- We are living in an age when the costs of customer acquisition have reached enormous levels. Therefore, it is even more crucial to retain customers. Churn prediction is one of the ways to achieve that. But, how to build a churn prediction model, and how can it enhance the growth of your business? Learn that, by reading this article.
What is Churn Prediction?
Before we answer how to predict churn, we need to underline what churn prediction is. We will divide it into two sections: revenue and customer churn predictions.
- What is customer churn prediction? This is the act of analyzing which customers are about to leave your company, based on their behavior. It is done to react and prevent customer churn.
- What is revenue churn prediction? Revenue churn prediction is based on calculating how big the financial losses generated by customer churn will be. It focuses on the income.
Why is Predicting Churn Important?
Churn prediction allows you to react before the negative changes happen. It is a way to reduce the costs of customer acquisition by ensuring that your customers stay loyal. In general, predicting customer churn has three main advantages:
- Identifying at-risk customers. Prevention is better than cure, and retention is better than acquisition. Predicting customer churn allows you to understand which clients are on the verge of leaving your company and react to that, saving you the resources that you would have to spend on customer acquisition otherwise.
- Identifying customer pain points. Predicting which customers are about to churn is also an excellent way to understand why they want to do that. Being able to accurately forecast specific customer’s churn allows you to learn about their pain points and develop your products or services further, to reduce future churn.
- Identifying strategies to lower churn and increase customer retention. By predicting customer churn, your organization is capable of testing retention strategies. This way, it is possible to choose the most effective one and prevent high churn in the future.
What You Need to Build a Prediction Model
If you want to learn how to predict customer churn, you need to begin by building a proper prediction model. Yet, for it to work, you must collect appropriate data and input it into your customer churn prediction software. What exactly do you need?
- Customer success metrics. Measurable information from customer satisfaction surveys, Net Promoter Scores, etc.
- Metadata. The date on your target group, for instance, age, gender, or education for B2C clients or company size, type of industry for B2B clients.
- Engagement metrics. The levels on which your customers are engaged and willing to perform additional activities (for instance, interacting with your website offer and contact forms).
Designing Churn Prediction Workflow
What is a churn prediction model without an organized workflow? An inefficient model. In order to create a system that will be truly effective, you should follow five steps:
- Defining problem and goal. Getting the wrong insights from churn prediction will get you nowhere. Therefore, it is crucial to decide what you want to collect and why.
- Establishing data sources. CRM systems, customer surveys and feedback, analytics services – all of these may be the source for your model. You need to select which ones you want to use before proceeding further.
- Data preparation, exploration, and preprocessing. Since your model will be using machine learning, you need to adjust the data you have to it. Change it into a format that your system will be able to use, and get rid of the unsuitable data in the process.
- Modeling and testing. No product is perfect on day one, neither will be your model. Before you begin to rely on it, test its effectiveness and introduce the required updates.
- Deploying and monitoring. Finally, you may send the best version of your model to work. Integrate it with your systems and control how it works.
Calculate your Churn with Put It Forward
If you desire to truly elevate your business and are looking for a dependable tool to calculate your churn, opt for Put It Forward Revenue Churn Calculator. Thanks to the advanced churn predicting model, our tool is capable of calculating two crucial metrics for your organization:
- Expected revenue. To understand how much your company is growing and earning each month or year and plan future investments.
- Potential losses. To realize how revenue churn affects your business and prevent these losses.
Churn prediction is crucial for the finances of any organization – it allows the teams to react quickly and decrease the number of customers leaving your business. To conduct it, you need to implement a churn prediction model that will suit your specific business needs.
Was this article helpful? Consider reading: How to Create a Customer Experience Strategy.
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