Loyal customers are the backbone of a successful and thriving business. The number of customers that stop using your services or products – customer churn – can cripple your business.
Luckily, there are measures you can take to prevent your customers from leaving you. Our blog explores what customer churn is while analyzing why it happens and provides strategies on how to reduce it.
What Is Customer Churn And How To Calculate It
Customer churn is the natural business cycle of losing and acquiring customers. Every company, no matter how great your products or services are, will experience churn. In general, the less churn you have, the more customers you’re keeping.
To work out the percentage of revenue that has churned, take all your monthly recurring revenue (MRR) at the start of the month, and divide it by the MRR that you lost that month, minus any upgrades or additional revenue from existing customers. Don’t include new sales in the month, as you’re looking for how much revenue you have lost. New revenue has been gained.
Why Is Customer Churn Important?
Understanding your customer churn is essential for evaluating how effective your marketing efforts are and the overall satisfaction of your customers. It is also much easier and cheaper to keep the customers that you already have rather than trying to acquire new ones, so the more customers you are retaining, the better. Due to how popular subscription business models are, it’s critical for a lot of different businesses to understand where, how, and why customers might be churning.
If you’re experiencing high levels of customer churn, there are some strategies that can be used to reduce your churn rate.
Analyze Why Churn Occurs
This sounds obvious, but it’s important to find out why your customers have decided to leave. The easiest way to do this is to talk to the customer. If you can, really talk. Get your customer on the phone. This demonstrates that you genuinely care, and you can instantly find out what went wrong. This gives you the immediate voice of customer feedback on whether or not your product is solving the customer’s needs or causes them issues.
One of the most effective ways to gain insights from your customers is through a customer feedback form. You will be able to gauge how satisfied customers are with your product and services, how you could improve your offering and what they expect from you. From the information gained from the survey, you can base important decisions on such as what new features to introduce or how to design better marketing communications to target your customer segments. Capturing this important information through a customer satisfaction form can be done using an online form builder which can automatically be sent to customers after a purchase and even analyses results for you.
Communicating directly with your customers can work miracles in analyzing churn. You should be actively using all channels for this. Use phone, email, website, live chat, and social media. You can get very valuable feedback on how well you’re serving your customers from a simple phone call, email, or survey.
Engage With Your Customers
Another way to stop churn is to engage with your customers with your product.
This is often called relationship marketing and gives your customers reasons to keep coming back by showing them the day-to-day value of using your products, by making your products, offers, or services a part of their daily workflow.
To start with, offer ample content about the main functional benefits of your product and offer regular news updates such as announcements, deals, special offers or upcoming upgrades. Engage with your customers on all channels.
One of the most efficient ways to engage with your customers is to reach out to your existing customer base through email marketing. To determine when you should be contacting your customers, start by analyzing your customer’s journey.
The customer journey will give you a clear picture of all customer interactions across all channels, devices, and touchpoints throughout every stage of the customer lifecycle, and be ready with the right content at the right place and time.
Another tool you can use is social listening. This is the process of finding and contributing to conversations about your company online by looking for brand mentions, specific keywords or phrases, and comments. This helps you to keep your finger on the pulse of what’s happening in terms of customer satisfaction.
Don’t forget about customer feedback. Ask your new customers what their first impression of using your product was. This helps you to understand the first impression that your product is making.
Educate The Customer
This churn-prevention trick naturally flows from the first tip. You have to provide enough high quality educational or support materials, which will help to increase customer retention and reduce churn. You could offer free training, webinars, video tutorials, product demonstrations or use an infographic to provide consumers with an easy-to-understand visual explanation of your product features and benefits. Offer whatever you need to in order to make your customers feel comfortable and informed.
You have to not only give them the tools that work but also offer them the training they need to use the tools. In this way, you can demonstrate the full benefits of your products and services and can make sure that your customers have a successful onboarding and implementation.
Know Who Is at Risk
The best way to avoid churn is to stop it from happening in the first place. There is always a group of customers that is more likely to leave you than others, so it’s in your best interest to know who is getting close to that. If you know, you can reach out to them in time to make them stay with you.
Finding your at-risk customers is one of the most popular churn tactics for B2B companies, and many use it to successfully reduce customer churn.
The good news is that spotting your at-risk group of customers isn’t difficult. Find out which of your customers has not been contacted for a while. Do you have customers that asked for something like a list of prices or more information that you forgot to follow up on? Knowing this will help you to become a lot more proactive in preventing churn.
After analyzing the reasons for churn, you can find the actions, or lack of actions, that your churned customers made. You can use this knowledge to spot if someone is behaving in a similar way and is likely to leave soon.
Define Your Most Valuable Customers
You should be separating your most valuable customers from the rest and go the extra mile to make sure that they are getting what they signed up for.
They are the customers that you want to keep the most. Valuable customers should be taken extra care of because they bring in the most revenue.
A history of your interaction with your customers can show you whether they have encountered any problems with your product, and whether those problems were handled.
Segment your customers into groups of profitability, readiness to leave, and their likelihood to respond in a positive way to any communication from you encouraging them to keep their business with you.
While you can read all the resources available on reducing churn and take all the necessary steps to retain your customers, every business will have leaving customers.
However, that isn’t to say you should throw your hands in the air and sit back and relax and account your whole churn rate to just the inevitability of customers leaving. Instead, seek to find why they are leaving and take measures to keep them from taking their business elsewhere.
Author bio: Tegan Tedd is a digital marketer and content writer at Paperform. She loves writing about product marketing, technology, and workplace productivity.