Philip Kotler is one of the best marketing minds the world has ever seen. In one of his books, Kotler had suggested that the average company loses anywhere between 10 to 30 percent of customers each year.
Although a number of studies disagree with this figure, there is a consensus here that customer churn, at least some of it, is unavoidable.
There are several reasons why a customer chooses to stop doing business with you. Some of it is internal – for example, the customer may no longer need your service, or they may be looking to tighten their purse strings.
Other times, you may be responsible for the churn – the customer may be unsatisfied with a price increase or the support they received.
In each case, while it may not be possible to keep each customer happy, the objective of any business should be to identify possible causes and rectify them.
Why Customers Churn
One of the most popular ways to identify the reasons behind the churn is to ask customers who have signed out. While this is effective sometimes, it does not provide you with the right answers all the other times.
Let’s take the example of a customer who ended their subscription because of a rise in fee. Such a customer can always provide you with a coherent response about their decision.
But consider the case of a customer who moved out because they were lured in by a competitor’s marketing campaign, or simply because they no longer needed your product.
Such customers are often unable to pinpoint the specific factors that contributed to their churn.
From a marketing perspective, too, this exercise is unhelpful since it does not provide you with a list of actionable strategies you can implement to reduce the churn.
Data Mining & Hypotheses
Data mining is one of the more effective strategies to understand customer churn. In this case, the business logs in each and every customer activity and benchmarks it against the bigger picture to identify patterns and trends.
Such data analytics campaigns can throw up some really interesting patterns. For instance, you may find that customers referred to you from Facebook ads typically churn after three months while those from Google Search stay for much longer.
Alternately, you may find that customers who shop for baby products typically churn after two years. Or that customers who use discount coupons typically churn after a price rise.
Once such patterns are identified, a marketer can apply a specific hypothesis for each case to reduce the churn.
For example, customers shopping for baby products stop buying when their kids get older. Building inventory targeted at older kids could potentially help retain these customers.
It is possible that visitors who convert from your ads are misled through your landing page communication and are hence more likely to churn when their expectations are not met.
Building such hypotheses can let you implement specific fixes to reduce churn. Track the performance of your customers before and after the implementation to see if this helps.
If the fix fails to reduce churn rate, then chances are that the hypothesis was wrong. Pick an alternate hypothesis to test.
Customer Journey Benchmarking
Although hypothesis-based fixes can be extremely effective, they can also sometimes be expensive. This is especially true for brick and mortar businesses that have high operating costs.
For instance, building an inventory of new products can incur high procurement costs, and also need new resources to market and sell these products. If this hypothesis turns out to be false, then this is a lot of investment that did not yield the desired results.
In such cases, businesses can opt for customer journey benchmarking instead. In this process, marketers pick each stage of the customer journey and benchmark their experience against what competition offers.
For instance, you may notice that the market leader in your industry retains customers by offering reward points for loyalty.
If your business does not offer such a program yet, you may consider implementing one.
You may also alternately choose to hire a consultant who may study each stage of the customer journey and identify ways to improve them.
Customer Onboarding
Marketing processes often end with customer acquisition. However, one of the biggest reasons for customers to move away comes later in the form of inadequate onboarding.
Customers typically sign up for a product or service based on marketing messages. This sets up certain expectations that the customer expects the product to fulfill.
In the absence of adequate onboarding, these expectations remain unfulfilled, leading to churn. Depending on your industry and offering, customer onboarding may be done through video conferencing, Learning Management Systems (LMS), walkthroughs, or coach marks.
Study the existing onboarding processes to understand its impact on customer experience. If your current onboarding techniques fail to train the customer, then it is important to fix them.
Customer Support
Bad customer support is one of the major triggers for customers to sign out. While it is not always possible to keep your customer happy, a business can implement specific policies that can keep the churn rate low.
One proven strategy is to make use of NPS scoring to identify unhappy customers. NPS (Net Promoter Score) is a survey that customers are asked during various interactions (including support requests).
The survey asks customers how likely is it for them to recommend the business to a friend or family.
Customers who rate the business poor on the NPS scale are likely to change their mind if they are instantly contacted by a higher ranking executive from the business.
It is also worth bringing down friction in the customer support process. Offering a toll-free number for support or providing multi-channel support go a long way in making the support process smooth, and this improves customer experience.
Offering incentives for future transactions during such calls may further improve the engagement and and prevent customer churn.
