The Customer Churn Prediction Guide

Customer Lifecycle Marketing|9 Minute Read

The Customer Churn Prediction Guide

There is no crystal ball for customer churn prediction that can show you exactly when some of your highest-value buyers will exit their respective customer journeys and fail to purchase again.

But you can improve your churn rate (and, subsequently, your customer retention rate) when you constantly and proactively analyze why both former repeat and one-time buyers never return.

By closely examining the behaviors, habits, and attributes of specific individuals and segments in your database, you and your marketing team can learn what exactly drove them away — and determine what could drive other high-priority customers like them away in the future.

Given one-third of subscription-based organizations said they’ve lost revenue or experienced reduced profitability due to high customer churn rates, it’s vital to scrutinize your customer data regularly and take the necessary actions to keep your buyers coming back again and again.

Customer churn prediction and its impact on customer retention

Before you begin your customer data audit, it’s important to understand how proper customer churn prediction protocols impact both short-term marketing goals and long-term brand profitability.

We’ll assume we don’t need to answer the obvious question: “What is customer churn?” Having said that, it’s certainly worth outlining why it’s one of the most important metrics for marketers:

The evidence continues to mount in favor of developing customer churn prediction models you can regularly refine and prioritizing customer retention strategies.

And yet, many executives at B2B and B2C businesses still don’t understand the negative ramifications — both fiscal and reputational — of ignoring these approaches:

TL;DR: Those who fail to forecast when certain customers will churn or focus on bolstering their retention rates will only continue to see their audiences flock to competitors.

“So, how can I address my company’s churn rate and keep our customers coming back?”

That’s definitely the right question to ask. The answer is threefold: Understand customer intent, track customer experience, and identify customer trends through routine churn analysis.

customer churn

Analyzing past churn data to improve future retention

As you likely suspected already, churn prevention and customer retention go hand in hand:

  • Churn prevention focuses on the past: unearthing insights from your databases to identify the potential and likely reasons behind previous buyer abandonment.
  • Customer retention focuses on the future: using those findings to inform new and/or revised marketing messaging to retain existing customers for the long run.

What’s essential to remember is the best customer retention strategies are only possible when marketing and data science work together to reduce customer churn across the board.

You can certainly use a customer data platform like BlueConic without the aid of a data analyst to leverage easy-to-deploy customer churn prediction models like those offered in AI Workbench.

If you don’t have a CDP (or simply need assistance with getting going with this kind of machine learning model), a data analyst can help you dissect your quantitative customer data from your various sources to see what commonalities exist among premier buying segments, like:

  • The number of customers to buy your highest-priced products or services
  • The volume of clients to sign a long-term contract within a given time period
  • The propensity of subscribers to sign up for paid plans after their free trials

Once these figures have been compiled, sorted, and sent your way (or unified in your CDP after simply integrating with the data sources in question), you can supporting your data-based findings further by conducting qualitative research about customers to glean more purchase and churn insights, like:

  • Why they repeatedly bought specific products or services but eventually stopped
  • What reasons ultimately led them to end contracts and sign with competing brands
  • How they perceive the quality of your brand, products, services, and pricing model

Whether or not you decide to go the extra mile with this qualitative data research (which can be accomplished through tactics like NPS surveys you can promote on-site and via email), the next step is the all-important one: developing hypotheses and an action plan based on these insights.

customer churn

How B2B and B2C marketers approach churn and retention

At the end of the day, B2B and B2C marketers want to accomplish similar goals through similar means, like nurturing top prospects and acquiring high-value customers and clients.

Having said that, it’s clear B2B marketing differs greatly from B2C marketing in many respects as well — including and especially regarding their customer retention strategies.

Comprehensive client retention strategies for B2B brands

Whether you work for a SaaS startup or an established B2B ecommerce enterprise, your company’s customer acquisition costs are likely substantial. That means it’s critical to keep those high-cost customers long term through client retention strategies like these.

