Breakups are always hurtful and destructive whether in love or business. A ‘break up’ in business is when a customer decides to just stop their relationship and communication with the enterprise which is termed as Customer Churn or Customer attrition and it apparently has a huge impact on companies for obvious reasons.
Orkut, owned by Google, the once-giant who ruled new media succumbed to its tragic death because it had to endure so many such customer breakups coupled with its inability to break the back of rising customer churn rates.
Why is it Vital to Monitor your Customer Churn Rate?
Though piling up new subscribers to your services is a delightful win, many businesses often overlook the importance of keeping the acquired customers hooked to them. A high customer churn rate crushes the soul of your enterprise, your revenue. It’s like a leak in the bucket. Even the smallest hole can drain it dry if left unattended. Gaining a new customer for your company can cost you in between five to twenty-five times more than retaining an acquired customer.
And to make matters worse than it is, you’re not just wasting money on lead acquisitions, you’re losing profits too. A 5% increase in customer retention rates can increase the profits by 25-95%, according to a research from Bain and Company.
Chiseling down the customer churn rate as small as possible should be your priority always. According to Global marketers Customer churn rate impacts:
- Revenue loss impacts Business performance by 59%
- Profitability is reduced up to 39%
- And re-acquisition costs by 36%
For any company to succeed, customer acquisition cost must be lesser than the customer lifetime value which is the amount he or she pays throughout their time as a customer in your company. If it’s otherwise, customers end up costing you rather than contributing to profit. Lowering acquisition often lessen the burden, but reducing customer churn rate is also vital, as the standing customers would stick around and they end up paying in subscription fees which would secure their loyalty for a while.
When companies can convince their customers to stay, they increase the average customer lifetime value (CLV) significantly and thus be able to reduce acquisition costs.
Companies often spend profoundly to attain new customers through various innovative sales and marketing efforts thus making Customer churn breakups very expensive. They do this lavishly, hoping that this money will be paid back to the company many times over, during the customer’s lifetime. And what happens when customers leave earlier than expected?? They end up with just expenditure.
From industry to industry and business to business the rates of churn varies. Netflix was sued by their shareholders over its churn rates. The shareholders argued that they were using an inadequate method of calculation which generated a low churn rate. Clearly, Customer churn rate is a decisive metric for any of the subscription business.
Though it’s usually impossible to foresee customer churn rate, you can definitely uncover some correlations amongst churned customer demographics and patterns that would give you a clearer idea.
For example, Your company offers a 30-day trial subscription to your services and imagine you have been experiencing high app churn from the ones who have signed up for the trail, who rarely used the service during that time. Now there must be a correlation between the trial, the lack of use and the Customer Churn rate.
A recent survey by Gartner states that even though 90 percent of the companies are tracking their customer behaviors, only 5 percent puts it to use.
1. Identify Your Strengths and Weaknesses
As you discover the reasons for customer churn rate through various qualitative as well as quantitative methods, you create a list to ensure that you don’t repeat them. For that, you could make a list of customer accounts that you have lost and collect information as to why they wanted to leave. So that you can build systematic strategies and processes to evade such situations in the future. Try to identify if you are giving any avoidable causes for Customer churn by conducting a peer-editing process. Reviewing all your strategies could uncover some of the potential long-term negative effects.
Identifying the reasons that enable you to keep the customers loyal to you would be the key to profitable customer retention and major growth. You are doing something that is just very right, uncovers those and then leverage them across the entire customer base. These could be the initial offering or educational material that you are providing.
2. Keep An Eye On Your Competitors
Alright, Let’s put it in very simple terms. What happens to the customers that you are losing?? Where do they go?? Look under your competitors’ cap, they would be there. Often the customer churn that you are experiencing has nothing to do with you, but everything to do with your competitors’ strategies. Always monitor your competitors very closely. Know your enemy!! If you Lookout for the tactics and customer engagement programs implemented by them you will always have an advantage over them. And you can evade an accidental opportunity that would interest your customer to leave you.
Now, this doesn’t mean you have to blindly follow the wagon. However, it would be wise to upgrade your product and services to match up with your competitors’. To ensure that you aren’t getting lapped by your competitor, make note of their customer success programmes. Do they have a chat-enabled website? Or are they engaging in social media? Taking hints from their policies it can immensely help you to serve your customers better and to retain customer loyalty.
3. Build Them Loyal
Customer loyalty is one of those things that are priceless in business. And Why? You ask. Let’s admit it, you are going to disappoint your customers once in a while. You are going to screw up one or two things. And this thing called Customer Loyalty would fly in and sweeps you off into safety. It buys you some buffer room with the customer. Once a customer feels loyal to your company, flight risk decreases significantly. And it doesn’t just stop with that, you can increase your profit by 25% with a 5% increase in customer loyalty.
