Why are your clients churning?

Do you know when your clients are most likely to cancel? Are you keeping tabs on the reasons your clients are churning? Do you know your attrition rate? Client attrition or “churn” is an unavoidable component of membership-based businesses. Even if you provide exceptional service, a top-notch community, and really massage and maintain your client relationships, the reality is that some people just won’t stick. People move out of town, decide it’s not a good fit, opt to try something new, life situations change, etc.

Attrition is the flip side of the membership growth coin and deserves some attention. Attracting new clients is the obvious component of growing a membership base. However, to reach your growth targets you must put just as much effort (if not more) in keeping the clients you already have. If you track your attrition rate as well as the reasons your clients are churning you’ll have some key insight that can help direct your efforts to minimize future churn.

What To Do

First, require cancellations in writing via email (you probably already do this)

Next, create a simple spreadsheet with the following columns

• Client name
• Membership start date
• Cancellation date
• Membership duration
• Reason for cancelling

Finally, when you receive a cancellation email do the following:

Reply and acknowledge receipt of the cancellation request. Ask if they will share with you why they are leaving (if they didn’t mention this in their original cancellation email) and that you appreciate any and all feedback in order to better your program.

Enter the client name, membership start date, and cancellation date into the spreadsheet. From the membership start date and cancellation date you can discern the duration of the client’s membership. For example, if the client started on February 20, 2012 and cancelled on October 26, 2012, the duration is 9 months (9 payments).

Next you’ll enter the reason for cancelling. Create some buckets that you can put folks in to track reasons for leaving. There are a handful of common reasons people cancel (moved, financial, poor fit, had a baby, etc)

Do you see any trends?

After you have some data entered you’ll want to look for trends. For example, at what point in the membership are most people leaving? At 3 months? At 7 months? If you see a consistent attrition spike when folks are 3 months into their membership you can preemptively reach out to folks at 2 months to put some love on them and ask for feedback etc. Just reaching out to your clients at various intervals can be valuable for minimizing churn.

Similarly, if you notice that the majority of folks are leaving due to financial reasons, you can spend some time thinking about whether you should adjust your pricing. Or maybe a common reason is inadequate class offerings. Again, you will want to pay attention to any consistent feedback and see how you might best address it to minimize potential future churn.

Your attrition rate

Each month you’ll want to add the number of cancellations and divide by your total membership to get your attrition rate for that month. Let’s say in September you lost 7 of your 100 clients, leaving you with a 7% attrition rate for September. After a year of tracking this you can calculate your average monthly attrition rate. Over the course of a year you’ll likely find that some months you’ll have very little (even zero) attrition whereas at other times you’ll lose several folks all at once. Your average monthly attrition rate is a helpful number to know when projecting the rate of growth for your business. You’ll also have a benchmark churn rate that you can then work to lower. Dropping a 7% churn rate to 5% represents a significant amount of revenue!

Spend a few minutes gathering and entering this information into your spreadsheet and you’ll be able to actively analyze attrition in your business. Not only will you have the tools to take a proactive approach to minimize future churn you’ll have key information to positively affect your business’ bottom line.