Customer attrition is the situation in which customers who have made purchases before do not become repeat customers. This could also be known as customer churn, customer defection, customer cancellation and customer turnover.

How does customer attrition harm your business?

1. Less revenue

If customers leave, so does the revenue. Monthly recurring revenue (MRR) is not only essential to a business’ survival, it is also a representation of that business’ long-term viability. Customer attrition has a direct negative impact on your business’s revenue, so it is vital for any seller to prevent customer defection. A customer churning also means that you can no longer be able to monetize that customer. 

2. Fewer customers

Imagine you have a product that you have convinced a single person to spend a million dollars a month on. If that happens, you are likely to experience the feeling of being successful for a while, but once you have lost that one customer, you have also lost that million dollars. This might be an extreme example, but it reminds you of the value of having as many customers as possible. Having a large customer base does not only bring you high revenue but also alleviate the impact that attrition brings when it happens. When you have many customers, losing just one would not do much harm for your business. However, it is worth noting that attrition minimizing is required in order to create a large customer base.

3. Low CAC to LTV ratio

Customer acquisition cost (CAC) is the cost for attracting a new customer to your business. Your customer lifetime value represents the total revenue expected from each customer throughout their time with your company. In order to maximize profits, the main goal of any business owner is to have the lifetime value of any customer be considerably higher than customer acquisition cost.