The Importance of Measuring Retention
In our last few videos, we’ve been banging on around the topic of customer attention. But there’s really one place to start when it comes to improving your retention results, and that is to measure your retention.
What you measure in your business tends to improve, and that’s because you’re putting focus on that.
If you’re not measuring your retention rates, it’s difficult for you to improve that because you’re kind of in the dark about how you’re performing in terms of industry standards and also how you’re improving against your own past performance.
How to Measure Retention
The one thing I would advise is to start measuring your retention on a monthly basis. And the way you do that is you just need really two things:
The number of people that dropped out or canceled for the month or date period.
The number of active students you had at the start of that period.
For example, if I lost 50 customers in July, but at the start of July, I had 1,000, that would be a 5% churn or attrition.
If you’re not currently measuring it, I would recommend that as the starting point to really making inroads in your performance.
What Is a Good Churn Rate?
The other question I get asked is, what is a good churn rate? Well, there’s no specific answer that’s right, but obviously, the lower or closer to zero, the better.
I can tell you, that if your churn rate is over 5%, you’ve definitely got very significant room for improvement. If it’s as high as 7 or 8%, it’s going to be very, very difficult to have a sustainable business in our industry. In fact, it’s almost impossible.
I think the ideal range would be around 2 to 3% per month. If you can do that, you can have a sustainable business that will be successful. But obviously, the closer you get that to zero, the better.
Getting to zero is probably an impossibility. There’s always going to be churn, but we want to focus on lowering that down as much as possible. And as I said, that starts with measuring.
Take Action
If you’re going to take one action from this video, it’s to find the numbers, jot them down, put them in a spreadsheet, and start measuring.
Go out and do it, and let us know how you go.