Turn the churn around: how to reduce customer churn

Learning what can be controlled regarding churn is how you'll recognize the predictive details to reduce defection and improve customer retention.

By Brett Grossfeld, Associate content marketing manager

Published April 21, 2020
Last updated July 14, 2020

Customer churn is one of those metrics that every company must learn to live with, even when it invokes that fear of failure in us. The reasons why a customer would want to churn (which is to end or suspend their service) are long and varied. It could be anything from an ongoing problem with your software to a lack of focus on customer service. Not to mention, a customer might churn for reasons and that are beyond your control. Your customer's business might be restructured in a way where your product doesn’t quite fit, or they might have encountered circumstances that have forced them to close up shop.

But when churn happens because your customer feels let down? When the customer loyalty that once existed is no longer there? That’s what needs to be mitigated, and what you definitely can.

Learning what can be controlled regarding churn is how you'll recognize the predictive details to reduce defection and improve customer retention. This starts with measuring the reduction of churn and taking a few key steps to better prevent a customer from saying “thanks, but no thanks.”

Measuring the reduction of customer churn

Churn rate is the primary metric used for calculating customer churn. Determining churn rate is fairly simple: choose a timeframe (a month or a quarter) take the number of customers lost within that timeframe and divide it by the total number of customers you had at the beginning. So, if your company started with 10,000 customers at the start of May, and lost 1,000 by the end, your churn rate would be 10%. It's important to keep in mind that in addition to keeping current customers, one way for your company to improve churn rate is to leverage customer acquisition and earn new customers.

3 steps to reducing customer churn

  • Use customer churn surveys
  • Getting to the bottom of why a customer is leaving starts with going directly to the source and asking them why they decided to stop doing business with your company. A customer churn survey is an excellent way to get feedback from churned customers, especially if you’re a subscription-based business, that can prompt customers to tell you why they’re canceling their account. Giving canceled customers a chance to share their feedback shows them that you value their relationship—even if it's ending right now, it doesn't mean they won't come back at a later time. From the survey data, you can create a detailed report of your churn activity and focus on what you can improve to create a better experience for your existing customers.

    There are a few ways to accomplish this: it can be done within the user interface during the cancellation process or as a follow-up email request after the customer has canceled. The former method will lead to a much higher response rate than a marketing email (which might go directly to spam if your customer is deadset on churning), so taking the time to embed the survey in the user interface is worth the effort. Providing some kind of incentive, like a gift card or the chance to win a raffle, will also motivate people to respond. And, when canceled customers do take the time to share their thoughts with you, you should follow up to let them know they were heard, or it can be demotivating.

  • Analyze the churn related feedback…all of it
  • While it's important to glean feedback from customers who already decided that they want to move on from your company, it's also imperative to ask your existing customers for feedback. Feedback from existing customers is a great resource for churn predication as it allows your teams to be proactive and address issues or concerns before a customer ends the relationship.

    Your company should focus on every potential source where there could be valuable feedback on your customer service, marketing, product, and/or brand. These can include:

  • The trends or problems discovered by your customer service representatives
  • Taking a look at customer service metrics such as spikes in ticket volume and issues by resolution area can help you uncover pain points in the customer journey. For example, if you're a saas company and your customer service team experiences a massive wave in ticket volume with every product update, it might suggest that you need to reevaluate your communications around new features. Or, taking a look at the most common issues new customers experience can help you improve the onboarding process. And, since your agents are on the front lines interacting with your customers directly, it's helpful to ask them to provide insights into these metrics, too.

  • Customer satisfaction surveys
  • Sending customers satisfaction surveys after a customer support interaction or a recent purchase is one of the easiest ways to improve customer satisfaction. Net Promoter Score®, Transactional CSAT, Global CSAT, and Customer Effort Scores are a few customer surveys you can use. Looking into what might have caused a low score and following up with that customer gives you the opportunity to fix what went wrong before that customer churns.

    Even better, your agents can leverage the power of AI to help them predict satisfaction, before sending a survey, while they still have that customer on the line.

  • Comments left on social media
  • Increasingly, customers want to interact with brands on the same channels they use to communicate with friends and family, like Facebook and Twitter. In today's constantly connected world, social media is an important digital customer engagement channel. Paying attention to the comments on your social media pages can help your company glean insight into your customers' experiences with your product or service. In fact, 55 percent of customers complain on social media when they have a problem with a company. Simply responding to these comments can make a big difference in reducing churn—Harvard Business Review found that people who complained or wrote negative comments about a brand on social media and received a response were more loyal afterward than those who never complained at all.

  • Community forums
  • Community forums build feedback into the customer experience by giving your customers the opportunity to share their experiences with your brand in a way that feels more natural and authentic because it's with other customers. Paying attention to the conversations between your community of customers can help you learn things like what features customers would like to see or common points of frustration.

Keeping a finger to the pulse of your company means listening as much as possible and understanding what might contribute to churn rate. Listen to what others are saying about your competition as well–while it may not get you to the root causes of your customer churn, learning about what's contributing to their churn may provide some extra (and valuable) context as to why it’s occurring. And, at the very least, your company's marketers will appreciate the insights.

  • Implement a churn-reduction strategy
  • From the customer churn survey data and the feedback you’ve acquired, you should have the information you need to create an actionable strategy for reducing customer churn. This data can support things like your product roadmap, marketing, onboarding for new customers, or even for quick fixes like filling information gaps in your training materials. For instance, are new customers turned off by a complicated onboarding process? Is marketing sending too many emails to current customers? Is the company not meeting customer expectations?

    It’s also not a bad idea to experiment with some smaller-scale strategies to see what reduces churn. Pick an area that could use improvement and determine how it can be measured, and set a reasonable goal for a drop in your churn rate percentage. This will help influence bigger-scale initiatives for reducing customer churn.

    Be sure to also think about how the strategy can be implemented successfully within your business. A customer success manager or team will likely be integral in a churn reduction strategy, but it also starts with ensuring that customer service representatives are enabled to provide effective support. The expectation can fall on outbound sales and marketing teams, who are responsible for making a strong first impression. The stronger the first impression is, the less likely that customers will be willing to jump ship.

When you’re ready for large-scale churn-reduction strategy, it’s all hands on deck. The responsibility of measuring and reducing customer churn doesn’t just fall to customer service; every department in the company, from sales to marketing, should focus on what it takes to build loyal customers. If the needs of your customers are evolving, it’s up to everyone to recognize it and support each other’s efforts and reduce churn.

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