Customer Churn

The purpose of this dashboard is to identify trends (positive and negative) in Customer Churn. -  specifically, if a business is either gaining or losing customers faster.  When Churn is examined as a trend, a business can assess the effectiveness and efficiency of marketing methods. To drill into marketing channels and specific campaigns, use the filters.

Churn is a number of customers who canceled their relationship (subscription) within a designated date range. These customers have “churned.”  Said another way, Churn Rate is simply the percentage of lost customers compared to total customers at the beginning of the date range.

  • The higher the churn, the more customers lost.
  • The higher the Net Churn, the more customers gained.

Customer Churn = Customers Lost ÷ Customers at Start Date

The Customer Churn metric can provide an insight into several operational and/or marketing activities:

  • How clear is the offer
  • How effectively is customer service handling customers
  • How quickly is the business growing or shrinking from a pure customer quantity perspective - are customers being acquired quickly enough
  • etc

 Additionally, there is a second Churn metric to understand when considering Customer Churn - Net Churn.

Net Churn Rate, which goes further, takes into consideration customers gained within the period being analyzed - not just customers lost.  

Net Churn = (Customers at End Date - Customers at Start Date) ÷ Customers at Start Date

 If a business's Net Churn is increasing, it will be gaining more customer's than it is loosing; its customer base will be growing.  Said another way, positive Net Churn increases a customer base.  Negative Net Churn indicates that the customer base is reducing.

Additionally, the rate at which customers are churning is vital to the Customer Lifetime Value (CLTV) metric since the longer a customer is retained, the higher the CLTV. Since CLTV is one of the more important factors, indicating the highest cost a company should pay to acquire new customers, one can understand that Customer Churn is a vital indicator of probable success.

To help improve understanding, we have created some standard language.

 Ending Unique Customers  =  EUC
 Starting Unique Customers  =  SUC
 Lost Unique Customers  =  LUC
 EUC - SUC  =  Net Change

Using the above, the formulas used to calculate Customer Churn Rate and Net Churn are:

  • Customer Churn Rate equals  LUC / SUC
  • Net Churn Rate equals  Net Change / SUC

The Customer Churn dashboard also provides key metrics specific to helping fine-tune marketing efforts such as eCPA (effective Cost Per Acquisition) and MER (Media Efficiency Ratio). Use these two metrics to help adjust the CPA and to determine how specific marketing channels (i.e. email marketing, display advertising, organic search, etc) compare from both an eCPA and MER perspective.

Potential Actions

  1. Consider the impact to Customer Churn Rate that can be achieved by making modifications to campaign and/or operational procedures (i.e. modify customer service scripts on how cancelation calls are handled, alter fulfillment procedures to decrease time in home (how long it takes a package to get to the customer), modify internal refund protocol to inspire a larger percentage of partial refunds and save sales, etc).
  2. Perform deep channel evaluation of campaign traffic (i.e. affiliate, paid search, email marketing, etc.) to improve the efficiency of new customer acquisition - measured through the eCPA and MER metrics.

  • Data presented in this dashboard is based on "Transaction Date" unless otherwise noted. Transaction Date is the date that the order was placed without an association between the Re-bill and Recurring transactions (Cycles 1…X) and the Initial transaction (Cycle 0) that initiated the order.

  • All orders marked as "test" within the platform are automatically removed from the Analytics data.

Chart / Table

Description

Formula

Churn Rate

The line chart shows Churn Rate over time and can be used to help identify anomalies - points in time that are higher or lower than the norm. The higher the churn, the more customers lost.

Data Based On: Transaction Date - The date that the order was placed without an association between the Re-bill and Recurring transactions (Cycles 1…X) and the Initial transaction (Cycle 0) that initiated the order.

LUC ÷ SUC

Net Churn

This line chart shows if unique customers are generating at a higher or lower rate than unique customers are lost. The higher the Net Churn, the more customers gained.

Data Based On: Transaction Date - See description above.

Net Change ÷ SUC

Churn Data

This table includes the data elements related to Customer Churn, including key metrics such as MER (Marketing Efficiency Ratio) and eCPA (effective Cost per Acquisition). Use this table to understand positive and negative trends over 12 months time. 

Data Based On: Transaction Date - See description above.

 

Gross Revenue   

The amount of revenue processed based on order acquisition date range.

