What is customer churn, and why is it so important to understand it? Well, let’s put it this way: understanding customer churn is the key to understanding where your business is falling short. By definition, customer churn is expressed at the rate at which your customers discontinue your services. A probe into this trend can essentially help you understand customer demands, react to the trend in real time, reduce customer churn and help you retain customers.
Are you looking to reduce churn for your business? If so, you must understand that achieving a low churn cannot be achieved with a one-time effort. The demands of any industry change with time, and the key to reducing churn lies in your ability to adapt to these changes.
Effectively reduce customer churn requires an empathetic understanding of customer requirements, providing effective customer service and being invested in a positive customer experience. Keep reading to gain a comprehensive understanding of what churn is and why it matters, calculate churn rate, learn ten tips that can help you reduce customer churn and stay ahead of the competition in 2025.
What Causes Customer Churn?
Several factors cause customer churn, and let us look at a few of these:
- Poor Customer Experience: Data reveals that 80% of US customers think that they like the customer service of a brand when the executive is friendly and knowledgeable, leading to a faster resolution of issues.
- Lack of Value Perception: Customers often refrain from resubscribing for a service they did not find commensurate with the money they spent on it. As a new entrepreneur, you might be led to understand that a brilliant sales pitch is all that it takes to generate a great annual revenue. The real trick, however, is to retain customers by delivering quality service consistently.
- Delinquent Churn: SaaS companies lose 40% of their customers to delinquent churn. Software-related glitches that deter a customer from making payments or purchasing a product can quickly lead a customer to choose another brand.
- Fierce Competition in the Market: One of the most pertinent reasons why new businesses struggle to find a foothold in the market is competition. The market is saturated, and it only tolerates a service or a product that can fill an existing gap.
- Economic Situation: The economy of a nation at a given point also decides the rate of customer churn. You might be doing everything that is best for your business, but you will still be frustrated because your consumers have limited purchasing power.
Why Does Churn Matter?
Trying to reduce churn is important, but no less important is the attempt to understand why churn matters. Churn value must be seen subjectively rather than objectively because in certain industries, such as specs manufacturing, customers do not return as frequently as you would like them to because of the nature of the product you are selling. Furthermore,
- Churn Costs More: It is a known fact that if you are trying to satisfy a new customer, you need to put in more time and resources into it. Typically, you need less effort to generate more value for customers whom you have already served. This is where retaining customers becomes important rather than captivating them once with a well-crafted sales pitch.
- Negative Impact on Future Growth: Churn can have a long-term negative impact on business revenues. Not addressing a recurring issue that customer faces earns you bad reputation in the market and deters future customers from opting for your products/services.
What is the Formula for Calculating Churn?
The formula for measuring the rate of churn is pretty simple. First, you need to determine the time frame within which you need to find the churn data. Thereafter, note the number of customers you had at the beginning of the period (say, 1000) and at the end of it (Say, 1300). Also, take note of how many new customers you have gained within the said period (say, 500).
Therefore, it is clear that you have lost 200 customers during the arbitrary period (1000+500-1300). Therefore, the churn rate for this given period is 200/1000 x 100 = 20%.
What are the 10 Tips to Reduce Customer Churn?
A sound knowledge of the market dynamics and a positive outlook to push that extra mile every day are what help reduce customer churn. However, with these ten tips, you could get a grasp of how to deal with customer churn and maintain a steady annual revenue.
1. Understanding Customer Preferences
The key to successful sales and triggering rave buying of your products and services is knowing the pulse of the market. The market sets the trend and influences customer behaviour, which must be satisfied by a brand that wants to survive in the market. A popular service or product might become obsolete after a given period, owing to causes not in the hands of the manufacturing business. According to Gartner, 15% of customers replace software because they are no longer compatible with associated software. Therefore, staying up to date with the market is key to survival.
2. Personalised and Proactive Support
Timely support offered to a customer goes a long way towards attaining customer satisfaction. The best way to always keep your customer in the loop and feel valued is by opting for Atidiv’s services, like social media support and live chat service, apart from other modes of communication.
3. Collecting and Acting on Customer Feedback
Collecting customer feedback is a way to engage your customers so that they feel heard. You can achieve this easily by introducing various channels like survey forms and email reviews. However, the most important thing here is to let the customer know what actions were taken/were not taken based on their feedback. Maintaining this transparency goes a long way towards attaining customer satisfaction.
4. Building a Strong Community
Fostering a community feeling is a great way to let customers feel that they are part of a pack that they want to be associated with. If you, as a business, can provide them this feeling of fulfilment, customers will stay loyal to you. This community feeling can be bolstered by creating different forums on which customers can interact and exchange ideas. Your participation in these platforms, even if occasional, can be a great way to connect with your customer base.
5. Monitoring Customer Behaviour
Monitoring customer behaviour can help you identify the ones who are less likely to churn. Thus, you could put more effort into engaging with them and listening to their concern. Research says that if you can increase your customer retention by 5%, you can treat yourself to profits enhanced by up to 25%.
6. Offering Incentives and Rewards
Although you must refrain from unethical predatory tactics, there is no deterrent to incentivising customers who help you reach a business target. Rewards can potentially make people feel good, and they are more likely to feel that they have drawn out more value out of the money they have spent on your product or service.
7. Improving Onboarding
One of the most neglected aspects of the sales process is spending enough time to let the customer understand the extent of the service. At this point, guiding them through the terms of service is also important so that no room is left for miscommunication. Therefore, keeping your communication lucid is important. Studies show that you have a 36% chance of receiving a response for such communication if the reading level of your text is that of a third-grader. The percentage dips to 17% if your text has college-level readability.
8. Communicating Regularly and Meaningfully
Communicating regularly with customers can give you great insights into what they think of your product or service. It is also an unmatched checkpoint that helps you estimate churn. It is important to have this idea because if you have even a mere 2% churn per month, your business could be in serious trouble.
9. Prompt Redressal of Grievances
Quick redressal of issues is of great help to customers, especially when your service or product is of great importance to them in their daily lives. Therefore, if you can solve their problem rapidly and efficiently, the trust quotient between your customer and you is sure to leap for the better.
10. Putting the Customer First
86% of B2B and 71% of B2C customers prefer businesses to be familiar with their personal details. The ask is not really a grand one, especially when they provide these details when they buy your product or service. If you have got this covered, you are not just humouring the customer, but are also taking a step towards fast resolution of a critical issue. Customers do not like repeating what went wrong with your product, and a little empathy on your part towards their cause can help build a lasting relationship.
FAQs on Reduce Customer Churn
1. Does offering rewards and incentives pay off, considering it actually takes up monetary resources to deal with the process?
Yes, it pays off because you are not offering these rewards to everyone. Rather, by rewarding certain customers, you are advertising this policy, thus driving sales. Moreover, think of these rewards as an additional discount you are offering on your products or services for a limited time. Therefore, the monetary resources deployed for this scheme are not unlimited, their renewal being subject to their ability to bring in more revenue.
2. How important is it for a business to build a strong community?
Building a community forum for your customers has several positive points to consider. To begin with, customers can connect through these channels and feel heard, thus improving the customer satisfaction quotient for a business. Moreover, as these forums gain traction online, your business will naturally attract attention from prospective customers.
3. How do we deal with customer feedback effectively?
Dealing with customer feedback has only one prerogative – to make the customer feel valued. Therefore, even if you cannot accommodate a service request, it is important to let the customer know the reasons for such a decision. Thus, you can show your respect for the customer’s time and opinion, leading to better customer satisfaction.
