Every business faces churn. If your business is facing churn, you are not alone. But everyone deals with it differently. Some companies immediately look for new customers while some invest all their efforts in retaining existing ones. Customer churn is the number of customers who stop doing business with a company during a given period. According to research, avoidable customer churn is costing U.S. businesses $136 billion a year.
What is Customer Churn?
Customer churn is the number of customers who leave the company or stop business in a given period. Churn rate is important cause it shows how much it costs to lose business with customers. According to research by Bain and Company, a mere increase of 5 percent in customer retention can improve profits up to 95 percent.
Churn rate is calculated by dividing the number of lost customers by the number of customers you started with in that period of time. Knowing about customer churn reduction is necessary for any business.
Why do customers leave a company?
Customers can leave a company due to multiple reasons. Some of them include-
- Customer is dissatisfied with your service.
- Product does not fulfill customer requirements.
- Customer doesn’t get personalized service.
- Lack of communication.
- Customer feels disengaged with company ethos.
- The price feels unviable in the long run.
- They are no longer a target audience for your product or service.
Most churn happens in these brackets. Sometimes customer needs outgrow the category or niche; this may cause churn.
Why customer churn matters?
Customer churn causes a problem for companies in many ways. As per Forrester, it costs 5 times more for companies to acquire a new customer than to keep an existing customer.
Companies lose more than $1.6 trillion per year due to churn. If more customers are retained, more revenue is generated by companies. Harvard Business School report says that nearly 65% of a company’s business share is from existing customers. Customer churn is unique for each company.
For some companies, customers find the price point not effective and hence want to switch. Poor market fit is another reason customers churn.
Churn rate formula= Number of customers lost/ Total number of customers
11 Effective Strategies to Reduce Customer Churn Immediately
There are some things a company can do to reduce customer churn. Here are the 11 best ways you can reduce churn immediately.
Analyze Reasons for Churn:
You need to find out why customers decide to leave in the first place. The best way to know why they leave is by talking to them. Getting customers to talk about their issues is the best way to learn. If you connect with them over mail or phone about their issues, chances of replying are faster.
Fast replies show that you genuinely care about them and want to find out what is wrong importantly. If you know the reasons for churn, mitigating it becomes easier.
Engage with Customers:
Engaging with customers is also important. It does miracles in reducing churn. Higher engagement means better interest. Relationship marketing or engagement is making your customers feel valued. Showing them the value in your products and services through good content will help keep them hooked.
Engaging through emails and calls can help the existing customer base clarify upcoming upgrades, news, and more. When you engage, you have to practice social listening as well to create a great customer experience.
Target the right set:
No matter how many strategies you make, if the audience is wrong, there are fewer chances of success. Targeting the set of audiences who are likely to use the product for the long term is important.
Those who appreciate the long-term value will stay invested for a long time. You cannot consider every customer as the best. Instead, it is important to keep the right ones more invested. The right targeting is important even for marketing and sales purposes.
If you reach out to customers before they need you, they feel very happy. If you demonstrate an interest in their activities, they understand the value of the product or service.
Being active with customers is great. If someone has signed up with the product or service, you need to check if they leverage the benefits. If they are not, reach out and ask why. When customers know the capabilities, it is easier to keep them interested and active. Customer engagement is the key here to build long term relationships.
Estimate who is at risk:
The best way to not get burnt is to avoid the fire. The best way to prevent churn is not to let it happen. There is always a set of customers who will leave more quickly than someone else. Know who these individuals are and reach out to them.
Identifying those edgy customers is one of the most popular churn reduction tactics. Nearly 35 percent of B2B organizations have reduced customer churn by identifying customers.
Once you identify their pain points and who they are, half the reduction is made. They may have written a mail once or complained about an issue. Look at those numbers and decide if their experience can be of critical importance in estimating churn.
Ask for feedback:
It is often frustration that leads to churn. When customers are annoyed with products or services, it can manifest as churn. Getting to the root of the issue is necessary to get feedback early.
Creating a customer feedback loop is necessary to present the business’s right tone with an AI chatbot. A survey, or feedback form can immensely help in understanding the customer’s pulse.
When you know what the majority feedback is, you can apply those remarks on a product or service to improve customer satisfaction. Once you get the feedback, take it seriously.
Educate your customer:
If the customer has good quality educational support materials, it will increase retention and reduce churn. Free video training, tutorials, product demos can influence customer mindset. Any tutorials, training, and demos will keep your customers informed and comfortable.
You must teach your employees how to use your site tools with adequate training. Good training will be necessary for onboarding and implementation. When you pass the knowledge on to your customers by way of education — it can lead to high retention levels, as it is the backbone of customer success. If your customers know how to use the product, chances of deflecting are low.
A great way to retain customers is to offer them incentives. Special offers, discounts, and deals will immensely help customers who are likely to defect.
Offering such incentives is very effective in reducing churn. One thing here is offering a deal or incentive that does not drill a hole in your pocket. Your costs of retaining them should not exceed the profits you will get from their continued relationship.
Give the best service:
Isn’t this the finest tip of all? This is the most important way to keep customers. Poor customer service is the biggest reason customer churn occurs. As per a report by Oracle, the two main reasons for customer churn include poor or slow service and rude staff.
Take Complaints seriously:
Complaints are important. They reflect a problem in the process that can be corrected if paid attention to. It is necessary to note that 96 percent of unhappy customers do not complain. The ones complain are, often, not taken seriously.
One negative experience is all that it takes to stop doing business with a brand for more than 30 percent of customers. Customer reviews on social media, online portals, and word of mouth publicity can all be deciding factors. Have a live chat feature on your site to get feedback and insights on the product or service.
Be competitive in the market. What makes your company stand out? What are the aspects that make it different? What are the losses for customers if they quit? Analyze what makes your company special and present that piece of you — to customers. Be situational in upgrades. Understanding the precise situation will help you stay afloat and solve customer problems.
If the product has undergone any improvisations, let them know. This will showcase the unique points and let customers know the positives of the product. Spot the ‘next big thing’ and be there. Keep shifting as per trends, technology, and public mindset.
Bottom Line: Reducing Churn is Important
It is clear that losing customers is hard. So it is better to provide them the best service. Creating conditions where customers see clear benefits in the products you offer is important. By working on the tips, you can let your customers stay loyal to the company.
Even a mere 2 percent increase in customer retention can reduce customer acquisition costs up to 10 percent. Churn is inevitable, but we can only work to reduce the impact of it.
Customer churn is mostly due to poor customer service and lack of awareness instead of product competency or value. Give your customers the value they signed up for. Communicate with them about your products and enhance your customer service levels.