What is Customer Churn?
Sometimes known as customer attrition, customer churn refers to the percentage of customers your business lost during a specific time frame. A higher customer churn rate means that a larger proportion of your customer base no longer wants to use your business’s services or products.
The most common way to calculate customer churn is to divide the number of customers lost in a quarter by the total number of customers at the beginning of the quarter.
Customer churn typically falls into one of two categories:
Voluntary churn: When a customer chooses to switch to another brand or service provider
Involuntary churn: When a customer leaves due to circumstances beyond their control, like relocating or failing to make payments
In most instances, businesses focus on voluntary churn, which is affected by factors they can control, such as customer service. Customer churn is a high priority for growing companies, as it can pose a significant problem for customer retention and long-term profitability.
What Causes Churn?
Before planning how to reduce customer churn, it is essential to understand the most common reasons businesses lose customers. Below are some reasons for churn that you can address.
Poor Customer Service
Customer service isn’t just about solving problems and answering questions for customers. Good or bad, customer service has a considerable impact on your business’s bottom line.
You could have the best product offering on the market, but if you don’t prioritize customer support, it won’t matter. In addition, poor customer service can lead to increased churn and lost revenue in the long run.
Over 80% of consumers reported that a positive customer service experience increases the likelihood that they will make another purchase in the future. However, bad customer service can cost your business when customers leave and switch to one of your competitors.
For example, if a customer is comparing your brand to one of your competitors, they want answers now, not later. If it takes them too long to connect with a customer service representative, they might lose interest in purchasing at all.
Lack of Proactive Support
Businesses in any industry have to deal with the inevitability of customer churn. But in some cases, companies do not realize a customer wants to leave until they’re already out the door.
Many organizations do not take a proactive approach to customer service, in which customers need to understand the total value of a brand’s product offering. By reaching out to customers, asking how they’re doing, offering help, and recommending products, you can show them just how much your business can do beyond what you sell.
Weak Customer Relationships
Your relationship with your customers doesn’t end after they complete a purchase. Therefore, staying connected with customers and nurturing those relationships must be an ongoing process.
Building strong customer relationships enables you to deliver an incredible, personalized customer experience. Personalized experiences can transform your relationships with your customers.
Over 90% of consumers say they are more likely to shop with brands that provide customized offers and recommendations.
Tips for Reducing Churn Rate
Now that we’ve gone over why customer churn happens, here are six recommendations to reduce customer churn rates:
- Understand your customer churn problem
- Send out customer feedback surveys
- Boost customer engagement
- Deliver an excellent customer experience
- Implement a proactive customer service strategy
- Offer special incentives
Understand Your Customer Churn Problem
To successfully resolve an issue, you need as much information as possible. When it comes to discovering how to reduce customer churn, businesses need to learn why these customers left in the first place. The simplest way to find out is to ask them directly, ideally by talking to them over the phone.
Communicating with your customers using all channels — via phone, email, SMS, social media, website, and live chat — increases their likelihood of responding. But a phone call is your best opportunity to gain real insight into your customers’ reasons for leaving. Even a short conversation allows you to ask follow-up questions and get clarification on why a customer left.
Send Out Customer Feedback Surveys
If you can’t speak with your customers on the phone, an exit survey is a great alternative. Using tools like a mobile marketing platform, you can easily send customer feedback surveys to hundreds or even thousands of people.
You will see higher response rates by reaching out to a broader audience across multiple channels. For example, most consumers want to get notifications from their favorite brands on their mobile devices today.
Nearly 50% of surveyed customers prefer to receive brand updates via SMS. In addition, sending customer feedback surveys via SMS makes it even easier for customers to complete surveys.
Remember to keep your surveys short and to the point, with no more than three questions for best results. Try asking open-ended questions, like:
- Why did you first start using our products or services?
- Why did they choose to stop using our products or services?
- How do they think we can improve?
You can streamline your surveys by asking customers to respond on a scale of 1 to 10, although this doesn’t offer as much value. Instead, consider offering a small incentive, like a discount on their next purchase to participate.
Boost Customer Engagement
Quality, price, and convenience play a role in why customers choose one business over another. But a less concrete factor is involved, too: the relationship between your business and your customers. By investing in strategies like relationship marketing, your business can develop long-term connections with customers that translate to higher engagement.
An excellent customer experience can grow into trust and loyalty for your brand, and loyal customers are less likely to switch to a competitor. Focusing on long-term relationships, rather than just transactions, will drastically increase your customer lifetime value (CLV) and, therefore, the viability of your business.
Deliver an Excellent Customer Experience
If a customer’s experience with your brand is not favorable, they are less likely to want to continue purchasing your products or services. Therefore, you should look after them throughout every step of the customer journey.
From a first-rate onboarding process to email newsletters with personalized product recommendations, your business has more to offer to customers beyond products and services. Ultimately, customers want to shop with brands that show they care. An exceptional customer experience will help your business retain customers, encourage loyalty, and grow brand awareness.
Implement Proactive Customer Service
Most customer service teams expect customers to reach out to them if they have questions or need help. But if one of the biggest causes of customer churn is that customers feel like a company doesn’t care, then waiting to hear from your customers won’t do your business any favors.
Instead of a reactive customer support approach, consider a more proactive customer success strategy. Unlike traditional customer service, where agents resolve specific problems brought to them by customers, customer success takes a proactive stance by anticipating customer challenges, then offering the answers and solutions they need.
By addressing your customers’ issues sooner rather than later, you can improve their overall satisfaction and loyalty to your business. In addition, retaining loyal customers will quickly reduce your customer churn rate and even drive revenue. Existing customers will spend an average of 67% more than new customers, so it’s essential to keep them happy.
Offer Special Incentives
Developing customer loyalty is a sustainable strategy to reduce customer churn rates. Loyal customers come back again and again and often recommend your brand to their friends, family, and colleagues. On average, word-of-mouth recommendations drive $6 billion in annual global spending.
To continue growing a loyal customer base, set up a loyalty program where customers can earn reward points with each purchase, receive special discounts, redeem points for more products, or other bonuses.
For example, if it’s been a while since a customer has made a purchase, you can send them a 10% discount and invite them to check out your latest products and services.
For your most loyal customers, why not offer them something extra to show your appreciation? Loyalty programs can easily track which customers have been with you the longest and generate the most revenue. Using this data, you can target these customers with long-term discounts and other bonuses to thank them for their continued patronage.
Reduce Customer Churn With Personalized Mobile Marketing Campaigns
Although some customers will leave no matter what, learning how to reduce customer churn is the key to improving revenue. Reducing your customer churn rate can increase customer loyalty, creating a more significant customer lifetime value and a stellar brand reputation. If you’re ready to use personalization to reduce customer churn rates, CM.com can help.
Our Mobile Marketing Cloud combines popular mobile messaging channels like SMS and WhatsApp into a powerful omnichannel customer engagement solution. With our user-friendly platform, you can create personalized mobile marketing campaigns, automate your customer journeys, and unlock your customer data.
To learn more, contact us today.