Customer acquisition is obviously an important part of e-commerce, especially for new businesses. The more new customers a company brings in, the better its revenue. But for the sustainability and growth of a company, customer retention is perhaps more important than acquisition. The cost of acquiring new customers is at least 5 times higher than retaining existing customers. Therefore, when a company tries to win new customers, it must take definitive action to reduce customer churn.



Customer churn occurs when a customer ends their relationship with a company. Customer churn is the percentage of customers lost within a certain period of time. Calculating customer churn is easy for companies that have a subscription-based model. This is less the case for retailers. In general, unsubscribing from newsletters or not purchasing from retail after 3-6 months can be considered customer churn.

Because e-commerce is a fast-paced, regularly changing space, it's natural to churn customers. However, when the churn rate exceeds the ideal range of 5 – 7%, it indicates that concrete action needs to be taken. The main impact of customer churn on a business is the significant dent it puts in the monetization process. For example, retailers in the US incur a cumulative loss of more than $ 136 billion each year due to lost customers. In contrast, an increase in customer retention by just 5% can contribute to a revenue increase of 25%. We see the same trend worldwide, so this is also a strong factor outside the US.



Undoubtedly, companies should focus on increasing retention and reducing customer churn. The first step to achieving this is identifying the top reasons your business is losing customers. Here are some of the top reasons for customer churn in modern ecommerce:


It is not uncommon for companies to exaggerate certain features and benefits during the marketing and advertising phase. While this can contribute to a short-term increase in revenue, the long-term effect on finances is often negative. This is because misrepresenting the limitations and capabilities of your products creates two major problems. First, it creates false expectations. Second, it can attract the wrong customer to your business. Consequently, these two categories of customers will eventually leave, leading to churn and revenue losses.

SOLUTION: Practice transparency. Accurate and consistent product information from the marketing calls to the onboarding emails. Doing this will attract the right customers and eliminate false expectations early on.


The modern shopper has several options to buy from, and this plethora of choices empowers them. Therefore, 32% of the customers will churn after just one bad experience with a company. In addition, 66-70% of people cite poor customer service as the reason for leaving a company. Not understanding and acting on customer perceptions and pain points will reduce customer loyalty and hurt the likelihood of retention.

SOLUTION: The three key ingredients for improving the customer experience are effective communication, incorporating feedback and personalizing services. Ensure two-way communication channels are wide open so that customers feel heard and valued. Also, invest more time and effort in delivering personalization to your customers. Remember that 77%'s customers refer friends and family to companies where they have positive experiences. Therefore, a great customer experience positively contributes to retention and acquisition.


While it seems logical to assume that price increases lead directly to customer churn, it's not that simple. Several studies support the belief that many people are willing to pay more for better customer service. Therefore, the modern customer is fine with a price increase if there is a corresponding increase in value. Customers only get value from your business when your product and services help them solve pain points. Not finding the right balance between price and value inevitably leads to the loss of customers.

SOLUTION: A company that focuses on delivering value to customers will always be successful. Create and sell products that have unique properties and meet appropriate needs. Have how-to videos and how-to videos available for products that are difficult to understand. Personalization is very important in creating value because pain points differ from customer to customer. Understand the perceptions that customers have about your business and act accordingly and quickly.


Accurately predicting customer churn is extremely difficult. However, the signs are sometimes visible to companies who pay close attention. Some strong indicators of impending customer churn include:

  • Fewer responses to newsletters
  • Negative comments on social media
  • Repeated customer service complaints
  • Less time spent on your website, etc.

Customers who exhibit such behavior are likely to say goodbye to your business.

SOLUTION: Use customer segmentation to identify the customers at high risk of churning and take appropriate action. Pass a so-called RFM model segmentation and focus on the best customers who are in danger of walking away from another provider.

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