Customer churn is the most challenging fact companies have to tackle. The actual size of customer churn is not always fully appreciated; however, the estimated cost of churn is about $2 trillion yearly. The customer churn rate highlights the number of potential buyers that have stopped using your products/services. The churn rate is measured within a particular timeframe, such as monthly, quarterly, or annual customer churn rate.
Customer churn (formally known as customer defection, turnover, or attrition) is the biggest factor affecting the company’s growth, profitability, and revenue. Several studies reveal that only a 5% increase in customer retention rates can boost the profitability growth of a company by 25-95%.
With the advanced and instant availability of price comparison tools and the highest quality products across the web, customers can easily find the lowest price products. Companies offer higher values to their customers to stand out from the crowd and grab their customers’ attention and trust. If you’re not using reliable strategies to provide value to your customers, they’re more likely to switch to other brands.
Customer churn can drastically affect the company’s revenue and growth, but fortunately, you can find several ways to prevent it. Please scroll down to read the main causes of customer churn and five quick ways to prevent it.
What is Customer Churn Rate and How to calculate it?
Customer churn rate gives an eye-opening insight into tracking your customer nurturing strategies. It is significant to solve your customers’ problems and improve the overall health of your business. You can calculate the customer churn by dividing the number of lost customers by your total number of buyers at the start of the timeframe.
For example, suppose you have 300 customers start of the first quarter, but at the end, you come up with 290 customers; you lost 10 of your customers-customer churn would be 5%.
Main Causes of Customer Churn
You must meet your customers’ expectations and aspirations to build a strong customer relationship. Companies/brands that keep their customers’ satisfaction higher than anything else can build many loyal customers. Several different factors can cause customer churn, some of which are;
- Impropriate Customer Support
A great customer support team lets your buyers get information about products/services. It is an excellent tactic to keep your customers happy and build a strong relationship with them. 90% of Americans believe that superb-quality customer support services can help businesses attract loyal and potential buyers.
Surveys show that about 9 in 10 customers abandon a business/brand because of poor customer support services. You can improve your customer support services by adding AI conversational chatbots to your communication section.
- Poor Onboarding Experience
Surveys highlight that 74% of the buyers prefer switching the brand if they don’t understand the values of your products. An impropriate user and shaky onboarding experience may lead you to face customer churn within a few days of new signups.
Customers can immediately switch to other brands when they don’t find their desired values from your products. Proper customer onboarding is crucial to improving customer satisfaction and giving them the values, they deserve. You can guide your customers on how to use your services/products through proper onboarding.
- Difficult User Experience
You may have a product that offers all the core functionalities but does not satisfy your customers. The reason behind this is the difficult user experience. 49% to 56% of marketers believe that our potential buyers stop using our products after a certain period because they don’t know how to use them. An easier user experience design is the backbone of every product/application. You can implement UX design principles to improve your customers’ experience.
- Targeting Wrong Audience
Sometimes, you generate many signups, but the churn rate remains high. You’re targeting the wrong audience for your products/services. The customers who are not interested in buying your products will not stick and affect your company’s growth.
- Wrong Prices
If customers feel your products have higher prices than their budget, they are more likely to find the lowest-price products. If you’re setting higher prices for your products, you must include advanced features and updates in your products to justify them.
5 Quick Ways to Prevent Customer Churn
Businesses focus more on customer acquisition instead of customer retention. This is the costliest mistake affecting the bottom line of brands/companies. Reduced customer churn and solid customer retention strategies can help businesses boost their ROI (return on investment).
- Provide the Top-Notch Customer Support Services
A reduced customer churn and improved customer retention mainly depend on your customer support services. When you help your customers in every possible way, they build trust in your offerings and stick with your brand.
A case study reveals that better communication with the customer and productive customer support can reduce customer churn by 22%. Being only reactive is not enough to satisfy your customer’s needs; it requires a proactive and strategic approach. You can offer best-in-the-class support in the following areas;
- Collaborate with your Customers
Collaboration with your customers is key to maintaining a loyal customer relationship. You can use different co-browsing software to collaborate and communicate with your potential buyers without facing any hurdles. It can assist you in guiding your new customers through your products’ complex workflows and usability.
- 24/7 Support
You must ensure 24/7 availability to provide your customers with immediate support. You can implement different AI (Artificial Intelligence) tools to provide reliable 24/7 customer support. These tools are integrated with your products to give a better relief to your potential buyers.
- Personalization
Personalized customer support options can grab your buyers’ attention at a glance. You can implement live chat or video chat options in your customer support section to guide your buyers straightforwardly.
- Real-Time Support
Real-time assistance is key to improving your customers’ engagement and satisfaction levels. It can encourage your customers to feel more about your products/services.
