Let’s say your team spends a lot of money on a marketing and sales campaign that targets a particular customer segment. For example, the product might not resonate with its intended users, or the company’s customer-acquisition strategies are somehow missing the mark. It tells you whether or not your customer-acquisition strategies are effective.Ī high rate of customer turnover can indicate several things. If your team does not track and review your turnover rate, you will be missing an important data point to determine whether or not your profits have long-term profit potential. That means that retaining customers-in other words, keeping your turnover rate as low as possible-is a key strategy for increasing your products’ profitability. It gives you a better picture of your product’s profitability.Īccording to research cited in the Harvard Business Review, it can cost a business between five and 25 times as much to acquire a new customer as it costs to keep an existing one. Turnover rate is a key performance indicator (KPI) because it tells a business exactly what percentage of its customers find the product valuable enough to continue paying. To determine if it resonates with users, a business needs to know how many customers are sticking with the product over the long-term. If a product team examined only its products’ annual revenue and the total number of new customers in a given year, the team would have only part of the story. It signals whether or not your products are earning a loyal user-base. Here are a few specific reasons turnover is a metric worth tracking and analyzing. Why Is Turnover Rate an Important Metric?Ĭustomer turnover can tell a business a great deal about how well its products perform in the market. Note: You can also think of the turnover rate as the opposite of your company’s customer retention rate.
Many businesses refer to the customer turnover rate as churn. For a SaaS company, the turnover rate will include both customers who actively cancel their subscriptions and simply don’t renew them. For a product or marketing team, turnover rate refers to the percentage of customers lost over a period of time.
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