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How To Prevent Customer Churn
Humans are wired to escape unpleasant situations. This applies to all facets of life — from a toxic work environment to an abusive relationship. In many instances, people leave if they're unhappy. Simple as that!
However, these scenarios hit different when we're talking about your brand and your customers. In the commerce world, we're conditioned to believe that it's a curse to lose customers. Well, we don't live in the Elizabethan era of witch hunting. Surely, in the modern customer marketplace, churn is likely a cue to something malfunctioning. Yet chill, that's not the norm.
What is customer churn?
Simply put, customer churn — or else, customer attrition — represents the number of individuals, aka subscribers, that cease to purchase your products or use your services.
Though, there's no such thing as a 0% churn rate. Even reputable enterprises experience customer loss. Churn is a natural, almost inevitable, phenomenon. You're going to say goodbye to some of them here and there, and that's OKAY. It's a I-like-strawberry-over-vanilla-ice-cream sort of personal preference. Having a loyal customer base is great. But this is subject to change, as it's a metric that constantly fluctuates.
A quick and easy way to estimate your churn rate is to divide the number of customers lost at a given time by the total number of customers you had up until that point. In mathematical shape, this equation looks something like this:
Churn Rate = Number of customers lost / Total number of customers
Say, for example, that a business kicked off the quarter with 20 customers and lost 1 over the course of the same quarter. In that case, it would have an approximate churn rate of 5%.
I know, there's no better feeling than seeing your pitch to a prospect turn into a deal. But as much as an ever-growing acquisition and conversion rate can thrill you, high churn numbers can “kill” you. Not only does the latter mean less profit, but it can cause harm to your reputation and credibility within the industry.
Like all things in life, it's not wise to blame others — especially when a customer decides to conduct business with someone else. Something must have triggered their big “exodus” and the switch to a competing brand.
Let's investigate the possible reasons for them leaving.
Causes of customer churn
According to the founder of the Database Marketing Institute, Arthur Middleton Hughes, there are 4 reasons as to why customers ditch companies:
They no longer buy in your category
They are unhappy with the price
They are unhappy with the product
They are unhappy with the way that they are treated.
Let's break this list down:
1. POOR MARKET FIT
That's what happens when you omit personalisation and roll out a feature that may be irrelevant to your target clientele. When salespeople are hustling to serve everyone and aren't incentivised to cater to well-fit customers, the outcome will be churn within a few months of purchase — namely, when the customer realises your product or service can't be the solution to their problem.
2. PRICE
Price is another factor that induces churn. If your ideal segment finds a more cost-effective solution to their pain point, they may leave your side. That's why it's vital to establish value, customer onboarding and education (e.g. a set of instructions printed on the side of your goods' packaging), so that the purchase is worth the cost.
3. PRODUCT
If your product doesn't live up to its expectations or your software is glitchy and difficult to navigate, your customers will be like “Thank you, next!”
4. USER EXPERIENCE
If you want customers to stick around, you need to map out their journey holistically. Consider polishing up your marketing and social media content, customer support and account management team. Who doesn't want to feel valued and welcomed by communities they follow? If they're left with a negative experience engaging with your company, they'll seek assistance and reassurance elsewhere.
Hughes' findings suggest that customer retention is a crucial measure to business success. On that note,
Marketing Metrics reports that the possibility of selling to an existing customer is 60-70%, and only 5-20% to sell to a newly acquired one. See the difference?
What is more, the Harvard Business School claims that a rough 5% surge in customer retention rates can bring from 25% to 95% uptick in revenue. Therefore, it's a no brainer that an efficient churn prevention strategy should be implemented.
No need to panic if you don't know how to do it! Let's find out together what it takes to reduce your churn rate and retain your customer base month to month.
How to prevent customer churn
Identify why the churn happens and contact customers
It's time for some action-taking! In order to tackle an issue and plug customers up, you first need to analyse the cause. Right?
Whenever churn strikes, there are 3 tried and tested tactics you can use to minimise it:
Send a customer exit survey (don't)
Contact them with a personalised email (you can do better)
CALL THEM! (Yes in red!!)
Divert from the lazy, generic and impersonal route of surveys and dial that number. Show that you care, call the account closers and ask them why they did it. Their responses may surprise you, while they can give you invaluable insights into what drives them away, and how you can improve your business operations.
Now, if you want a tangible input from your audience to earn their loyalty, reach out to them via email.
(Steal my email template below)
Hey [Customer's name],
I really appreciate you joining us at [Your brand's name], and I know you'll love it when you see how effortless it is to deliver great, personal support to every customer.
I noticed that you didn't make it through the setup process, and I thought I'd drop an email and offer a hand. I'd love to walk you through our mailbox functions; it's the only way to receive all the benefits of [Your brand's name].
Can we jump on a Zoom call this afternoon?
Thanks,
[Your name]
Email tip: keep it succinct and conversational to demonstrate that it's a human sitting behind the screen and not an automaton!
You can enhance your user interface or gear your customer support department up by activating other touchpoints, such as live chats, social media comments / DMs, feedback bars, etc.
Cornerstone On Demand is testament to this efficient integration, which helped them upgrade their user experience and win 12 million avid fans (and counting).
Be proactive and refine the user onboarding process
Study proves that 40-60% of free trial users of SaaS software do not purchase a pro plan. (Churn alert!)
This occurs because they fail to understand the value proposition of your offering, i.e., how you (but mainly the premium version of your service) can benefit them or their organisation. Refining their onboarding process, and communicating directly with your customers across all stages and throughout the lifecycle of the sales funnel is necessary to mitigate against this.
Introduce additional services that rest beyond the scope of your business practices. Try posting tips or host free webinars and educational training sessions on how they can use a certain tool or feature to scale their company and drive more revenue. A real-time interactive chat helpline is never a bad idea!
Hubspot leads by example with the wide selection of inbound marketing software and automation services it provides for marketers.
Truth is, the more acquainted and well-versed is someone with your offerings, the less likely to churn.
Send trigger-based messages
Not two customers are the same — each and every single one of them experiences your brand differently after signing up. Getting in touch with them at specific timeframes can help reduce churn rate. Whether it’s a user who had a one-off with the tool and never returned or a long-term customer who hasn't come back in a long while, send out automated messages that spur them into action.
Tinder is a king at crafting re-engagement notifications for groups whose interaction is lagging.
Grow your CHI by adding value to products
Your Customer Happiness Index (CHI) should be the quantifiable lifeblood of your business if you want to keep a low churn rate. Improvements in the follow-up of customer feedback are almost a necessity when you aim towards growth.
Whether it’s turning your weaknesses into strengths or honing what already works, I encourage you to kick your service up a notch even further. The point is to bring so much value to your business affairs that the prospect of leaving never crosses your customers' mind.
You don't have to reinvent the wheel. Take an existing product and lace it with some new cutting-edge features and innovations. Adding value to your product or service prevents customers from throwing eyes on to your competitors.
Did you find these tips helpful? Let me know in the comments section below!
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