- Introduce a Loyalty Program
Nurturing relationships with potential buyers is crucial to increasing customer retention and decreasing customer churn. Having a loyalty scheme can help you get more loyal buyers as it can influence the purchasing decision of 69% of customers.
A loyal customer offers a higher lifetime value and requires minimal conversion work. Your loyal customer may work as your advocate and recommend you to many others. You can develop a loyalty scheme to gain the trust of your existing buyers as well as increase your customer acquisition. 58.7% of the buyers say that loyalty programs and additional rewards complement their shopping experience.
A loyalty program can help you prevent customer churn in the following ways;
- Create Brand’s Advocates
Your most valuable customers help you to generate a streamlined income flow. A loyalty program assists in identifying your most valuable customers. You can build a network of brand advocates through loyalty programs. You can ask your potential customers to refer your offerings to their friends, family, and followers; in return, you will offer them discounts.
Several surveys highlight that more than 92% of the buyers believe in WOM (word of mouth) recommendations more than other marketing. A loyalty scheme uses a two-way reward system, in which you gain the trust of your existing customers and get new ones too.
- Strengthen Personal Relationship
Customers are the most significant asset of your brand, so treat them uniquely. A loyalty program encourages customers to feel valued and engaged in your offerings.
- Retain Existing Buyers
Acquiring new buyers costs at least five times more than retaining the existing ones. A loyalty program can help you gain the trust of your existing buyers and turn them into your most valuable customers. A loyal customer makes 67% more purchases from your brand than new ones. Customer retention is vital to reduce customer churn and boost your revenue.
You can follow the following tips to design an impressive loyalty program to prevent customer churn;
- Identify your customers’ needs and aspirations.
- Introduce referral programs to boost your customer acquisition and reduce churn simultaneously
- Gamify your loyalty scheme to keep your customers engaged
- Improve Product Quality
Product quality decides whether the buyers will stick with your product or churn just after a single use. Your product quality should surpass the aspiration and expectations of your buyers. If your product does not offer advanced features compared to the competitors, your buyers are bound to abandon it after a single use.
Analyze your key offerings, weak points, and customers’ needs to improve the quality of your product. A better product quality helps you grow faster, build brand trust, improve customer retention, and boost your ROI (return on investment).
You can follow proven tips to improve product quality and prevent customer churn.
- Understand what Quality is
Quality is not only about introducing the best-in-class products; it includes many other constituents, such as whether your product is tailored to your customers, is efficient, and does the product solve your customer’s problems.
- Analyze your competitors
Analyzing your rivals’ performance is the best way to develop the highest-quality product. Competitors’ analysis helps you identify your weakness and gaps in the market. It is essential to grab a higher position in a similar business.
- Listen to your Buyers
Please don’t feel shy to collect feedback from your buyers; it will help you identify your pain points and improve product quality.
- Optimize Customer Onboarding
Customer onboarding is about educating your new buyers about the features and functionalities of your products. Companies/brands face higher customer churn during the first few weeks of gaining new signups. The poor onboarding process can lead your customers to switch to another brand. 55% of customers return the product or churn after a single use because they don’t understand how to use it.
Here are some tips to improve your new customer onboarding process to reduce customer churn.
- Set Up Training Sessions
An interactive training session and walkthrough can help customers better understand your products. It is valuable to make your customers feel comfortable with your offerings. You can have a team of professionals set up a training session within your product or application.
- Develop a Self-Serve Onboarding Process
The study of American Express reveals that more than 60% of buyers use digital channels like mobile apps, websites, and live chat to answer their queries. You can include live chat, FAQs, how-to videos, and search functions in your customer support section to deliver a self-serve onboarding experience.
- Identify Your Customers’ Needs
You should have a feature-packed platform to identify your customers’ needs and expectations during onboarding. Ensure regular dashboard checking to identify the elements that require immediate action for an efficient onboarding experience.
- Prove your Core Values to the Buyers
Proving your values to the buyers is essential to identifying what makes you special and unique from your competitors. Most buyers leave using your products because they cannot build trust in your offerings. You can use the following tips to prove your value to the buyers and reduce the churn rate;
- Highlight the Main Features of your Products
You can send automated emails to new buyers highlighting the main features of your product. It will encourage them to research more about your product and stick with it if they find it valuable.
- Share your Success Stories
It would be great to share your customers’ case studies and success stories. If you’re selling a product, you can highlight the name of recognizable companies using your product. It is also excellent to share the positive reviews of your other customers to help new buyers feel motivated.
- Share Informative Content
You can share informative content such as tutorials and infographics with your buyers to show your business’s core values and product features.
Bottom Line
Customer churn is the biggest challenge that can drastically decrease the company’s profitability growth and revenue. You must take proper measures such as improved customer experience, better product quality, efficient onboarding experience, and super-class customer support services to prevent customer churn.