How To Reduce Customer Churn Rates
Discover the reasons why your customers are leaving and methods for reducing your churn rate, both right now and in the long term.
Understanding Why People Leave & How To Keep Them
What Is Churn?
A business’ churn rate is the number of customers who have stopped using their services within a certain time frame.
It’s really important to know how many people fall into this category in order to run your company successfully.
To work out your churn rate percentage, simply divide your number of lost customers by the total number of customers and multiply by 100. So, if you lost 2 out of 10 people over a year, your churn rate would be 20%.
The reason a high churn rate is bad is that it not only affects your business’ reputation but costs you a lot of money. Figures show that it’s 6-7 times more expensive to acquire a new customer than it is to retain an old one.
So, it’s really worth putting the effort into reducing the number of people who churn.
Finding Out Why They Leave
Before you can fix the reasons that are making customers leave, you need to know what they are.
There are many reasons a customer will stop using your business: some are persuaded by a competitor, a small percentage move away, but the majority – 68% – leave because they don’t believe you care.
You can’t avoid churn, but you can show your customers you care. This will reduce the number of people who leave due to dissatisfaction.
In order to do this, you need to find out what their expectations are and why you’ve failed to meet them.
Make it part of the cancellation process to find out why they’re leaving. Whether it’s over the phone or via a form, a few simple questions can illuminate any issues. This ensures you’re tackling the actual problems rather than what you perceive them to be.
Furthermore, data shows that 40% of people will not return if they have a bad experience with a website.
You should try to identify the areas where customers encounter the most difficulties on your site. Tools such as Hotjar can provide you with heatmaps and visitor recordings so you can see how users interact with your page. So, if they’re struggling with bad navigation, design or content, you’ll be able to make changes which may seem small, but could have a big impact on user experience.
Only once you know the reasons why customers are churning can you fix them.
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Whilst churning customers are a long-term problem, there are a few fixes you can employ on a wider scale to do damage control.
First and foremost: apologise.
Whilst there’s no single cause for churn, an unresolved customer complaint is at the top of the list for why many people break ties with a company. So, make sure you a have a satisfactory system in place to deal with any issues.
There are a few reasons why an apology can go a long way:
It shows you accept fault for any wrongdoing and understand their point of view. It shows that you see them as individuals with individual experiences rather than just a figure in your profit margins.
Moreover, a personalised apology is key: a generic response is likely to do more harm than good. Show your customers you see them as individuals and appreciate their custom – after all, without them, you don’t have a business.
Furthermore, a gesture of goodwill goes far in rebuilding customer relations. Whether this is coupled with an apology or offered as an incentive stay just before a customer cancels, it can really persuade people to give you a second chance.
Also, you should be sure to keep on top of asking customers what they want. Their needs and expectations will change over time, so use regular surveys and customer contact to understand their demands. This means you’re less likely to be surprised by the reasons people choose to leave.
Reducing Churn Long Term
You shouldn’t focus on trying to reduce churn. You should focus on strengthening retention.
From the beginning of a customer’s journey with you, they should have a good first impression and feel like they’re getting value for money.
You should also work to identify customers that are about to churn.
Set up systems to alert you to customers who are still using your services but at a reduced rate. Similarly, people who are still paying for your service but aren’t actually using it. Both of these scenarios demonstrate the type of customers who are likely to churn soon. If you’re aware of the warning signs, you can have further systems in place to try and improve their experiences.
By recognising customers who have the potential to churn before they leave, you still have the chance to change their minds.
There are some best practices you should adopt to ensure your focus is on reducing customer churn.
Firstly, make sure you have a plan which focuses on your customers’ needs now and in the future.
Be proactive in your approach to reaching out to them and offer additional support where necessary. This will not only reduce the number of problems they encounter across their journey but also encourage those who may have just suffered in silence to stay.
Additionally, always strive to add value to their experience, ensuring they never feel like you’ve forgotten them.
Keep track of the red flags which indicate a customer is about to churn. It’s far better to spend your time and effort working to retain them than winning new customers. Not only is it far cheaper, but your reputation will benefit too.
You should also devise an easy, yet thorough, onboarding process. When introducing a customer to your business, you should cover everything they need to know and any concerns they may have to ensure that they’ll come back again.
Keep Customer Satisfaction High
Overall, it really is important to keep your customers at the forefront of your mind. The most successful companies do this really well. Founder of online giant Amazon, Jeff Bezos, attributes its success to its focus on its customer experience:
“If there’s one reason we have done better than of our peers in the Internet space over the last six years, it is because we have focused like a laser on customer experience, and that really does matter, I think, in any business. It certainly matters online, where word of mouth is so very, very powerful.”
So, it’s fair to say if there’s one sure way to reduce customer churn, it’s keeping them happy in the first place.