Avoidable customer churn is said to cost U.S. businesses a staggering $136 billion annually. The revenue leakage can significantly drag down growth, tarnish your brand in the customers’ purview leading to customer attrition. Customer attrition comes in various forms, including canceled subscriptions, not renewing a subscription, closure of account, and switching to a competitor. The good news is that you can combat customer attrition by successfully implementing a good churn prevention strategy. Here is what to know.
What is Customer Churn?
Customer churn, also known as customer attrition, is simply the loss of customers by a business. Most of the customers who do business with you will, at some point, cease their relationship with you. Customer turnover can be measured by the percentage of customers lost, the total loss of recurring business revenue, or the rate of recurring revenue lost.
It may cost up to five times more to acquire a new customer than to keep a current one. Repeat customers are also easier to sell to, are likely to spend more, and will promote your business. Today’s world of digitalization and competitive marketplace means that customers can quickly compare the options available and choose the business that meets their needs. To avoid losing customers, you have to convince them and build customer loyalty to promote retention.
What Causes Customer Churn?
It is vital for businesses to keep track of the customer turnover rate. However, to manage the churn, you will also need to understand why customers leave. This knowledge will help you develop and implement a solid strategy to tackle leaky customer buckets.
One of the common reasons why businesses lose clients is because of poor customer service. Investing in customer service, or even better, customer success, is a critical part of retention. However, customers can also end their relationship with your company when the value of your product or service is not communicated early, and they do not feel confident using it. Lack of perceived value and poor market fit may also result in customer defection. There is also involuntary churn that does not result from a negative experience and positive churn, which happens when the desired outcome has been achieved.
Analyzing Churn Data
Churn data can help you identify what is not working in your business. In essence, you should continuously evaluate your company’s customer loss rate with the aim of reducing it and keep track of the right data to enable you to make informed decisions. When doing this, you should pay attention to customer engagement and usage. Look at the number of support tickets your team is receiving, monitor competitors’ pricing, and consider the likelihood of your customers upgrading.
How to Prevent Customer Churn
Reducing customer attrition will help you save customer relationships, increase your market share, and save your bottom line. Below are some strategies you can use to prevent the loss of customers
Identify what is causing customers to churn
There are many reasons why customers may choose to stop doing business with you. To reduce customer churn, you should start by investigating why customers have churned. Only by doing so will you be able to make others stay. A robust feedback system, talking to the customers who have churned, and using a product analytics tool will help you obtain the information you need.
Anticipate customer loss in advance
You should always keep an eye on customer activity, so you can identify those who are likely to stop engaging with you. Some of the signs you should look for are customer complaints, declining usage, and failed payment methods. You will need to address the signs as soon as you notice them to avoid losing the customers.
Segment your customers
The different customers you serve have varied needs, a factor that results in different behavioral patterns. Once you understand the needs and purchase behaviors of your individual customers, you should segment them in order to offer a unique experience that will make them stay. You can categorize customers through demographics, geographical areas, and behavior to understand why specific customers are churning.
Improve communication with your customers
Good communication is at the heart of good customer service. It is important to keep your customers engaged and happy so that they do not forget about you. Increased communication will make you come across as an authority in the business and a company that delivers value. You can send messages to customers from time to time, engage with them on social media, and update them on their orders.
Educate your customers
As a company, you should give your customers information and support to help them make the most of your products or services. Educating your customers can be as easy as creating educational materials on how they can use the product. You can also provide prompt answers to the questions customers ask through a chatbot feature or by maintaining an active social media presence.
Prioritize customer experience
Your customer attrition rate is one of the most reliable indicators of how your business is doing. Because poor customer service is one of the main causes of customer loss, you must ensure your customers enjoy a great experience right from their first interaction. You should also work on the continual improvement of your product and needs to meet the changing needs of your customers. Incentivizing customers to keep using your products can also reduce customer attrition.
Rewards can help you create loyal customers who are willing to work with and buy from you. Start by developing loyalty products and offer discounts to existing customers to encourage them to keep coming back. This approach will reduce customer loss, earn you repeat business, and give you an edge over your competitors.
Try to win customers back
When you lose a customer, you should always try to win them back. In addition to finding out why they are leaving you, it is important to offer a solution and get the customer to buy from you again.
In a nutshell, only a strong and well-thought-out strategy will help you lower your customer churn levels. The tips we have shared above, however, are an excellent place to start.
Prevent Churn, Increase Retention, Scale for Success
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