a retail company can scale, but that’s how we try to differentiate,” says Chad during an episode of the Shopify Masters podcast. “When a customer goes around a designer, we make sure to still send them a 25% commission check. After that, they’re a client for life.”
4. Remind customers that you exist
A well-timed email highlighting new features can prompt users to explore (or re-explore) your product; a strategically placed retargeting ad can convince a casual browser to “Add to cart” and a “We miss you!” text message with a special offer can reignite interest. The goal is to stay on your customers’ radar but avoid bombardment. Provide value with each interaction, not just noise in their inbox or social feed.
Keto Hana, a clean keto granola company specializing in low-carb, high-fat, plant-based products, sends thoughtful reminders to customers who haven’t ordered in a while. The brand’s follow-up emails feature top-selling nut and coconut-based granola bars and mixes, along with enticing recipes.
This approach helps minimize customer attrition rates by reminding customers of their favorite products while providing fresh ideas for incorporating Keto Hana into their daily routines.
5. Survey customers who churn
When customers leave, they take valuable insights with them. A monthly artisanal cheese subscription box might get wind that customers are canceling because the portions are too large for small households. A custom-fit running shoe company might find that customers are dropping off due to poor customer service. Don’t let this critical information slip away.
Deploy customer satisfaction surveys to understand the hidden reasons behind your customer turnover. Ask questions like:
- What prompted your decision to cancel your subscription?
- Were there specific features you felt were missing?
- How could we have improved your experience?
- What would make you consider returning in the future?
The answers can guide your approach to keeping customers onboard. You can fine-tune your offerings and smooth out any bumps in the customer journey. The changes you make might just win back some old friends and turn them into your biggest cheerleaders.
Customer attrition FAQ
What is the difference between customer retention and attrition?
Retention focuses on keeping customers engaged and loyal, while attrition measures how many customers you’re losing.
How do you measure customer attrition?
Measuring customer attrition involves tracking how many customers stop doing business with you over a specific period. You typically calculate this as a percentage, comparing the number of customers lost to your total customer base at the start of the period.
What is the main cause of customer attrition?
The main cause of customer attrition varies by business, but it often boils down to unmet expectations—an underwhelming product, increased prices, or a poor customer experience.
