6 tips on how to reduce customer churn

It may be stating the obvious, but customers are the lifeblood of every business. They bring in the revenue, make your business grow, and can become your biggest advocates and referrers when treated right. They can also be the reason your business fails, if they decide to no longer use your product or service. Every year, more competition arises across every sector. External threats such as technological advances, changes in legislation and policies, environmental factors, and social factors can all make winning new business easier or, in most cases, more difficult. Internal factors can also cause big problems, from product flaws to inefficient or problematic business processes.

We wanted to provide some expert tips on exactly what customer churn is and how to approach reducing it. It may feel like a daunting task but with the right strategies deployed, reducing customer churn can be a successful and profitable endeavour.

What is customer churn?

Customer churn is the percentage of customers that stopped using your product or service in a given time frame. The financial benefits of reducing customer churn are undeniable.

It costs 5-25x times as much to attract a new customer than to keep an existing one, so reducing customer churn is key for long-term business success. PWC found that 32% of the people asked said that, after just one bad experience, consumers would stop doing business with a brand or company they’d previously loved. They also found that companies who are excellent at creating brilliant customer experiences are able to charge up to 16% more on their services, because consumers are willing to pay a premium for a great experience.

Below is a quick overview of the steps that we recommend taking to start devising ways to reduce your customer churn and create an effective, market-leading customer churn strategy.

Tips to reduce customer churn

1. Churn analysis

Why are your customers leaving? You will never be able to reduce customer churn without answering this all-important question first. First understand your customers' reasons for leaving your business or struggling with your product or service, then spend time and efforts on trying to fix the problem.

Open an ongoing line of communication with your customers, giving them the chance to share feedback before and after they churn. You can try:

  • Customer satisfaction surveys, which can be incentivised to encourage uptake
  • Analysis of customer reviews using the Feefo Smart Themes sentiment analysis tool
  • Customer satisfaction metrics such as NPS and Customer Effort Score
  • Feedback from customer service or sales staff.

Real-life, unfiltered feedback from your customers and your colleagues who work most closely with them is the only way for you to dig into the details of why your churn rate is high. From there, you can start to build out a roadmap of customer churn reduction strategies that you know are driven by data and insight.

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2. Customer segmentation

Every business is different in terms of their customer segments and groupings. Your own business model should help to inform your segmentation - do you work with different sized businesses, offer a variety of different services, or provide products at a range of prices? Maybe you want to group your customers by acquisition channel or product engagement. You can also look at recency, frequency and monetary value metrics, or churn risk.

These are all great ways to segment your customers. The bottom line is that customer segmentation will help you to better understand which groups are more at risk of churning and why.

3. Your business value proposition vs. your competitors

What sets your business apart from your customers? How can you use this information to reduce your customer churn rate? Use a simple SWOT analysis to identify your strengths and weaknesses, and any opportunities or threats. Once you have all of the information noted for your own business, replicate the process for your competitors. This is especially important if you believe that you are losing customers to your competitors' products or services.

By carrying out SWOT analyses, you will know the exact weak points of your business proposition and the strengths of your competitors and vice versa. From here, you can map out strategies to reduce customer churn for key segments. This analysis will also allow you to make a more compelling business case if you need to persuade your management and secure the budget you may need for the project.

4. Short term and long term product/service improvement opportunities

Once you've carried out steps 1-3, you should have a much stronger, data-led understanding of what is impacting your business churn rate, going into granularity with certain segments. From here, you should look to create a roadmap for reducing churn rates for your key segments. Initiate cross-function collaboration with your product development team to prioritise the changes that will have the biggest impact on churn. Involve your customer service, insight, marketing and sales teams so that priorities can be agreed across the business, from representatives from all of the customer touchpoints.

5. Analyse your business processes

Sometimes it isn't the product, service or competitor that is responsible for customer churn. It can be the business processes that tick away behind the scenes that are causing the problems. Small or new businesses might find it easier to review and iterate on their processes, whereas large or legacy businesses often find themselves dealing with cumbersome, ingrained processes that are rigid and difficult to optimise. Either way, business processes can be the make or break element of customer churn, so whatever your business size and history it is important to review:

  • How the product is sold
  • How the client is onboarded
  • How relationships are managed
  • How upselling or renewal takes place.

Don't be afraid to dive headfirst into analysing these areas. If you can find the data to support your observations about how flaws or inconsistencies in business processes are affecting customer churn, it will be better received by the rest of the business.

6. Create a marketing plan to communicate better with customers

Armed with your customer feedback data, the segments you want to prioritise for reducing churn, your plan for improving your products or service, and an optimised set of business processes, where do you go next? The final step is to develop a stellar marketing plan to improve communication with your customers. They need to know about the changes you've made and how they will make their experience as a customer (or ex-customer) better.

You should aim to engage them by acknowledging the issues they've flagged and the feedback they've provided. Being honest with your customers about your weaknesses and transparent about your plans for improvement can help to re-engage customers and help to strengthen relationships. Approach your messaging with appreciation, authenticity and inclusivity, offering reassurance that ongoing feedback from your clients is encouraged for continuous improvement. Plan in email campaigns, paid media campaigns, and PR pushes to spread the word about your improvements. You can also go back and respond to previous customer reviews or feedback with an update on how things have changed, in order to encourage customers to give you a second chance.

This isn't just a job for marketing either. Spread the word across your business - from sales through to customer service - that your customers have been listened to and you're growing as a business. Your colleagues will want to be a part of your business transformation and growth journey as you move forward, and including them from the outset is key to ensuring that they're the biggest advocates of your improvements.

Conclusion

Customer churn is a scary concept, made even scarier when your business churn rates are rising and you don't know why. The best way to beat the fear and protect your business is to follow the tips we've provided. You must get to know your customers better - as part of your churn reduction project but also on an ongoing basis.   They are the ones who live and breathe your business, from the first interaction with your brand to the decision to become a loyal or churned customer. The answers you need as to why customer churn is happening are there for you to discover and to use to make smart business decisions going forward.

It's also important to remember that customer churn isn't a one-off project or a quick fix. You will be bringing new business in all the time, and it's important to keep one eye on churn and be proactive in spotting trends that might increase it. Aim to create an in-depth churn reduction strategy that takes into consideration our tips, but on an ongoing basis. Depending on your business goals you may choose to borrow just a few ideas that we've laid out above to start the process.

There is no one size fits all approach here, but the worst thing you can do is ignore the problem and hope that it goes away on its own. We can guarantee that your competitors will not be doing that. Your customers, their experiences and their feedback are your greatest business asset - they hold the insights to your success and your losses.

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