How To Calculate And Reduce Churn Rate For Shopify Stores

Numbers are essential to the growth of every Shopify store. Having the numbers is how to determine if a store is doing well in terms of sales and revenue as well as customer satisfaction. That is why there are several metrics for weighing the performance of an e-commerce store.

As one of many metrics, the churn rate takes into account customer lifetime value when it is calculated. You can use these factors to determine the performance and growth of your store.

That is why a store merchant will value a customer that patronizes her store once a month more than a one-time buyer. Let’s take for instance if Mr. A makes a purchase of $25 once a month for a year and we have Mrs. B with just a one-time purchase of $50. Who has a better chance of improving the sales performance of the store? Mr. A of course.

Knowing the churn rate for your Shopify store helps you to know the level of customer retention that your store gets. This performance metric shows if your customers return often to buy your products again.

What Is Churn Rate?

The basic definition of “churn” means to move or cause to move from one place to another. That is, to change positions or choices.

When this concept is applied to e-commerce, it means that a customer may switch their choice of ordering from an initial merchant to a competitor probably after not being satisfied with the initial one.

Churn rate for e-commerce stores is the rate at which customers make a one-time purchase in their customer lifetime. It is used to test customer retention and loyalty to the brand.

How To Calculate Churn Rate

Churn rate for e-commerce Shopify stores can be estimated by dividing the total number of customers that unsubscribed from your mailing list or subscription by the total number of customers for the whole period for stores based on subscription.

For Shopify stores within the product niche, the churn rate will be calculated by dividing the total number of customers who patronized the store once divided by the total number of customers for the period.

With the above-stated being the simplest way of calculating the churn rate, Shopify has coined a way of calculating this metric to take into account new customers for the period.

There are multiple ways of calculating the churn rate for Shopify store owners. One of them involves taking note of newly acquired customers during a year or period, customers at the beginning of the year, and customers at the end of the year. This is the Shopify method of calculating the churn rate for subscription-based stores.

Formula for churn rate for subscription-based e-commerce stores;

(customers at the beginning of the period – customers at the close of the period + New customers acquired during the period) / customers at the start of the period

For Product Based Niches For Shopify Stores

Customer Cohort

This is for stores that are not subscription-based. You can estimate the churn rate by grouping customers based on their first purchase date and their activities after that period.

Formula

Customers who did not return divided by the total number of customers that are in that cohort timeline.

If at the beginning of the period 500 customers made their first purchase, after a period of say 3 months 200 customers returned to order again. The churn rate will be calculated as outlined below:

{(500-200)/500} x 100 = 60%

That implies that the store has a churn rate of 60%.

Knowing the churn rate for your Shopify store helps you understand how well your marketing strategy performs in terms of customer retention. The core reason for calculating the churn rate for e-commerce stores is to know the percentage of customers who return to buy again from the store. The lower the churn rate, the better your prospects for sales growth.

Ways To Reduce Churn Rate For Shopify Stores

Knowing what churn rate means to your store can help you determine the causes of the churn rate that you experience.
– Customer cancels a subscription.
– A negative post-purchase feedback
– One-time purchase
– Irregular patronage

Here are ways to help you reduce the churn rate for your Shopify growth:

1. Simple Payment Procedure

Complex payment processes are one of the reasons why there is an increase in cart abandonment. And some customers go as far as not buying again from stores with complicated checkout procedures.

Keeping your checkout process simple and easy to use reduces the churn rate for customers in such categories.

6 Ways to Reduce Cart Abandonment And Gain More Sales

2. Seamless Customer Support

A way of improving your churn rate is to improve customer service. People get impressed a lot by how you communicate with them and the impression you leave on them.

3. Stay Updated With Customers

Having practices such as emails in place is a way of keeping in touch with your customers. This way you can build brand trust and loyalty.

Whatever marketing strategy you choose, ensure that it is well positioned so as not to bore the person to the point where they do not want to resume.

The best customer support system is provided by a team that is efficient and friendly. About 93% of customers return to buy again due to the pleasant customer service experience that they had.

4. Knowing The Cause Of Churning

Why are customers not returning to your store? Did they experience poor customer service?

These are some of the questions that should be running through your mind as a store owner each time your churn rate is too high for your business capacity.

Making an assessment of the causes of churn rate can help you adjust where necessary so as to improve customers’ lifetime value.

Wrap

Following through with the causes of churn rate with a marketing solution that works for your product niche can help you reduce the level of churn rate that you get on your Shopify store.

Improving your store with the necessary strategies can reduce the churn rate and increase the average order value over a customer’s lifetime. This, in turn, increases your revenue and improves sales growth.