Customer Churn and How to Prevent It

Customer Churn and How to Prevent It

Customer churn is a metric through which to measure and evaluate your customer retention. Although every company wishes to retain all of its customers, that’s simply unviable. Instead, understanding where your company’s weaknesses are regarding their customer retention, in addition to their strengths, will arm you with a more comprehensive strategy going forward.


What is customer churn?

Customer churn can be defined as the percentage of customers that your company has lost during a certain time frame. In other words, customers who have completely stopped using your product/service. Companies, for obvious reasons, should aim to have their customer churn rate as close to 0% as possible.


Churn rate example:


You would calculate this percentage by taking the total amount of customers lost in a specific period of time, divided by the number of customers you had at the beginning of that same period.


Why is customer churn rate necessary?


It’s natural to question why customer churn rate is important, given that all companies will lose a certain amount of customers over time. A customer churn rate of %4 doesn’t sound too bad, right? Why look into it?


Because customer retention costs less than customer acquisition. That means, keeping your existing customers will cost you less money than trying to attain new ones. When you retain more customers who don’t need further convincing to buy your product, you can invest more money in your company’s products and services. While you can still make a solid revenue with a customer churn rate of %4, consider this:


simply decreasing your churn rate by %10 could add an extra $100,000 in revenue to your company.


4 steps to prevent customer churn


1. Analyse churned customers


Your customers will know better than anyone else what their reasons are for leaving your brand. Don’t let that information go to waste! Consider surveying your churned customers to get a better sense of what a competitor did better or differently than you did, and why. Analysing that type of data will help your company draw more informed conclusions about what it needs to do to retain customers, and lower its churn rate. Once you make the appropriate changes, whether it’s slow customer support, a faulty product, or another factor, analyse your new customer churn rate compared to the old one to determine if it’s working.


2. Provide value beyond purchase


Your company needs to showcase the value it brings its customers beyond just a single product. Consider creating newsletters, blog posts, or events to demonstrate that your company provides unparalleled value. Similarly, webinars are a great example of hosting an event specific to a particular subject, that is both educational and engaging. You can also use blog posts to form a rapport with your audience, citing real-life questions, concerns, or practical information that resonates with your customers. Your customers will thank you for thinking of them and for bettering their lives with useful, delightful content.


3. Provide exceptional customer support


Customer service is one of the biggest reasons why customers churn. If a company fails to hear their customers, or put their concerns at the centre of their operation, then they will switch companies altogether. Research shows that:


  • 42% of respondents have left a business due to poor customer service
  • 59% of consumers would try a new brand or company for a better service experience
  • 78% of consumers have bailed on a transaction because of a bad service interaction
  • 58% of consumers are willing to spend more with companies that provide excellent customer service


Given these statistics, customer support should be the focus of your customer retention strategy.


4. Personalise customer experience


After having a positive experience with a company, 77% of customers would recommend it to a friend. This means that how your company curates their customer experience directly relates to your inbound sales funnel, and the amount of organic leads it generates. The better an experience you create, the more people will spread the word about your brand and/or product. Since 64% of marketing executives consider word-of-mouth to be the most effective form of marketing, you’ll get free, effective marketing in exchange for a stellar customer experience.


2 steps to reduce customer churn


1. Focus your attention on your leading customers


Instead of only focusing on incentivising your churning customers, it might be more beneficial to offer incentives to your best, most loyal customers. Your most profitable customers will appreciate the recognition and further promote your brand while decreasing the possibility of a high churn rate.


2. Show customers that you care


You should try to be proactive when it comes to reaching out to your customers. Don’t simply wait for them to contact you. If you creatively inform your customers about your product offering, the perks you provide and demonstrate that you care about their experience, they will certainly remain loyal to your brand.

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