Loyalty programmes would cultivate the feeling of oneness with a positive and forgiving attitude towards your companies. You could reward your loyal customers with rewards to let them know that they are appreciated and that they matter. Everybody loves personalized gifts and your customers are no different. These programmes would help you to plan strategies that would make the customer feel that you have made it just for them. Even personalizing their emails by addressing them by names, or sending greetings on special occasions would be enough. Cleverly designed loyal programmes could be all that your company needs to overcome a crippling Customer Churn rate.
4. Be There Always
Some customers leave merely because they’re indifferent and have no problems wiggling out of a relationship. Some like to flit from one place to another. If you can’t transform indifference into satisfaction (or even better – reliance on your product), at least Make it difficult for your customers to leave you. Sometimes customers leave just because they are indifferent. If you fail to transform indifference to loyalty, making the exit process difficult could do the trick. If they can just end it with a button, you are making it easier for them, not to say, you never get to know the reason for their departure too. Give yourself a last chance by forcing the leaving customer to have a verbal conversation with you where you can give them reasons to stay. If you couldn’t persuade them, take it as an exit interview and give yourself a chance to learn from the situation.
You could also try and convince your customers to buy longer contracts. You could try giving special discounts for choosing longer contracts instead of short ones. This could increase the longevity of your relationship with customers, giving time and space to improve and create a loyal customer. This is helpful especially for services where it takes some time to see the results from using the products, such as CRM platforms like Hubspot.
5. Find Strength Within
Be it happiness or growth it should happen from within. In any organization having a strong core is important to the development and achieving goals. When companies lose their money, usually, they try to compensate for that by laying off their employees. This is actually one of the biggest reasons for a high customer churn rate. Your employees see those types of reactions as thankless and depressing. This makes them discourteous which leads to building a bitter opinion about the company. This will be rendered through their demeanor and will affect their commitment to customers thus spoiling the customer experience.
It’s pertinent to bring in additional training sessions to make sure that they understand the fundamentals and also aids in to acquire some more skills to increase your employee engagement. Having loyal employees is as important as building loyal customers. This loyalty and positivity towards your company would trickle through to the customers.
6. Keeping the Spark Alive
When you have plans that lock customers in for six months or even a year, it would be hard to measure customer satisfaction based on Customer churn rates alone. Having subscribers merely hooked in for a year is not good enough for your business and you will come to know of their dissatisfaction only when a customer quits or unsubscribes, which is too late. Customer Satisfaction is critical in keeping your customer churn rates low.
Customers often let issues fester rather than relying on your customer support team for help. Customer frustration, which ultimately leads to customer churn occurs when there is no clarity about a product or service and sometimes it surfaces when there is a lack of efficient support team.
You should always conduct customer feedback surveys regularly to get some insights into your customers and how well they are coping with your products and services. You should always let them know that they matter and that their experience matters too.
It wouldn’t matter even if you have the best support team ever to assist your customer if you are waiting for your customer to initiate the conversation. Be proactive and check in with your customers regularly. See if they have any suggestions for you. A time-stamped feedback would give you a guideline so as to where their loyalty starts to wane. If you have a consistent feedback system in place you can catch and resolve issues that might lead to customer churning before it escalates.
7. Create (and Automate) a Retention Process
There are some key moments that you identify even without any idea when a customer decides to cut ties with a company. You can always create a retention program that pitches in on these key periods. You could use customer engagement methods such as nurture emails, customer surveys, special offers, and personal touches to remind them of you and how they cannot just leave you.
You have to design it in such a way that it goes off as a natural process. You should be careful not to smother your customers with attention placing you in the spam folder. Automate the process to send a remainder mail when there is an inactivity found in a customer’s account. Make sure to throw in a reward or coupon they can avail as a bait to hook them back in. When a customer has signed up but has not been using up the offer, send a friendly nudge. Once you have mapped out at-risk customers, automate the process as much as possible.
Customer churn is not something that you can always hide or evade from. It is quite natural and doesn’t imply that your company is incompetent or a flight risk. All the steps listed above would help you to keep your Customer Churn rates low. Remember that not every customer will stay. But the perceptiveness that you gain while going through these steps would definitely help you keep the next customer on board. Churn is part of any business. The key is to use your churned customers and your loyal customers to foresee signs of Customer satisfaction as well as customer dissatisfaction so that you can take the necessary steps to retain the relationship before they leave.