How to Reduce Your Customer Churn Rate
by Ron Welty, Founder & Chief Client Officer
Customer come and go, but eventually, the losses add up. According to Gartner, 80 percent of a company’s future revenue will come from just 20 percent of its existing customers. When measuring the success of your business, make sure to look at your failures, too. In order to improve customer retention, brands must focus on customer churn.
What is Customer Churn?
Customer churn, also referred to as customer attrition, is the percentage of customers that stopped doing business with your company during a certain time frame.
To calculate your customer churn rate, divide the number of customers you lost during a specific time period by the number of customers you had at the start of that time period. For example, if you start the first quarter with 1,000 customers and end with 900, your churn rate is 10 percent because you lost 10 percent of your customers.
Reduce Customer Churn
Every company’s goal is to get their churn rate as close to zero as possible. Bain & Company found that an increase in customer retention of just 5 percent can create at least a 25 percent increase in profit. Here are a few strategies to help your business retain customers.
Improve customer service
Ensure your associates have the proper training for more efficient service and continue to sharpen their customer skills. To better serve your customers, practice:
- Empathy. Put yourself in the customer’s shoes. Take the time to understand your customers’ problems and make them your own. Don’t forget to share in the customers’ joys, too.
- Adaptability. Every customer is different. You should be able to sense a customer’s mood and adapt accordingly. Even if the customer is wrong, the customer is still always right.
- Communication. This goes both ways. Take the time to listen to your customers, but also be clear in communicating your values, goals, and solutions to their problems.
Create an omnichannel strategy
Engage with customers by embedding your brand—your products, services, and promises—into your customer’s daily life. According to the Aberdeen Group, companies that are able to provide a consistent customer experience quality across multiple channels retain 89 percent of their customers—that’s a 56 percent higher customer retention rate than inconsistent companies.
A great customer engagement strategy requires creating an omnichannel experience, so your brand can engage your customers everywhere they are. Utilize social media, mobile apps, email, live chat, text messaging to better connect with your customers.
Map the customer journey
As your business grows, it’s important to set up an onboarding process to guide new customers through your product or service’s features, functionality, and process.
Create a roadmap outlining the customer journey to identify where customer engagement and retention drops off. Use these gaps in the customer experience to educate your customers and manage their expectations. Offer webinars, video tutorials, product demos, and email newsletters to make your customers feel comfortable and informed about your company, products, and services. When a customer feels included and connected to your brand, they’ll be more inclined to stay with your company.
Reward valuable customers
Reduce the downside of customer churn by focusing your attention on the most profitable customers. These are the customers you’ll want to keep around as they’ll not only be 50 percent more likely to try new products, but they’ll also serve as great brand ambassadors. Temkin Group found that 77 percent of customers with positive customer experiences will spread the good word to their friends.
Offer rewards to give customers a reason to stick around. Discounts and loyalty programs can help show your existing customer base how much you value their business. For example, Sephora’s Beauty Insider loyalty program, which offers exclusive discounts, freebies, and access to events, has increased their customer retention by 5 percent and profits by 25 to 95 percent.
Incentivize at-risk customers
Prevention can sometimes be the best medicine when it comes to reducing customer churn. In addition to poor customer service, other reasons for customer churn may include price and an overall bad customer experience.
Take a proactive approach by asking for customer feedback to identify reasons why your product or brand may not be fully meeting their needs. Offer incentives like discounts and special offers to at-risk customers to tide them over while you work on building a strategy for improvement.
This strategy worked well for Baremetrics. After receiving feedback from customers who were ready to cancel due to lack of features, the analytics firm offered a discount on their service while they worked on adding more features. As a result, they were able to save 15 percent of at-risk accounts.
Improve Customer Retention
Customer churn is one of the most important metrics for a business to evaluate. IntelliShop has the solutions to help your business improve customer retention. Our mystery shopping programs and voice of customer tools are designed to provide a holistic picture of your customer experience, provide guidance for improving customer retention, and will guarantee a positive ROI.
Contact IntelliShop today to request a quote and see how we can reduce customer churn and improve retention at your company.