7 Actionable Tips to Reduce Customer Churn Rate

how to reduce customer churn rate

Business needs customers and no one love losing their customers. Companies rush to acquire new customers but often lose sight of retaining their existing customers. And that’s when customer churn happens.

Building a long-lasting relationship with your existing customer is vital to growing your earnings. Sometimes it is inevitable that customers will stop doing business with you no matter what you do. Customer churn is when a customer stops using your products or services over a certain period. And how many customers you lose over a quarter from your existing customer base can tell your customer churn rate.

Every business should focus on reducing customer churn rates. But how can you do it while acquiring new customers? In this post, you will learn about customer churn and seven ways to reduce churn rates.

What is customer churn rate?

Customer churn is a business growth metric analyzed when customers leave any business over time. This metric shows how your business is doing quarter by quarter.

Customer churn rate shows the percentage of customers your business lost in a certain period. You can calculate the customer churn rate by dividing the number of customers you lost over a quarter by the number of customers you started with.

Customer churn, also known as customer attrition, helps you determine how much revenue your business lost in a certain period. It is the opposite of customer retention.

Let’s say when you started your quarter, you had 1000 customers. At the end of the quarter 200 of your customer decided to not buy anything from you anymore. Then your churn rate would be 20% for that quarter.

Why does customer churn matter?

Churn rate is a critical metric every business should consider analyzing. If you have a high churn rate, you are losing money every quarter. You should start investigating what is happening and lower the churn rate.

Churn rates matter. Businesses lose 1.6 trillion per year due to customer churn. You see, you can spend less money to keep your existing customers, but it costs five times more to acquire new customers. According to Harvard business school reports, an increase in customer retention rates of 5% can increase by 25% – 95% in profits.

This is why businesses should start improving their churn rate and focus on keeping their existing customers happy. The lower your churn rate is, the more revenue you can expect over a certain period.

How to calculate customer churn rate?

Calculating customer churn rate is easy. All you have to found the data of how many customers you had when you started a quarter and how many customers you lost in that quarter. Now you can calculate your churn rate by dividing the lost customers by the total number of customers you had at the beginning of the period. Multiply the result by 100 to get a percentage.

Here is the formula:

Churn Rate = (Number of customers lost / Total number of customers at the start of quarter) x 100

What causes customer churn?

Every business is different. Customers can lose interest in your products and services for various reasons. Here are some common factors that trigger customer churn in every business.

1. Poor Product/Market Fit

When you market your business to a specific category, you should do the business analysis properly. Every business should know who their customer is and their product fit. If you fail to do business analysis, you will lose money advertising your business to the wrong customer demographic. Your customer churn will be higher and it will double your marketing cost. 

If your sales team is trying to fill up a quota, it will also hurt your business. Customers will churn high when they realize the product does not fit them. It may be beneficial for you in the short term, but a high customer churn rate will cost you much in the long term.

2. Terrible User Experience

Sometimes terrible user experience with your products could be the reason for your high churn rates. If your product has a bad design, buggy software and poor user interface, it may be hard for risers to stick around.

3. Bad Customer Experience

Customer satisfaction plays a huge role in customer retention. Everything connected to your business, like your marketing content copy, social media channels, customer support agent’s behavior, and customer service, can influence a customer’s decision. If they have a negative experience, they will lose interest in your product or service. Over time they will churn anyway.

4. Price 

This is the most common churn reason you will find in any business. No matter what price you offer, if a customer finds out your competitors are offering a much better price, they will churn. Then how can you avoid this inevitable loss?

Establish value right when a customer onboard and educate your users, so they feel your products and service are worth the cost.

How to reduce customer churn rate?

You can’t make everyone happy. Customer churn is a common thing in business. You can not make customer churn go zero. But there are a few ways businesses can reduce customer churn rates. Here are ways to follow:

1. Target right demographic

When launching products or services, every business should do business analysis to find out what their market fit is, their demographics and whom they are selling. It is an essential process of starting a business. Because if you do it right, your churn rate will be low from the start.

Always prefer customers who want to invest in long-term quality, not free or cheap products. Those are the customers who appreciate your business’s value and will stick with you for a long time.

2. Provide excellent customer service

Bad customer service is another reason for high customer churn rates. Offer great customers service to reduce churn rate. Sometimes users will get confused with your website or where to get the correct information. This will make them frustrated and the customer will churn. Use AI tools and chatbots to level up the customer experience. Give your customer instant solutions when needed, reduce churn immediately.

