Let’s face it, customer churn is very costly and adds more pressure to sales to help close the gap. So, in order for the business to continue to grow, sales must not only hit operating plan growth numbers, they also need to account for lower revenue caused by customer churn and find a way to close this gap as well. Churn is typically calculated by dividing the number of customers you lost in a quarter by the number of customers you started with in the quarter. When it comes to acquisition versus retention, acquisition costs are always much higher than customer retention. Hence, customer churn risk needs to be continuously monitored and reduced in order to improve your bottom line and achieve the growth goals for the company. To begin with, you need to identify what’s causing your customers to churn. Some of the common reasons could be poor customer service, a disappointing onboarding process, subpar or no customer engagement, or perceived lack of value or appreciation. Customers need to see real value for their money and this is precisely why customer retention should always be a key priority. The best way to predict churn and increase customer lifetime value (CLTV) of a customer is to have a firm grasp on customer behavior at all times. According to a study, companies with a designated customer success team experience a 24% lower churn rate than those without it. Thus it’s important to constantly monitor churn, so that you can pivot on initiatives to improve your retention metric.
Separate your customer into groups based on their user behavior to analyze, anticipate and reduce customer churn and then identify the similarities in their behavior and see how to engage with them:
- Identify how different customers use your products and services and which of them are more churn-susceptible.
- Based on how long have your customers been using your product, identify how the churn risk changes.
- Observe how customers belonging to different pricing tiers operate with respect to churn.
- Identify signs of a customer who has not used your products and services in a long time.
Ask yourself some tough questions once you are an established brand:
- Which customers are truly benefitting from our service in the long term?
- What marketing and sales initiatives are leading to the good customers?
- How are we communicating our product/service and is it both accurate and clear?
- How can we develop a more sustainable solution for our customers so they don’t consider leaving?
- How do we communicate with our customers effectively to keep them engaged and aware of all the work and value we are adding to them?
How is reducing customer churn beneficial for your company?
- Accelerates revenue growth
- Increases CLTV
- Strengthens customer loyalty and improves referrals
- Increases return on customer acquisition costs
Here are some early warning signs regarding customer churn. Empathizing with the customer goes a long way:
- It’s never a good sign when your paying customers stop using your products and services. You can diagnose this using a real-time analytics platform. More often than not, this signal means either your customers find your product difficult to use or they don’t see value in what your product can do for them.
- If there’s no feedback and customers go radio-silent, then it will be very difficult to course-correct. Figure out how you can improve sourcing the feedback that you require. For example if your customer doesn’t like to fill up email surveys, make it personalized for them and create a personalized in-app survey to collect feedback.
- You may have a product development issue if your customer is getting stuck at various stages in your app or platform, and finding it difficult to buy from you. Identify early sources of friction and make improvements on a systematic level.
- Customer engagement should be an ongoing process, you don’t want newly acquired customers to feel lost and left behind with a new subscription or product they have no clue about.
This is how you can reduce customer churn:
- Add a strategic loyalty solution with high perceived value that is strategically focused on retaining your most valuable and profitable customers.
- 68% of the customers leave because they feel nobody cares. Why let that happen? Communicate with your customers often and analyze why churn happens.
- Engage your customers with versatile content about important functional benefits of your products and regular announcements of deals and offers. Engage in social listening and collecting feedback from your customers.
- Identify your most valuable customers who bring in the biggest revenue and go the extra mile to offer them what they have signed up for and make sure your offerings surpass their expectations.
- Offer incentives such as discounts and special offers specially to those customers who are more likely to defect.
- Did you know that 96% of unhappy customers will never complain and 91% of those will simply leave and never return. Pay attention to complaints and act on them.
- Have an amazing customer onboarding process to guide new customers through your product features. Make the transition easy for them and keep an eye out for any blockers.
- Keep your products on the cutting edge and make sure your competitors are not lapping you. Stay focused on next level trends, technology and product advancements.