Reducing Churn Rate: Strategies for Sustained Customer Retention
The term Churn Rate refers to the “cancellation rate” or loss of customers in subscription services, or the “non-renewal” of contracts over a certain period. Specifically, in telecommunications companies, the average Churn Rates in the United States were around 21% in 2020, as pointed out by explodingtopics.com.
It’s important to note that high churn or cancellation rates can signify issues in service quality, low customer satisfaction, fierce competition, or deficiencies in customer retention strategies. Therefore, it’s crucial to reduce both the Churn Rate and Revenue Churn Rate, while significantly improving the “Customer Retention Rate“, which averages around 78% for telecom companies.
How to Calculate the Churn Rate
Although software and platforms can calculate the Churn Rate with just a few clicks, to understand its determination, we divide the number of customers who canceled their service by the number of active customers at the start of the evaluated month. Then, multiply by 100 to get the rate in percentage (%). Once calculated, we can ascertain the number of subscribers who have unsubscribed and delve into why, identifying improvement opportunities.
In the telecom and streaming industries, this abandonment rate directly impacts company revenues. Therefore, it’s also important to monitor the Revenue Churn Rate (MRR Churn), focusing on how much revenue was lost as a result of these cancellations. To calculate this, consider the sum of the monthly value paid by the customers who canceled, or divide the total monthly value of the canceled subscriptions by the last month’s total revenues, thus obtaining a percentage value (%).
Why It’s Important to Retain and Build Customer Loyalty
According to Harvard Business Review, acquiring a new customer can be up to 25 times more expensive than retaining and cultivating loyalty among active customers. Therefore, companies today must ensure that a part of their efforts is focused on retaining and building customer loyalty through creating unique, exciting, and valuable experiences for them.
As the saying goes, “a satisfied customer might bring in two more, but an unsatisfied one can take away eight”, and no business wants that!
Therefore, it’s increasingly necessary to thoroughly understand the behavior of customers, users, consumers, and/or subscribers, as the case may be, their level of satisfaction with our brand and the experience we provide, as well as understanding their needs and identifying their preferences so we can increasingly personalize our products, services, and added values that set us apart from the competition.
At Kuack Media, through working with our partners, we have pioneered developing innovative business models tailored to different populations. It might be hard to imagine, but in emerging markets, there are users who mainly consume branded content because their monthly mobile budget is less than the cost of a premium music app, and the data charges for streaming are extremely high. However, by creating a daily or weekly music service and partnering with mobile operators offering zero-rated data, we enable users to enjoy a legal, quality app.
Music and Tailored Strategies to Reduce Churn Rate
Among the most common methods employed to reduce the cancellation rate, not only in telecom but in any industry, are improving customer service, creating personalized offers based on the customer, developing loyalty programs, as well as technological improvements that directly impact service quality and brand experience.
However, over the last 10 years at Kuack Media, we’ve discovered how effective it has been for telecom companies and other industries to develop their own music streaming apps, thus reallocating the budget to use it more intelligently. Strategies that allow for building and solidifying communities around music, in favor of loyalty, and having total control of the platform and the data and behaviors generated on it, have proven to be beneficial.
At Kuack Media, we have developed 100% customizable white-label streaming applications, addressing the particular needs of each client, in Latin America, specifically in Colombia, Costa Rica, Peru, Ecuador, Bolivia, the Dominican Republic, Spain, Brazil, and recently in the United States, with expansion plans into Africa, among other regions.
In our many years of experience, for example, we have identified and catered to a significant portion of the Brazilian population’s need for a 100% Christian music application that also offers complementary valuable content, providing an experience aimed at increasing their faith without distractions. This is Godbeats! And it ‘s ours.
How Music Streaming Impacts the Business
Undoubtedly, having their own music streaming platform positively impacts companies, especially by the opportunity to improve key indicators such as churn rate, satisfaction level, and user recommendations. It offers a high-value-added service to build a close relationship with customers, or even to create attractive packages to boost service usage. This approach even extends to sponsoring concerts, promoting local artists, and becoming fully involved in the music industry.
Indeed, as our CEO, Juan Saavedra, asserts, “There is no one-size-fits-all approach, and this is what sets us apart, because each new partner requires not only the design of a completely new app but also the design of a long-term strategy, and that’s why our partners’ investments in music are successful and endure over time.”
If your company wants to take advantage of the great benefits of white-label music streaming, do not hesitate to contact us.