Sum(Order Total Revenue)

CPA   

Cost Per Acquisition (CPA), also known as pay per acquisition (PPA) and cost per conversion, is an online advertising pricing model where the advertiser pays for each specified acquisition. 

See expense assumption CPA

MER   

Media Efficiency Ratio (MER), is calculated by taking gross revenue and dividing it by total media spend. The more revenue a campaign generates against the media spend, the higher the MER. The higher the MER, the better gross return on the media spent.

Note: Currently, Lime Light Analytics leverages the Cost per Acquisition (CPA) data point entered into the platform and attributed to campaigns. If additional media spend types such as CPC, CPM, etc, are leveraged and there is a need to incorporate them into the MER calculation, include these added costs into the CPA expense assumption input into the Expense Profile for the respective campaigns.

(Gross Revenue ÷ CPA)

eCPA   

Effective Cost Per Acquisition. The eCPA is the average cost paid to acquire a customer. This metric is more relevant when generating orders from multiple marketing channels (i.e. affiliates, paid search, organic search, email, etc.) since each channel will have a different CPA.


Use the eCPA metric to understand if the CPA in a particular channel can be increased. For example, if the current eCPA is $35.70 and the current CPA in the affiliate marketing channel is $41, the decision may be made to increase the CPA to $44 if (a) the existing profit margin is sufficient, (b) it's thought that increased orders will result and, (c) there is a strong feeling that orders through the lower CPA channels can continue to be driven.

Total CPA Expense ÷ Total Initial Orders

Churn Rate   

The higher the churn, the more customers lost.

LUC ÷ SUC

Net Churn Rate   

The difference between the Starting Unique Customers (SUC) and Ending Unique Customers (EUC) divided by the Starting Unique Customers (SUC). Net Change ÷ SUC

Customer Churn Support Metrics

This table includes the data elements fueling the Customer Churn metric. Use this table to dig deeper into each the metrics used to calculate Churn Rate as well as Net Churn Rate. 

Data Based On: Transaction Date - See description above.

 

Gained Unique Customers   

Gained Unique Customers (GUC), is the number of newly acquired customers during the respective month.  SUM(GUC) 

Ending Unique Customers

Ending Unique Customers (EUC), is the number of customers at the respective month.

SUC + GUC - LUC

Starting Unique Customers   

Starting Unique Customers (SUC), is the number of distinct customers at the beginning of the month. Analytics identifies a distinct, unique customer by their email address.

Sum(SUC)

Lost Unique Customers   

Lost Unique Customers (LUC), are customers that no longer have an ongoing relationship - they would no longer have a future ReBill or Recurring transaction either because they have canceled the relationship or because their prior transaction was declined.

SUC - EUC + GUC

Net Change   

The difference between the Starting Unique Customers (SUC) and Ending Unique Customers (EUC).

EUC - SUC

Transaction Data

This table provides the data elements and metrics necessary to gain a deeper understanding of the supporting transactional data for the Churn Rate metrics -- Gross Revenue, Orders, Declined, Declined Percentage, Refund Count, Refunded Amount, Refunded Revenue Percentage, Refunded without MCB and MCB Lost Revenue. Click on the column headers to sort the data high to low for even greater understanding of the transactional data.

Data Based On: Transaction Date - See description above.

 

Gross Transactions   

Total number of transactions during the respective month.

Sum(Transactions) 

Orders   

Total approved transactions during the respective month.

Sum(Approved Transactions) 

Declined   

Total declined transactions during the respective month.

Sum(Declined Transactions) 

Decline %

Percentage of declined orders out of the total unique attempted.

Decline Transactions ÷ Gross Transactions

Refund #   

Total number of refunded transactions in the respective month, including both full and partial Refunds.

Count(Total Orders Refunded)

Refunded   

Total refunded revenue during the respective month, including both full and partial refunded amounts.

Sum(Refunded Revenue in all Refunded Orders)

Refunded Rev %

Percentage of Gross Revenue lost due to refunds.

 Refunded Orders ÷ Total Orders

Refunded w/o MCB

Gross Revenue lost with the refunds from chargebacks not included.

Sum(Refunds from sources other than MCBs)

MCB Lost Rev

MCB Lost Revenue is total Gross Revenue lost within the designated time period as a result of chargebacks only.

Note: The benefits of representment is not reflected in the MCB Lost Revenue calculation.

Sum(Gross Revenue of Orders Charged back)
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