How Low Churn Rate directly affects revenue of Online Gaming and E-Commerce
The online gaming industry has recognized that harnessing the power of customer data has a direct positive impact on revenues and profits. With the industry becoming more competitive than ever before, churn analysis has become very important. Low churn rate can help companies save substantially on their marketing spends.
What is Churn?
Churn refers to the circumstance that someone who was in a service leaves it and such a person is referred to as a churner. Churn analysis or prediction defines who will or will not churn. The churn rate is the ratio of churners to non-churners during a specific time period. Lower the churn rate of the users, more profitable it is for the business.
Churn models can be based on two definitions of churn: product churn and customer churn. In product churn, the organization does not lose the customer as a client but loses the revenue from that customer in a particular product. Customer churn, on the other hand is losing the customer to the competition altogether. Models developed to predict customer and product churn are usually developed to predict churn within a specific ‘time window’ of say 30 or 90 days.
How Low churn rate can help
When a new casual game is released, the company focuses on marketing to attract new users. However, if the number of users is sufficient, the company would do better by focusing more on user retention, because a small change in the retention rate can have much larger impacts on the profit. The key to retaining users is to identify who will or will not be out of service. This is well-known to be possible, because typically users who will be out of service appear to differ.
Typically, churn can be utilized in two different ways. First, churn rate can be evaluated as a business metric such that the status of business can be understood and monitored. Often a good indication leads to an increased marketing budget. Second, churn prediction can be applied to individual users such that a targeted action can be taken to the users who are likely to churn or are deemed to be important.
User churn prediction is crucial in online gaming, in which low churn rates are directly connected to revenue stability. The application of behavior analytics, viz. churn analysis, has emerged to become a core component of commercial and academic game development. Consequently, many analysis services for game developers have emerged, and companies are working towards retaining users.
Based on our vast experience in online gaming industry, we helped a client identify key variables to predict player’s behavior and understand patterns of churn, conversion to real money games, identification of VIPs in advance to name a few. We developed various statistical models to predict player behavior and created recommendation for CRM team to customize offers for player based on their profile.
Several technologies including SSIS, SSRS, SSAS and R were used to accomplish the same. Data was taken from two of the client’s data sources Oracle and SQL Server 2012. This helped reduce player churn rate by 10% and early VIP identification led to 5% increase in average player value.
Customer Churn in E-Commerce business
Churn prediction is not only useful in online gaming but also in several other fields, e-commerce being one of them. Predicting customer churn rate is among the most sought-after machine learning and analytics applications for retail stores, and of high value to companies that are eager to take advantage of the ever-increasing amounts of customer data they are collecting.
Businesses want to be more proactive and predict who is likely to churn before it happens. E-commerce Businesses also wish to identify the factors that are related to high churn rates, which in turn helps them apply resources towards acquiring the right type of customers in the first place. Churn rate can be used to see whether you are meeting customer expectations and whether the efforts you are taking are successful.
Churn rate matters for several different reasons. For one, there is the cost of acquiring a customer to consider. Marketing can be expensive. If you are losing customers soon after acquiring them, you may not be seeing a return on your marketing investment. You also have to remember growth. Lastly, and perhaps most importantly, tracking your churn rate helps you spot issues before they become problems.
Every business owner today knows that keeping an existing customer is more profitable than bringing on a new one. But how many actually formulate strategic plans to boost repeat business? We can help you with Churn Analysis.
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