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The rate of attrition is a reflection of customer retention in a company which offers products or services on a subscription or account-based system. When the rate of attrition is high, it means that many people are moving into and out of the business, while lower attrition rates indicate that there is less movement. Rates of attrition, also known as churn rates, must be looked at in the context of growth rates and customer retention and attrition rates in order to determine their implications for the business under discussion.
Churn rates are commonly discussed for businesses like phone companies, Internet service providers, and cable providers. These industries are highly competitive and in many areas they have a high rate of attrition because many customers leave to take advantage of offers from competitors while others move in as they respond to offers which are designed to entice them away from competing companies. The end result can be a high rate of movement.
People often use this term specifically to discuss people who leave or discontinue service. When looking at attrition rate information, it is important to find out whether the term is being used in this sense or in the more general sense of frequency of customer movement. When the number reflects the percentage of customers giving up a product or service in a set period of time and it is high, this indicates that the company has difficulty retaining customers and that it may have poor service, bad products, or unusually high rates which drive customers away. If it includes new customers and leaving customers, it would be read very differently.
The rate of attrition can be used to look at the overall changes in size of a customer base. Most companies want to push for growth, but it is possible to see decline with a high rate of attrition and a low signup rate. In addition, it should also be provided with information about the length of time people participate in a given company. Attrition rates can be viewed very differently depending on the factors behind them. For example, a company with a 10% rate of attrition which retains customers on an average of 30 years is very different from one with the same rate which only keeps customers for six months.
In industries with a history of high churn rates, companies may use advertising campaigns which are designed to promote customer retention. Others go the opposite way and cite their mobility and the ease of transitioning in and out of their services to appeal to customers who want more flexible options.
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