  • Ensure smooth onboarding and follow up often: Let’s say you offer supply chain software for manufacturers to help them better track all aspects of their business: from marketing and sales to packaging and fulfillment. This can be a complicated solution for any manufacturing executive to not only learn, but master over time. Per Vendasta, B2B clients who engage weekly with B2B brands from whom they buy have a 26% greater retention rate than those who don’t. Develop a successful onboarding program that carefully guides clients through the process and follow up with them over time to ensure they’re engaged, happy, and making the most from the software.
  • Build a customer consent management strategy: Consent management strategies help companies show they care about their customers and their privacy by allowing them to opt out of marketing messaging and gain control over their data. The more a customer trusts you, the more loyal they’re likely to be. Therefore, crafting a consent management strategy — one that takes advantage of martech with consent functionality to help comply with GDPR and CCPA, like BlueConic — is how you can win over one-time and recurring customers as well as appeal to prospects who’ve yet to buy from you but express interest in your brand. In the age of data privacy, transparency wins.
  • Offer custom discounts to ensure contract renewal: A couple common trends B2B marketers discover during customer churn prediction analysis is customers who cease communications with their company altogether or stop using the product fail to renew subscriptions or re-sign contracts. (Their silence and lack of engagement speak volumes.) That’s not to say all these buyers are ready to churn. It could simply mean they need a little nudge to re-up their deals. If you notice one or both of these trends, schedule additional check-ins or offer discounts to the customers in question to see if that’s enough to get them (and their business decision-makers) over the proverbial hump.

Given the considerable cost of obtaining new customers and the relatively inexpensive cost of keeping existing ones, implementing approaches like these is worth it for your B2B marketing team.

Concerted customer retention strategies for B2C companies

On the flip side of the customer retention coin is the B2C marketing approach. These retention methods are akin to those for B2B brands above, but with a more individualized focus.

  • Research your competitors’ digital presence: Price isn’t the only factor in customers’ purchasing decisions. Personalized deals, social proof (testimonials, reviews, etc.), and digital experience all affect whether consumers buy from your brand. Thus, it’s wise to invest some resources to investigate just how your competition is perceived online, what their website and other channels look like and entail, and the overall user experience (UX) customers have with those digital properties. Sure, you’ll want to price your products and services accordingly to properly compete with brands in your space, but don’t underestimate the quality of a good CX.
  • Individualize offers to potential churn risks: Another proactive approach comes from BlueConic customer Brief Media. The brand sent personalized messages to existing subscribers it identified as potential churn risks in BlueConic to update their subscriptions instantly within the product. By messaging these subscribers right before they could churn on the website or via its mobile app, Brief Media was able to retain countless customers and, in turn, keep recurring subscription revenue coming in the digital door — a big marketing win for the brand.
  • Modify existing offerings and add new ones: First-party data access allows you to determine which products and services sell most often, through which channels and mediums customers purchase them, and other details about customers’ buying journeys. With this info, you can see which offerings should remain (top sellers and those trending “up”), which should be fixed (previously popular products that are stagnant or declining sales-wise), and which should be eliminated (not selling at all) — modifications that can decrease churn and increase retention.

There are certainly other churn-reducing measures: donating to charities your customers care about, producing products in more eco-friendly manners, conducting surveys to better learn about customers’ wants and needs — the list goes on. Start with retention-rate-boosting tactics first.

customer success metrics

Calculating customer lifetime value (CLV) with the right tech

Consistent customer churn prediction and analysis allows you to gradually see what helps you maintain customers drive others away over time.

But to really see the impact of your efforts, you need the calculate the customer lifetime value of your top customers and segments to see if they’re truly helping your company stay in the black.

The most common customer lifetime value calculation (of which there are several variations from one brand to another) is the average purchase value times average purchase frequency.

While this will vary slightly from one company to the next, the formula always factors in expenses, profit margins, and retention rates. What smart marketers do to get more granular with their customer lifetime value calculations is build and deploy intricate CLV models using machine learning.

Just as BlueConic customers can build churn prediction models, they can also calculate CLV for different segments with our ready-out-of-the-box models in AI Workbench.

customer lifetime value

In combination with customer engagement listeners in our platform, BlueConic customers can more closely analyze those with “low” engagement scores to prevent them from churning.

As with the churn models, data scientists can aid with model development and training using Jupyter notebooks. But since our CDP is marketing-owned and -operated, it’s simple for even non-technical marketers to get up and running with customer lifetime value modeling using our solution.

Whatever martech you use to calculate customer value, discovering this data is crucial to ensuring your activities prevent lost profits and boost your brand’s fiscal outlook for the foreseeable future.

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