Customer attrition is the loss of clients or customers. In the business world, it is also known as customer churn, customer defection and customer turnover. Banks, insurance firms, cable television companies, telephone service companies, Internet service providers and alarm monitoring services often customer attrition data as a main business metric. The cost of retaining a client or customer is less than the cost of acquiring a new one, and long-term customers are worth more than new recruits.
Most companies from these industries have customer service branches that work to win back defecting clients. They concentrate on voluntary churn. Voluntary churn occurs when a customer makes a decision to switch to another company or service provider. Analysts study this type of customer attrition because it often relates to something that companies control: the company-customer relationship. Involuntary churn refers to a customer departure due to relocation, illness or death.
Most analytical models exclude this type of customer attrition. When companies measure their customer turnover rate, they usually also make a distinction between gross and net attrition. They measure customer churn through a calculation called Recurring Monthly Revenue (RMR). Numerous software programs exist to mine customer information and analyze customer attrition factors. Service Source is an example of a company that uses sophisticated analytics software to predict customer churn. It integrates customer date to give business-to-business (B2B) and technology companies a complete view of their clients and customers.
This helps them plan effective renewal management strategies to retain customers and increase revenue.