If you haven’t a clue what customer churn is…you’d think it was something good for your business. I mean, it has a nice ring…no? Unfortunately, it’s nothing to joy over. Actually, it’s like cancer that eats deep into your business bottom-line if you don’t discover it early and nip it in the bud –fast!
So, what’s customer churn exactly? Well, Investopedia defines it as “The percentage of subscribers to a service who discontinue their subscriptions to that service within a given time period.” To break this down further for you, customer churn is when you lose an existing customer, period.
There are several reasons why a customer will cancel their subscription to your service (or discontinue patronage of your product). And sadly, sometimes, (no matter what you do) you’ll experience a churn.
Below are typical reasons for churning…
- Customer dies
- Customer exits the market
- Customer gets someone else ‘kind’ enough to provide service for free
- Customer gets snatched by a competitor
- Customer is dissatisfied with your product/service
- Customer feels you don’t care about them (aka you’re all about the money)
While generating traffic and new leads is very important, business owners are forgetting that retaining existing clients is perhaps smarter and even more critical to business survival and growth. Why? For one, it’s 50% easier and cheaper to sell to existing customers than to pursue new prospects.
And, based on another research by Bain & Company along with Earl Sasser of the Harvard Business School , a mere 5% increase in customer retention can increase profits by 25% to as much as a whopping 95%. In fact, this is the main reason why reducing customer churn rate is so critical to business success in the long run.
And, below are 7 easy ways to reduce customer churn:
1. Keep a close tab on your customers
‘A Bird in the Hand is Worth Two in the Bush’ is wise and timely advice here. So, you must keep a close watch on what your customers are doing per time, and make sure it’s in your best interest, most of the time. For instance, say you find out that some customers are no longer buying your product/service for some time now. You could place a call through to them or do them a personalized email, asking why. A catchy “Was it something we did” email or call can get customers reaching out for their wallet again, getting them back in the game again –or at least they may hint at why they’re ‘churning’ on you for good which in itself is great insight for future use. Keeping a close tab helps you quickly swing to action and rescue the situation in most cases–before it’s too late. If you find the customer is dissatisfied with pricing or glitchy software, you can re-engage them by offering them ‘a little more for same price’ and promising to look into any technical issues they’re having, respectively.
2. Act before they act
In many cases, it’s better to reach out first to your customers with something that keeps them onboard –than acting when they’re at the brink of churning. You could introduce a short-term promo, start a ‘customer of the week’ program, and periodically ask customers to rate their experience with your service/encourage them to share what you can do to serve them better. This can be particularly effective if you have a highly interactive social platform where you regularly reach out to and hear back from your customers. By so doing, you’re showing your customers that you value the business relationship and that you’re looking out for unique ways to serve them best, every time.
3. Setup a user-friendly onboarding process early-on
You know exactly how your product or service works, right? You should! You created it, remember? But a new customer may have a hard time understanding some key elements of using the product for best results, and things can get so overwhelming for them that they disembark and move on. A step by step, easy to follow onboarding process for new customers can be the big difference between retention and attrition.
4. Hand out incentives
Offer customers something that makes them stick with you. They feel appreciated when you offer them a discount for continuous patronage or better, a loyalty program that rewards…yes, loyalty. There’s so much power in giving gifts (no matter how small). As long as it’s given in such a way that shows the customer that you care for them and that you value their business –it becomes difficult to leave even when they have a good reason to do so.
5. Ask for feedback
Don’t get overconfident or busy, assuming that you know what your customer wants per time. Even if you somehow know what they want today, that can easily change within 24 hours or less. What to do? Ask for feedback (aka hear straight from the horse’s mouth). You also must make it easy for your customers to reach you quickly when they’re dissatisfied with something. Have them take quick surveys, and you can go as far as grafting in a bonus for successfully completing and submitting their honest feedback to you.
6. Analyze the most recurring reasons for churn
As you probably already know, you cannot cure churn 100%. Despite your best efforts, it will happen. But what you can do is analyze each churn to get an insider scoop on why it happened and then see if there’s something you can do to curb it in the future. Suppose churn happens because customers misunderstood your product or service for something else (and this happens more than twice), then it’s probably a good time to find out what the actual product is, and start stocking/offering it.
7. Stay on top of things
Don’t just focus on producing a product or delivering a service. Invest time and resources in researching changing customers needs. As for the competition, find out what they’re doing differently that you could imitate or something they’re aren’t doing that you could kick off to ensure your customers have little to no reason to cancel their ‘contract’ with you.
According to a study by Kolsky, a staggering 50% of customers churn every 5 years; and while 1 out of 26 unhappy customers will complain about a bad customer experience, the rest will churn. So, churn is a crucial aspect of your business bottom-line to play with at your own peril.
And when you consider that you have a whole lot more to worry about in keeping your business afloat and competitive, indeed it can be tough to keep tab on churning –especially if you’re doing it the old, rugged way.