Customer churn, a process of losing customers in a given time period, is an integral part of leading any business. It's something you can never fully escape, no matter how much effort you put into it. What separates successful organisations apart from unsuccessful is how you reduce customer churn. Here, we will explore what measures you can implement to make sure you create loyal and long-lasting relationships with your customers.
When leading a business, you can always expect to lose customers one way or another. It is just a part of how a business-customer relationship works. How you deal with loss is what's important. Some businesses immediately start looking for new customers; others focus on analyzing what went wrong and how to prevent others from running away. Customer churn is the number of customers that withdraw from the company during a given period.
Customer churn, also known as customer attrition, defection or turnover, is one of the most significant issues a company can face. It is one of the most important key performance indicators for a business since it measures the signals of your customer engagement and overall brand loyalty. Combined with other company elements we'll discuss later, and it's what defines your success.
Customer churn is a phenomenon where customers no longer purchase or interact with a business. It is calculated by the number of customers who leave your company during a given period. In simple terms, the churn rate shows how your business manages to keep customers by your side.
If you can predict and understand what causes your customers to churn, it can become one of the most valuable metrics for your business.
'Customer churn, or customer attrition, is calculated by the number of users who leave your company during a given period. In a nutshell, churn rate shows how your business is doing with keeping customers by your side.'
Customer churn is a measure of customers you lost over a specified period. Retention is the opposite of churn in that it expresses the number of customers who continue to support you over a defined period. Both are equally valuable aspects of user analytics that identify what keeps and loses customers.
Customer churn is a measure of lost customers, vital for maintaining a recurring customer base.
It is calculated using the following basic equation:
Churn (%) = Customers Lost During Period/Customers at the beginning of Period
Customer churn is crucial in showing how good or bad you keep customers by your side. You may be sad to see your customers go. However, it gets much deeper than that. It implies how you deal with long and short-run performance and longevity in the company.
It would be great if you always kept in mind that retaining an existing customer is cheaper than acquiring a new one. Why is this important? Current customers already have had an interaction with your product or service. They made a purchase; this means they found value in what you offer. On the other hand, new customers probably never heard of your product, let alone used it. This is why lead generation costs are always higher and more time-consuming in customer acquisition than catering to an existing customer. This, in a nutshell, is why monitoring customer churn is essential.
There are two aspects of customer churn. The first one, the financial aspect, usually causes most issues. Let's look at the data: It costs five times more to acquire new customers than it does to keep existing ones, according to Forrester. It is also reported that companies lose 1.6 trillion dollars annually due to customer churn.
The second reason is that the more customers the company retain, the more revenue it makes. A report by Harvard Business School claims that, on average, a 5% increase in customer retention rates results in a 25% – 95% increase in profits.
Customer retention is crucial for any business to develop sustained revenue and growth. It is highly connected to customer acquisition, as both are vital factors in growing a customer base. Customer retention is arguably a priority over user acquisition because the cost of acquiring a new customer exceeds the cost of retaining an existing one.
The idea that retention is necessary may seem like a basic concept, but focusing on reducing customer churn is the way to utilize resources for many companies, especially those on a budget.
If this seems like something you need to start focusing on, let's learn how to calculate churn. You can now see that it makes perfect sense that reducing customer churn is crucial due to its undeniable impact on revenue.
Still, many companies have difficulty understanding the importance of customer churn and struggle to implement measures to reduce it.
So, how do you go about reducing customer churn? Let's get into it!
Knowing why your customers are leaving is crucial. There is always a dilemma on how to go about it. The easiest way is to talk to your customers. And by 'talk', we mean contacting them by any channel they feel most comfortable using.
Customers often feel like companies don't care about them. Only as little as 13% of customers are company loyalists. In contrast, 68% of customers leave because they feel like businesses do not care about them.
Communicating with the customers does miracles when analyzing churn. And it would help if you were actively using multiple channels: phone, e-mail, website, live chat, and social media. You can get valuable information about customer experiences through a phone call, an e-mail or a survey away.
Before handling a problem, you need to define the cause. That means analyzing customer feedback and measuring what is going on.
Analyzing and understanding customer churn factors is the first step in diagnosing the issue. This will then be the starting point for constructing a proper strategy with solutions that address the churn factors for your business.
Active customer engagement with your product is a significant part of preventing churn. It's about making sure you give your customers reasons to keep coming back by making your products or services part of their daily workflow.
Therefore, you shouldn't just provide them with functional tools. You should also offer proper training on how to use them, as well as non-stop support.
