In today’s marketplace, the power has shifted towards the consumers. With industries continually expanding and innovating, businesses need to adapt to the changes or risk losing customers. Now, customer churn has become a key metric in measuring customer satisfaction.
The figures speak for themselves—Kolsky’s study shares that 1 in 26 unhappy customers will complain while the rest will churn. Additionally, Insight Squared reports that reducing churn by 5% increases a company’s profits anywhere from 25–125%, with 80% of future revenue coming from just 20% of existing customers. It’s clear that keeping customer churn rates low not only helps your business grow but also prevents losses that can otherwise be avoided.
As with any customer service metric, the first step to reducing customer churn is to understand what it is.
Customer churn is the metric representing the percentage of customers—otherwise known as subscribers, buyers, users, players, and so on—who stopped doing business with a company. The customer churn rate can be computed with the following formula:
(Number of Customers Lost) / (Original Number of Customers) * 100%
Typically, a customer will be treated as churned after a certain period elapses since their last interaction with the company. This time period differs from one company to another, depending on the type of niche they occupy and their target audiences. However, voluntary churn—or churn resulting from a customer’s deliberate action—can be avoided or minimized.
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Predicting and preventing churn effectively allows your company to avoid direct revenue loss. More importantly, high churn rates are an indicator of a larger problem in your company. Detecting the churn rate can help to provide a solution that is more sustainable and better for your company overall.
It is crucial to get a full picture of the situation to develop an effective solution. Talking to your “churned” customers can provide valuable insight as to why they’ve stopped being patrons of your company. Maybe they left because your products did not solve their problems as they expected them to, or maybe they had trouble implementing and using your product.
It’s also essential to think about how you will be reaching out to these customers. Aside from sending an exit survey, you can also offer quality customer support through all channels—highly-personalized emails, feedback calls, and live chat—to help maximize this opportunity.
Their feedback can help you make better sense of the raw numbers, giving you context for what went wrong and what can be learned from the churn. This also opens up opportunities to further improve your offerings and adapt to your target market’s needs.
Playing a more active role in your customer’s journey before and after purchase can help prevent churn.
Reminding them of your product’s value and place in their daily life makes it easier for you to remain at the top of their minds. Creating well-written content, initiating regular communication and updates about your products and services, and designing easy-to-navigate websites can easily satiate a customer’s expectations and provide them a pleasant overall experience.
Additionally, offering free educational content such as training, webinars, tutorials, and demos, can aid in helping customers feel more informed and comfortable with your products.
A more active approach, such as creating a dialogue between you and your customers, can also go a long way. Consider using customer support outsourcing services to reach your customers better whenever they are ready and wherever they are.
It costs five times more to acquire new customers than it does to keep the current ones. While offering incentives like product discounts, extended trials, and bundle packages can be costly, it may still be cheaper than letting customers churn. Leveraging these incentives can be applied in two ways:
Loyal customers already know your company and the value your products bring into their lives. Implementing a rewards program or giving referral incentives not only lets these customers know how valued they are, but it can also draw in new business once they share their positive experiences with others. The key to leveraging this is to offer incentives that your customers see value in
Offering incentives to customers who are at risk of churning is one of the most effective ways of keeping them loyal to your brand. An offer gives them the chance to reconsider your product and lessen their risk to churn.
The quality of support you offer can make or break your relationship with your customers. More importantly, it can affect your business as a whole. With 78% of customers having backed out of a purchase due to poor customer experience, providing excellent customer support has be a necessity to reduce churn.
Whether you outsource customer service or have an in-house team, the agents who face your customers need to be knowledgeable about your products and services. These reps must know how to diffuse difficult situations with the customer, earnestly listen to their feedback, and offer a clear solution to the problem.
Presenting long-term offers is an excellent way for customers to get more comfortable with the product and it can also be effective at keeping them from churning.
When making these long-term offers, you need to reassure your customers of their value. You can leverage other services like free tutorials and educational materials, as well as customer support reps who can answer any questions and help troubleshoot problems throughout their contract period.
Customer churn is a real threat to any business, and the best way to avoid it is to demonstrate your company’s value to the customer. By catering to their needs, listening to feedback, and ultimately providing a smooth and frictionless way to solve their problems, customers are sure to stay loyal and may even put in a good word for you to their peers.
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