Customer Turnover Rate | Grow Your Audience With 5 Easy Tips
Ever wonder how you can provoke customers to return to your business? Customer retention strategies play a key role in every industry. Plus, they're vital for a healthy customer turnover rate.
If you're a business owner or manager, you might wonder how to sustain steady growth. Once you have a loyal following, it becomes a simple task.
Once you know who falls within your customer profile, it’s time to maintain steady sales. In this article, we’ll cover everything from the customer turnover rate formula to five ways you can keep yours at a minimum.
Customer turnover refers to the number of customers a business loses. In many cases, a company’s health relies on low customer turnover. This idea is especially true for subscription models.
Subscriptions give the business personnel a clearer picture of future sales. For example, if a customer subscribes to a service for one year on average, projecting within that window whilst gaining new clients is “safe”.
However, there are other types of businesses where customer turnover is more common. Sometimes, there’ll be one-off purchases in certain businesses. For instance, some customers may never visit the same restaurant twice. Or, someone might only visit a shop for a one-time necessity.
No matter what type of business you operate, low customer turnover is best. Read on to learn about how to calculate this metric.
Customer Turnover Rate
The customer turnover rate formula is a fairly easy one to calculate. To find this metric for your business, use the following equation:
Customer Turnover = Lost Customers / Total Customers at the Start of Time Period) x 100
For example, if a business serves 1,000 customers in a single year. Then, if they find that 200 of those customers don't return, the customer turnover rate would be 20%.
POS systems can help various business models keep tabs on their customer base. Payment processing activities remain in the database for your reference.
Prevent High Customer Turnover Rates
There are many strategic ways to combat a high customer turnover rate. However, what works for one business model might differ from another. For example, the way a high tech cruise ship retains customers will likely differ from sustainable restaurants.
That's why we gathered five tips for maintaining a lucrative customer turnover rate. Read on to learn all about them!
1. Create An Enticing Rewards Program
Thinking about ways to draw customers back to your business? Launch a customer rewards program. Giving consumers the ability to collect points for spending their money is a way to strengthen loyalty.
There's typically a sense of inclusivity when brands give free items. Between the positive emotions and incentive to return, a loyalty program is the perfect long-term solution to reduce high turnover rates.
2. Launch Smart Promotions
Create a cycle with discounts and promotions. For example, if you operate a casual dining eatery, give out a coupon upon spending a minimum of $25. It's likely pretty easy to do. So every time a customer eats at your restaurant, they'll receive another incentive to come back.
One-time discounts and short-term promotions are excellent ideas. However, creating a cycle is a sure way to build loyalty over time. Plus, this tactic will certainly allow you to stand out amongst competing brands.
3. Consider Customer Feedback
A business’ management team can learn a lot from customer reviews. After all, who else would be more honest than the people spending their hard-earned money? Gain insight into what your audience enjoys, and create strategic initiatives to grow your consumer base.
Luckily, there are many ways for businesses to collect reviews about customer satisfaction. Just a few examples include:
- Posting on social media to leave a review
- Sending out surveys as part of your email marketing strategy
- Providing a brief questionnaire with the receipt
4. Advertise to the RIght Market
When a business gains a low customer turnover rate, it's a sign that they cater to a specific audience. Utilize tools such as social media accounts to identify your audience. Then it's time to create targeted advertisements.
Paid ads and strategic online marketing can enhance brand loyalty. For example, restaurant SEO and social media posts can be tailored to a specific set of interests. In doing so, two things will happen:
- Content and products will likely resonate with your audience.
- You won't waste any money promoting ads to uninterested consumers.
Marketing can take a business to the next level. Just be mindful of whom you're targeting, and you'll be golden.
5. Price Your Products Properly
In order to gain customer loyalty, brands must price their products accordingly. When deciding on costs vs. prices, it's important to research the current market. Evaluate trends and what customers get for the money they spend. The value of this data will be immense.
Some brands even use a premium pricing strategy. Premium pricing refers to the concept of pricing items at a slightly higher price than competitors. In doing so, consumers perceive the product or service as being of higher quality.
Frequently Asked Questions About Customer Turnover Rate
High customer turnover rates are an issue that many businesses face. However, once you learn how to cater to your target audience, it'll become much easier to manage. Here is additional information about the matter. Read on to learn more!
What Causes Customer Turnover?
Customer turnover is a result of people losing interest in a product or service. In many cases, a business will experience customer turnover for one of the following reasons:
- A product doesn't work for a customer.
- The company doesn't offer positive customer service.
- There are less expensive alternatives available.
What Is a Good Customer Retention Rate?
The higher the retention rate, the better. Businesses should aim to maintain a retention rate close to 100%. However, it's important to note that dropping as low as 15% is very bad.
How Do You Calculate Customer Turnover Rate?
Calculate the customer turnover rate with the following formula: Divide the number of lost customers by the total number of customers at the beginning. Then, multiply this figure by 100.
What Are the Three Types of Turnover?
The three types of turnover include:
- Involuntary Turnover: This kind of turnover includes things like layoffs and terminations.
- Voluntary Turnover: Contrary to the previous type of turnover, this refers to when people resign, transfer, or retire.
- Total Turnover: This metric refers to the amount of voluntary and involuntary turnover.
What Is An Example of Turnover Rate?
The turnover rate is the percentage of a group of people who leave a facility. For example, if your company has 100 staff members and by the end of the year 10 resign, the turnover rate will be 10/100 or 10%.
Higher the Value, Lower the Turnover Rate
A healthy and sustainable turnover rate depends on your audience's behavior, spending habits, and experiences. Once you identify your strengths and what your customers enjoy, combine them to deliver a spectacular product line.
As consumers have one great experience after another, loyalty will begin to develop. And once you have a significant number of customers coming back, the turnover rate will decrease.