Communication
In a lot of cases, proper communication alone can help reduce customer churn. For instance, a hike in price always leads to higher churn. The damage can be controlled if customers are adequately informed of the reasons for the increase.
You may also precede a fee hike by announcing incentives for customers upgrading to a bigger plan or subscribing to a longer tenure.
Communication also plays a big role in building customer relationships. Customers tend to stay loyal if your executives are in personal touch with customers.
For each of these strategies, it is important for a business to benchmark your existing processes with those offered by competitors or leaders from other industries.
Such benchmarking processes can provide your organization with actionable tips to improve experience and consequently reduce churn rate.
Originally published 1/22/19; updated 11/1/20 to add infographic and remove unnecessary html; updated 4/26/21 to correct spelling error, add another resource and define LMS.
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Thanks for sharing the ultimate blog. Understanding a Customer is one of the best things one can to do retain that customer and gain their trust.
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I’ve never heard the saying customer churn before today. As a speaker coach, I see a lot of customers come and go into my business. It took years to develop a good onboarding strategy. My takeaway is to crunch the data and better track performance.
Hi Devin,
Yes, it is often possible to look at your data, survey your customers, and determine why you’re losing them. Did you know the #1 reason that customers answer when asked why they switched brands is that they didn’t think the company cared.
So the #1 best strategy for keeping customers is to make sure you know you appreciate them.
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wow that’s great article for customer needs. keep writing like this blog.
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Thanks for Sharing this wonderful article Aakash. Understanding the churn rate is quiet crucial for the online business. I really like the way you present your data in infographic format which is quiet useful to understand thing or two. I surely look into this as I am working on a Singapore based project.
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Hi
Thank you. it is a nice article…
Understanding and communicating well with your clients is the important thing you need to do because it will benefit you in long term with your relationship with your clients. They will return to you and buy other products that you are offering.
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Great Post! Thanku Aakash for sharing this helpful post on understanding Customer churn and how to prevent it.
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Hey Aakash ,
Your post is very informative and useful. .It i very important to understand customer then we can get their trust and attract towards our blog.
Customer support i o very important by which we can interact with them.
thank you
-sweety
Totally Agree! specially when how to properly communicate with the customers. I believe that customers are not always right but don’t treat them badly. Proper communication certainly plays a big role in managing a business.
I have read this content about customer churn, and after reading this i have got many new ideas of how i can retain customers.
It’s worth, Good explanation. Understanding customer is a key role in every business. Thanks for sharing such a great post
Regards,
Advane Joseph
The information provided in this article is very informative i really like it.
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Understanding customers need and pain points and solving it will build good relations. Thanks for sharing this information.
Stay Safe.
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Infographics are one good way to lessen customer churn, this was a good read and your infographics are neat and beautiful, I wish I can improve designing infographics like that.
Thank you so much for helping me understand customer churn, I really learned a lot
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Impressive article on how to prevent customer churn and ways to curb it with cool tricks. Thank you!!
Such a nice post. I would thank the author of this article, this is so helpful. Thanks for the amazing content.
Yo man! great post I can understand how is the feeling when customers get churn and got signed out since I’m in the business so I suffer this problem I’m glad to read this article that someone had cared for this problem.
you gaves us great information about customer churn. i appreciate your work
Great post. Another thing to look at accounting for customer churn is to assess win back customers. That is, customers who purchased prior to the past year that come back in current year. Make sure to account for these as you examine and study churn.
understanding customer is itself half battle for any company, nice post on dealing with customers. several useful tips.
Nice. Customer is First on the basis of priority. Thankyou for the article
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Proper communication can really help reduce customer churn. Thank you so much for sharing this very helpful post
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Thank you for the post! I’ve always been an advocate for quality communication and the wonders it can bring.
This information of understanding the users can really help me.
Understanding a Customer is one of the best things one can to do retain that customer and gain their trust.
Really found this post helpful.
Retain customers is cheaper, and if you have a good quality product, easier than “buy” new clients. Advertise can be expensive in some niches. So retain clients and the consequent recommendations to her friends proves that have a good support and understand your customers is always a good investment.
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Good advice Aakash. I find being super generous and continuing to build stronger bonds with customers keeps most of my eBook readers returning. Keep showing them love and these folks have no reason to leave. Also; no crying over customers who exit stage left. Feel free to ask why but know churn is unavoidable.