First, ensure you provide your customers with multiple types of support. This can present in content or manuals or engagement on different channels. Communication through various channels enables you to have access to your customers in case they deal with issues regarding your product. Since each customer has their preferred communication platform, you need to make sure you are quick to respond to many of them. We suggest you consider investing in an omnichannel platform since they enable you to reach customers and manage tickets in a record time. You should follow the right communication metrics across your organization to grow your customer base.
Listening to what your customers have to say and their problems can help you retain them. If they decide to leave, by actively listening, you can get a clearer picture of what improvements you can implement in the future.
Providing high quality and valuable user experience is the most crucial strategy to reduce customer churn. Before getting lost in the metrics, note that customers are real people using your product. It should be a priority to keep them happy, interested and engaged. Providing a quality product, ensuring a user-friendly experience, and adapting to customer feedback are great ways to improve customer retention and reduce your churn rate. Always consider this when analyzing your data and coming up with solutions.
Reducing customer churn and improving retention doesn't stop at you providing resources. There is more to it. You also need to provide education and support. This will directly impact customer retention by enabling customers to feel appreciated.
In other words, you have to give them the tools that work and offer the training to use them at a maximum profit. This way, you can demonstrate the full potential of your products and services and ensure that customers have a successful onboarding and implementation.
Identification of the correct target challenge is one of the most crucial to an organization's success. If your offer does not match their needs, you will have a high customer churn rate.
Aside from offering a superior product, there are some things you can do to make sure your customers stay loyal. Through customer engagement and audience targeting, you can better understand who most frequently unsubscribes to your product or service. Use complaints, tickets, survey data, and other customer analytics to find solutions to the problems expressed by users/customers to find ways to improve customer retention and reduce churn.
Time again, you can hear that customer service is a dealbreaker in reducing customer churn. Content clients are more likely to stay loyal for more extended periods. A great product is no longer the only thing needed to maintain a stable customer base. Hence, average customer service no longer cuts it. You need to ensure you are always there for your customers and ready to support them at any time of the day.
There are many ways you can go about it. First, ensure you always have customer service representatives available and ready to communicate with the customers. Be as helpful as possible: this lets your customers know you care about them. Ensure your customer service representatives understand companies' knowledge well to direct customers toward the solution.
Relying on a representative for customer support is a valuable method that has shown to be very useful for customers. Still, having your entire customer service based exclusively on human representatives can often result in missed customer complaints and repeated questions. With larger quantities of users, it is hard to keep track of every single interaction. This is where CRMs (Customer Relationship Management) solutions come in handy. Products like Live offer omnichannel support, ticketing systems, customer complaint processing, analytics, and more. CRMs help to ease communication and enable you to give each customer the best customer experience possible.
We've established that the best way to reduce churn is by preventing it from happening in the first place.
There is always a group of customers more likely to leave than others. Knowing who is balancing on that dangerous edge is in your best interests. Make sure you reach out to them in time to make them stay.
There are a couple of ways you can reach your customers, and usually, spotting the 'at-risk' group of customers is easy. Find out which customers weren't contacted in a while. Try to talk to them and see their thoughts about working with you. Are they interested in your products, and do they face any issues using them?
Or maybe they reached first, and you forgot to follow up on that?
Being informed will help you become more proactive in preventing churn.
Also, after analyzing the reasons for churn, you become aware of specific actions that your churned customers made, or maybe the lack of activities. This knowledge can help you foresee if someone behaving similarly is likely to leave your company soon.
Customers often leave your website because it is hard to find product information. This causes frustration, resulting in them wanting to stop doing business with you.
To help you address unsatisfied customers, have your customer support team take a proactive approach. That means engaging customers at specific points in their journey. This way, customers get immediate solutions, reducing your churn rate and creating a better overall customer experience.
Customer churn is inevitable- customers come and go. What you can do is try to keep it to a bare minimum.
Thankfully, you can do many things to improve your customer retention and reduce the churn rate.
Customer churn or customer attrition is the rate at which your customers abandon your product or services. It is one of the key performance indicators of any business.
One of the primary causes of customer dissatisfaction is an unpleasant account with customer service representatives. That leads to higher rates of customer churn. This is why it is essential that your company consistently puts in place exceptional customer service and regularly strives to educate its employees and customers.
Reducing customer churn rate is not something that can be done overnight. You need to build up and scale your retention strategy step by step. A good starting point would be to invest in the right tools, like CRM, which would help nurture better customer relationships and add more value. Customer relationship management solutions like Live enable you to monitor every communication you exchange with customers. It can help you work smarter and not harder by tracking interaction metrics across all channels.
Suppose you focus on customer-centric approaches from when your customers interact with you. It will help you to see a bigger picture of how measuring and decreasing customer churn rate is so important.
Learn more about how the Live product family can help you support and improve your customer experience strategy.