4 Ways to Keep the Customer Churn Rate at Bay

Let’s get the facts out first- acquiring new customers is five times more expensive than retaining existing ones and on average, businesses lose $1.6 Trillion a year because they can’t find a way to hold on to customers. That’s a big price to pay!

Customer churn rate or attrition measures the percentage of customers that a company loses over a given period. For example, if you measure your quarterly churn rate, divide the number of customers you lost in that time with the total number of customers you had during the start of the quarter. Multiply that fraction with 100 to get your customer churn rate.

Customer Churn = (Customers lost in a period/Total customers at the start of the period) x 100

The reason that this metric is so critical is because it not only inflicts a financial loss by way of revenue reduction but presents an additional burden on resources to acquire new customers.

While there is no single acceptable customer churn percentage that can be applied across industries, generally, companies tend to want to stay below the 10% threshold. Let’s look at some ways to keep the customer attrition in check.

Pinpointing Reasons Behind Churn

The first step is to identify the potential reasons behind the churn. It is highly likely that some of these reasons are hard to guess and are spread out through the customer journey. Consider evaluating the following points and see if you are catering well to them:

You are aware of customer pain-points and are addressing them head-on.
You are sure of having achieved good product-market fit, i.e., the product is being well received by many in the market you were targeting.
There is active communication between you and the customer, i.e., you are engaging with them at every point of the journey.
The customer experience is of the highest quality, and there are no lags or roadblocks.
You are providing a differentiated solution and are able to beat most of your competitors.
You have ascertained the paying capacity of your customers and have the right pricing strategy.
Your customer support and post-sales services are robust.

Try to dive deeper into each of these points and think about what may be hampering your brand image, such that people don’t want to continue with you. Periodic customer surveys and phone calls will not work.

You have to take the initiative and talk to as many people as possible to understand their issues with your startup. You’ll be surprised by how much people want to tell you. It is much easier to address the problem when you know the root cause instead of aiming in the dark.

Be Creative in Engagement Tactics

Engaging with customers is absolutely necessary to make them stick with your brand. You have to follow-up and keep up with queries, feedback and inputs. It is as much a part of the user experience as anything else. Till the time customers don’t feel valued, they will not invest time or money in your company.

With digital tools becoming increasingly democratised, there are plenty of ways to keep customers excited about the brand. Whether you do it through online competitions, webinars, blogs, emailers, giveaways or social media activities, there is no dearth of ideas to up your game. Customers will always look for value additions that go beyond the product. These small steps may pay off well in the long run as you build a loyal clientele. Get your team together, and get creative.

Listening is a Virtue

Of course, you cannot maintain a 100% satisfaction record with your customers. But you can be quite close to it only by listening to feedback- all that is right and all that is wrong. Customers are vocal about their feelings towards different brands, and whether they choose you or not, they will have a strong reason to back it.

Make it a point to understand the general market sentiment and dig deeper into customer reviews and survey answers. Can you see a pattern? Are many customers facing the same issue? Is that the reason they are leaving? Is the majority liking a particular aspect?

Criticism at an early stage is far more critical than praise. It allows you to make changes before penetrating the market. Failing early prepares you for success later on because you have time to make amends. As vast as the internet is, if used well, can help you figure out customer expectations. There are free tools to check brand mentions, comments and the general buzz. The more research you do, the more questions you ask yourself, the better chances you have at lowering customer attrition.

Include the Right Incentives

Another way to give your customers a reason to stay is by offering them small incentives from time to time. You must have seen that companies like Spotify and Amazon Prime, which offer a subscription-based model, often give a discount just when your pack is about to finish, and you have to pay to continue. It’s all about that slight nudge that allows customers to continue their relationship with a brand.

Consider offering such incentives to ensure that customers feel valued and see your effort in making them stay. You can also offer free trials and gift vouchers with certain purchases that encourage customers to buy again from you.

This strategy will work a lot better if you have useful insights into your customers’ behaviour and mindset. If you know the point when they are likely to back out, you can focus more on incentives during that period. Similarly, if you think a free trial after a new product launch is more valuable to them compared to a gift voucher, then you can divert resources there.

Bottomline

A high customer churn rate can be a worrying situation for any company and puts excessive pressure on the company’s resources. In order to grow and prosper, you need the backing of some loyal customers who stay with you for a prolonged period. They can further help you attract more people because they vouch for your work.

The solution to attrition problems is generally right in front of you, and not so challenging to implement. Continue to measure your churn rate because it has implications for your unit economics metrics as well. Get your thinking caps on before this domino effect begins.