Research shows 58% of customers will never use any service or products from a company after one negative experience. Poor customer service can leave this kind of effective impression on most people.

Pay attention to the complaints submitted by users. Train your support agents properly and give them the freedom to ensure customer satisfaction no matter what. Put empathic people in your team and empower them. Most times, listening to your dissatisfied customers can make them more loyal in the long run.

Find out your most loyal customer and offer them additional service beyond your business. It will not only make them stay, but they will also more likely recommend your business to your friends and family. Surprise and delight your champion customers from time to time. This will make them feel closer to your business and boost your organic marketing through word of mouth.

Always ask for customer feedback to reduce customer frustration. This way, you can identify issues before they arrive and solve them. Customer frustration is another huge reason why customer churn happens. The more you can minus frustration from your user onboarding and use process will lower customer churn rates exceptionally.

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3. Analyze why churn is happening

No matter what you do, customer churn will happen in your business. But it would be best if you did not wait for it to occur. Use data to fight churn and learn from it. Whenever your customers leave, find out the reason for their leaving. 

Analyze why customers leave. Find out the key data to predict customers dissatisfaction and customer happiness reasons. Use customer service metrics to collect customer support data. Analyze time frames, days and weeks. Figure out when churn occurs and what kind of contact can reduce that. 

Try to collect feedback from your lost customers. Use that information to improve your customer service to provide excellent customer satisfaction. Use your analyzed data to identify the customer’s risk churn, contact them, re-engage with them with incentives and offers to solve their problem. Communicating with customers at the right moment and tone can help them retain and lower churn rates.

4. Educate your customers

Find out your most profitable customers. Then train them to get the most out of your business. Leaning into your best customers will be more effective because they will most likely respond and re-engage with you.

Educating your customers about your products and service will naturally increase customer retention and reduce churn. Customers will more likely use your product if there are enough tutorials, guides and documentation available.

Keep your customer onboarding process straightforward. Please do not confuse your customers offering a free trial then charging their credit card. This will leave the customer churn rate high. Avoid these tactics and be honest with your users from the start.

5. Offer incentives

Show your customers that you value their time and money. Offer incentives like free promo, extended subscriptions or free account manager. This will help you retain existing customers and reduce churn rate.

Determine when to offer an incentive based on the customer’s timeline. Analyze your customer feedback rigorously to determine which customers need in line with your incentive offer. Offer customer managers to your valuable customers. Give them a way to connect with your business anytime they face any problem. Your customer manager will take care of their problems, give them tips and help them when necessary. 

You can also offer long-term contact to your valuable customers as an incentive. This will help you retain your profitable customer and reduce churn.

6. Create a community 

Connect your customers with your brand by building a community around them. People love to feel connected with things they use and like to belong in groups with like-minded people.

Use a community to gather your most loyal customers make them feel part of your brand. Your marketing team can use the community to help others, answer community questions and educate your customers with day-to-day engagement.

The community will help put your brand in front of your customers’ minds. Customers will stay loyal and this will reduce any churn along the way.

7. Increase customer engagement

Engage with your customer frequently. Remember, customers are often bombarded with various promotions and information all the time. It is your responsibility to connect with your target customer using valuable content marketing tactics.

Engage with your customers in all channels. Keep providing value by offering deals, promotions, step-by-step tutorials, in-depth guides, videos and information through blogs. The main goal of your content marketing effort should be building a relationship with your customers day by day. Keep an eye on social media and join the conversation where it happens. Don’t miss out on trends to engage with your users.

Focus on customer satisfaction and retention rates; use one-to-one communication to increase customer engagement. Segment customers in groups and define your most loyal customers for maximum engagements. Use automation and funnels in emails to make most of your email subscribers. Always keep collecting feedback from customers to measure your service strategy on the go. Strategic & planned customer engagement can lower your customer churn significantly.

Moving on

Your business should prioritize retaining existing customers as much you want new customers. That is why analyzing customer churn and reducing churn rate is necessary for any business. Nurturing existing customers creates loyal customers that can help you grow and scale your business. Profits and revenue will come by default. 

Reducing customer churn rate has no magic formula available. Every business is unique and has its characteristics. Follow these tips, analyze your business churn rigorously and take suitable actions on the go. Provide great customers service, treat your customers better and they will surely stick with you for a long time.

What tips are you going to implement from the above list? Are you using any new tactics?

Please share with us; comment below!

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