Predicting Churn: Customer Health and Churn Risk Scores

In the world of subscription and usage-based services, customer retention is paramount. Sales, customer success, and marketing teams constantly look for strategies to minimize customer attrition and increase net dollar retention. A powerful tool that has gained prominence is the Churn Risk Score. But what exactly is it, and how can it help predict and prevent churn?

What is a Churn Risk Score?​

A churn risk score is a numerical value assigned to each customer representing the likelihood of that customer discontinuing their subscription or ceasing to use a service. It serves as an early warning system, allowing teams to identify and act upon potential churn threats before they escalate. Think of it as a health checkup for your customer base: just as a doctor might assess risk factors to predict health outcomes, businesses can evaluate factors to anticipate customer behavior.

What Goes into a Churn Risk Score?​

Crafting an effective churn risk score involves assessing multiple data points, some of which include:

1. Engagement Metrics and User Interactions: Regular login frequency, feature usage, and interaction with the platform can indicate how embedded your service is in a user's routine.
2. Customer Feedback: Surveys, NPS scores, and direct feedback can reveal levels of satisfaction or potential pain points.
3. Billing Information: Late payments or downgrades in service tiers might signal a decrease in perceived value.
4. Support Interaction: Frequent support tickets or unresolved issues can signify customer frustration.
5. Usage Patterns: A decline in usage or irregular patterns can be early indicators of waning interest. Using Churn Risk Scores to Prevent Churn Identifying a high churn risk score is only the first step. The real value lies in taking proactive measures:
6. Personalized Outreach: A high-risk score can trigger personalized emails or calls to address potential concerns.
7. Targeted Offers: Special discounts or features might entice users to stay.
8. Feedback Loops: Encourage customers to share their grievances, giving them a platform to be heard and enabling you to adapt.
9. User Education: Perhaps they're not making the most of the platform. Webinars, tutorials, and training sessions might reignite their enthusiasm.

How to Create a Churn Risk Score​

One way to build out a churn risk score for your customers is to:

1. Identify Relevant Metrics: Based on your service and customer base, choose which data points are most indicative of churn for your business.
2. Data Collection: Ensure you have the tools in place, like CRM systems or analytics platforms, to collect this data systematically.
3. Assign Weights: Not all metrics have equal significance. Assign weights to each metric based on its importance.
4. Calculate: Create a formula that incorporates these metrics and their respective weights to produce a singular risk score.
5. Regularly Review: Customer behavior and industry trends evolve. Periodically reassess and recalibrate your risk score parameters.

A simpler way is to simply use Upollo, which uses AI to generate highly accurate churn risk scores along with specific reasons why. Upollo remove the guesswork out of manual weighting or analyzing what inputs you think are effective and can be setup in the time it takes you to create and name a spreadsheet.

Conclusion​

A churn risk score is an invaluable asset that gives sales, customer success, and marketing teams a predictive lens into the future behavior of their customers. By understanding, assessing, and acting on these scores, businesses can transform potential churn into lasting loyalty. Remember, it's not just about foreseeing the future—it's about shaping it.