A Look at the Math: Tiny Percentages of Client Loss Have a Big Impact on Your Profits

Today we're talking about Customer Attrition and Customer Lifetime Value. 

Customer Lifetime Value is a business term, but in simple language, it's the total amount of profit expected from a customer during the lifetime of an average business relationship.

A very important part of Customer Lifetime Value is Customer Attrition, which is the loss of customers.

We all want to lower our rate of attrition because nobody wants to lose customers.

Small numbers matter here. Even tiny changes to the percentage of customers you lose each month has a profound impact on the average Customer Lifetime Value.

Check out the math so you can see how small changes in attrition add up:

• If your attrition rate is 2.5% (which means 2.5% of of your clients cancel every month), your average customer is going to stick around paying for membership for about 40 months.
• If your attrition rate is 1.5%, you can expect customers to pay for membership for about 67 months.

Even though there is just a small 1% difference in the attrition rate, we can all agree that there's a BIG difference in profits when you can keep your clients for 67 months instead of 40 months. 

The fitness industry average attrition rate is 1.75%, so you want to aim for an attrition rate lower than this.

Bottom line: making small changes to your attrition rate really pays off, so keep your members happy.