What’s Your Churn Rate? Using Negative Metrics to Create the Best 2024 Strategy

Running an eCommerce business includes a wide variety of important tasks. There are elements that need to be built, content that must be optimized, systems that have to be created, and best practices to implement and maintain. All of this is done to move toward one eventual goal: to make more sales. All of these different things create data that can provide invaluable information when tracked and analyzed correctly. You can learn what you’re doing right, what you’re doing wrong that generates a high customer churn rate, and what changes will produce better results. That’s why tracking key performance indicators (KPIs) is so vital to eCommerce success.

The question is, how do you know what metrics are most important to track? Some people believe positive metrics are all that matter. However, tracking negative metrics like churn rate can provide insight that simply aiming to meet positive benchmarks cannot.

Let’s break down what negative metrics are, why they matter, and which ones you should be watching.

What Are Negative Metrics?

Most people are familiar with positive metrics like conversion rate and email open rate. It’s extremely common to track these metrics, and nobody really thinks tracking them is a bad idea. However, negative metrics like customer churn rate and bounce rate are a different story.

There is an ongoing discussion in the eCommerce industry regarding whether negative metrics should be tracked at all, let alone which ones are most important to keep an eye on. So, what is a negative metric? Negative metrics are measurements of outcomes you want to avoid or minimize.

While positive metrics track outcomes you want, like page visits and purchases, negative metrics track outcomes you don’t want. This includes things like customer churn rate, or the number of customers you lose over a given period.

Why Do Negative Metrics Matter?

Some will make the argument that you should only focus on positive metrics. They believe focusing on getting what you want is a better method than putting any energy into focusing on minimizing what you don’t want. That sounds intuitive, and to many, that makes it a very persuasive argument.

But there’s a pretty big flaw in that logic. At the end of the day, what you want for your eCommerce business is to make sales. Positive metrics revolve around measuring that goal or things that lead to it. That’s definitely important.

That’s a good argument for tracking positive metrics. However, many positive metrics only show you how many people did the things you want them to do. If those numbers are low, you may not know what to do next.

Making sales is a long-term practice that involves optimizing your website, marketing strategy, checkout process, and so much more. It’s a multi-step process leading to an end goal. Positive metrics can tell you if it’s working, but when it isn’t, they don’t tell you why. Negative metrics can show you the exact places where something went wrong.

Examples of Negative Metrics to Watch

Let’s go over the best negative metrics to track, what they are, and what they can tell you. Each one focuses on a particular step in your customer’s journey toward making a purchase. That makes them valuable tools with a lot of explanatory power. The following negative metrics can help you pinpoint exactly where in the process your customers chose not to continue toward completing a sale.

Churn Rate

Your churn rate is the percentage of customers who stop using your products or services during a specific time period. You can think of your churn rate as the opposite of your customer retention rate. While this metric is useful for any kind of eCommerce business, it can be especially helpful for companies using a subscription payment model.

There are two types of customer churn for subscriptions: voluntary and involuntary. Voluntary churn happens when a customer elects to stop their subscription. Involuntary churn typically occurs when customers intend to continue their subscription, but their payments don’t go through due to lack of funds or other payment issues.

Customer churn analysis formula:

(Customers lost during the specified timeframe/number of customers at the beginning of the timeframe) x 100

Example: If you start with 100 customers at the beginning of the month and lose 50 of them by the end of the month, your churn rate for that month is 50%.

(50/100) x 100

0.5 x 100

50%

The median churn rate differs by industry, but eCommerce churn rates tend to be high. Here are some approximate customer churn rates in different eCommerce industries to use as an example.

• Beauty & Fitness: 60%
• Health: 62%
• Food & Drinks: 63%
• People & Society: 64%
• Pets & Animals: 69%
• Sports: 69%
• Apparel: 70%
• Books & Literature: 75%
• Home & Garden: 76%
• Toys & Hobbies: 77%
• Apparel Clothing Accessories: 78%
• Shoes: 78%
• Consumer Electronics: 82%
• Gifts & Special Events: 83%

It’s important to keep this number low because it costs anywhere from 5 to 25 times more to acquire new customers than to retain existing ones.

If your customer churn analysis shows that you have a high customer churn rate, you know there’s a problem.

Bounce Rate

Your bounce rate is the percentage of visitors that land on a page on your eCommerce site and leave without viewing another page. Ideally, they’ll land on a page and click a link to go to another page, like a product page or the checkout page. When they land on your site and leave without doing that, it counts as a bounce.

This can happen when:

• Users don’t find what they’re looking for.
• The page isn’t what they expected.
• The UX/UI design doesn’t make it easy to find what they need.
• They aren’t interested in the recommended products.
• The page doesn’t load fast enough.

You can lower your bounce rate by doing things like improving the site design, optimizing your eCommerce site design and speed for mobile devices, making navigation more intuitive, and personalizing product recommendations.

Cart Abandonment Rate

Your cart abandonment rate is the number of customers who put things in their cart but don’t buy them. Typically, this happens when there are too many distractions on your site, the checkout process is long or complex, the price or shipping is more than expected, or the customer experience during this process is otherwise negatively affected.

Cart abandonment rate formula:

Shopping cart abandonment rate = (1 – (number of completed purchases/number of shopping carts created)) x 100

You want to keep this number as low as possible. If your cart abandonment rate is high, you know where to look and what to improve.

Email & SMS Unsubscribe Rate

Your email unsubscribe rate is the percentage of customers who elect to stop receiving emails from you. The exact rate you should expect will also vary depending on the industry. However, on average,  between 0.2% and 0.5% is a good email unsubscribe rate to aim for.

If you find that a lot of people are opting out of your emails, you may need to improve the contents by following customer email best practices. You may need to:

• Change the frequency of the emails
• Make the topics more relevant and appealing to customers
• Provide more incentives to receive them, like exclusive discounts

Your SMS unsubscribe rate is the same for your SMS recipients. Ideally, you should aim for an unsubscribe rate between 0.5% and 1.2%. Customers tend to be picky about who they allow to text them. You really have to provide value. If they feel like your texts are irrelevant or spammy, they’ll unsubscribe.

Use Negative Metrics to Your Advantage

Negative metrics like churn rate and bounce rate can provide unique and valuable insights into exactly where in the customer journey visitors are walking away. This can narrow down the potential causes immensely.

Keep monitoring your metrics closely and fix whatever you can. If you have UI/UX issues, slow load times, or any elements that aren’t mobile-friendly and optimized for any screen size, take action immediately to make those changes. Use A/B testing to improve all your marketing content across your site, emails, SMS, and ad campaigns. Also, use demographic information and customer feedback to zero in on your target audience and better speak to their needs.

These steps are the best path to meeting industry benchmarks for your negative metrics. However, this can be a lot to do on your own. You may want to work with Shopify web design, development, marketing, and UX/UI specialists who can manage these tactics for you.

Contact us today to learn how Future Holidays can help improve your website, increase sales, and minimize negative metrics.