What is Subscriber Churn?
Churn refers to when a customer unsubscribes from your service or no longer wants to do business with you. It’s important for ISPs to track churn metrics (like churn rate, for example), as these provide insight into how your business is really doing and can also reveal areas for improvement.
Subscriber churn is inevitable—no business in history has kept every customer it ever acquired. Some customers might leave voluntarily, because of dissatisfaction with your service or because a competitor offers a better deal. Others may churn involuntarily—because they can no longer make payments, for example, or simply because they moved.
Whatever the case, it’s important to keep tabs on how many customers are leaving, why they’re leaving, and if there’s anything you can do to lower your churn rate (spoiler alert: there is).
How Do I Calculate Customer Churn?
First, let’s take a look at how you can figure out what your churn rate actually is. Churn rate is the total number of subscribers lost divided by the number of customers you had at the start of a given time period, and then multiplied by 100 to get the percentage.
You can track this monthly, quarterly, annually, whatever makes sense for you. Let’s say you want to track your churn rate for the previous year. As an example, we’ll say our imaginary ISP has 4,000 subscribers and we lost 100 customers over the course of the year. The formula to calculate our churn rate is:
100/4,000 = 0.025 x 100 = 2.5
That means our churn rate for last year was 2.5%. Easy enough, but is that a good or bad churn rate? How does it compare to others in our field or in other industries? Good questions—let’s find out!
Industry Standard Churn Rates for ISPs
According to research by Recurly, the overall average churn rate for any business is 5.6%. B2C (business to consumer) companies can expect a slightly higher churn rate than B2B (business to business), at about 6.8%. At this point, our imaginary churn rate of 2.5% from our example above is looking pretty good.
But what about the ISP industry specifically? There are various studies on this, and rates often depend on market factors like number of competitors, average contract length, and more. For example, Analysys Mason noted that monthly fixed broadband churn in Canada between 2015 and 2019 was 1.8%, largely due to high retail prices. Meanwhile, a recent study by Statista showed that annual churn rates in the US telecom/wireless industry were around 21% in 2020 (or 1.75% monthly).
Other studies report an average monthly churn of around 2% for telecom providers, while Broadband Communities says “local ISP churn rates in the 1 to 5 percent range are common.” As you can see, then, there’s no set number to shoot for but somewhere around 2% monthly seems to be the general norm. In our imaginary example from above, 2.5% is not too bad but we’d probably look at ways to bring that down a little.
The Costs of Churn
So why should you care? Customers come, customers go, what’s the big deal? One of the biggest reasons to take churn seriously is that, according to research from Invesp, it costs up to five times more to acquire a new customer than to keep an existing one.
They also note that existing customers are 50% more likely to try new products and spend 31% more, compared to new clients. In other words, if you’re not prioritizing subscriber retention, you’re costing yourself in the long run while missing out on low-hanging revenue.
Besides missing out on upsell opportunities and having to spend more on acquiring new customers, there’s also the simple dollar value associated with losing subscribers. Let’s go back to our imaginary ISP above. If the average internet bill in the US is $64 per month, then losing 100 customers over the course of a year is equal to $76,800 in lost recurring revenue that we can’t count on when the next year starts ($64 x 12 months x 100 customers).
That’s a lot! Not only that, but replacing those 100 customers with new ones is a) no easy task and b) going to take a lot of time and money. As we know, not all churn is necessarily bad. However, mitigating churn as much as possible is going to be beneficial for your bottom line.
There’s also the damage that high churn rates can do to your reputation. A high rate of voluntary churn due to unreliable service, poor support, or non-competitive prices can lead to bad reviews online and damaging word of mouth. Bad news travels fast and can be hard to recover from. On the flip side, a lower rate and happier customers can have the opposite effect!
Ways to Retain Customers and Increase Revenue
If you prefer, you can think of lowering customer churn as increasing customer retention. So what are some ways you can go about keeping those who might otherwise voluntarily leave?
The most obvious way to reduce churn is to provide your customers with the best experience possible. Satisfied customers are much less likely to leave and, as an added bonus, they’re also much more likely to turn their great experience into positive word of mouth for your business. That can lead to warm referrals and an easy source of recurring revenue. Good news travels just as fast as bad 🙂
To get to the shameless self-promotion portion of the blog, some areas where Preseem can help you improve QoE to specifically reduce churn include:
- Identify network infrastructure problems: We measure QoE directly from subscriber traffic and show QoE data at subscriber, AP, and tower levels to make it easy for you to identify the source of any issues. This way, you can get out in front of any problems and fix the issue before it starts affecting your customers.
- Optimize traffic and reduce latency: We use Active Queue Management (AQM) to optimize for low latency, even during peak traffic times. This makes the internet feel fast for your subscribers no matter what plan they’re on or how many household members are online at the same time. This helps drastically reduce slow-internet calls—your support team will be just as happy as your subs!
It’s important to keep in mind that many of your customers ultimately don’t really care about Mbps or speed tests or anything like that. They care about the experience they have when using your service. If your ISP can deliver a quality experience backed with helpful support and competitive pricing, you’ll keep more customers than you lose.
For more insight on this topic, watch the webinar we did with Sonar as part of our recent ISP Virtual Summit!
