It’s easier to entice existing customers to make another purchase or review their subscription than recruit new customers. The loyal members of your customer base are far more valuable\u00a0to your business than your recent acquisitions: they are more likely to try new products, to spend more, and to spread the word about your brand<\/a><\/span><\/p>\n Reducing customer churn is an important goal, and a key part of an effective business strategy\u2014and it begins with gathering and analyzing data. Through understanding your customers\u2019 journeys more thoroughly and by monitoring certain key metrics, it\u2019s possible to spot indicators of customer churn early and to take targeted action before you lose another customer.<\/p>\n To quantify your losses and to have a better idea of just how much customer churn is impacting your business, start by calculating your customer churn rate. First you need to decide how you are going to define a customer that has been \u201clost\u201d. For a retail company, for example, a lost customer could be someone who hasn\u2019t made a purchase for 12 months. Find a definition that is meaningful for your business and based on the behaviors of your existing customers. For instance, if you know that most repeat business happens every 6-9 months, it doesn\u2019t make sense to mark a customer as \u201clost\u201d 3 months after their last purchase!<\/p>\n There are several ways to calculate your churn rate. You could measure it by tracking the total number of customers that have left during a specific period of time, or by working out what percentage of your customer base was lost during that same period. You could also measure the revenue that was lost due to the reduction in repeat business. Again, while there are plenty of ways you can look at this data, the important thing is to determine a metric that works for your business and act on your findings.<\/p>\n Looking at the number of customers leaving can give you some useful insights, such as how soon after acquisition your customers tend to be leaving. Looking at the loss of revenue, on the other hand, represents more accurately how large of an impact customer churn is having on your bottom line — regardless of which customers are leaving.<\/p>\n The average churn rate for one industry can be wildly different compared to the next — a typical churn rate is around 16% in Business Services and around 37% in Media<\/a>. So do some research to determine where your company stands relative to other similar businesses. This will help you estimate how much of your churn rate is likely to be preventable, and therefore how much effort you should be putting into stopping your customers leaving. Looking into your strongest competitors may give you an indication of a realistic target to which you can aim to reduce your levels of churn.<\/p>\n The next step is to gather information about the behavior of your customers in order to identify those who are at a high risk of churning. A key metric to record is customer satisfaction, which goes hand in hand with customer retention.<\/p>\n Looking to get started? Explore our Customer Satisfaction Survey template<\/a>!<\/em><\/p>\n Monitor customer satisfaction with frequent feedback requests (both general and transaction-specific) and combine this data with other insights, such as how often your customers decline repeat purchases, spend a lot less than usual, or opt out of services. Try to build as complete a picture as possible of the key indicators of potential churn (while observing data protection regulations), so that these can be flagged up and responded to. Ideally, you will be able to identify a few factors which have the biggest impact on churn and look at ways to address these.<\/p>\n In order to prevent customer churn, you\u2019ll also need to better understand why your customers are leaving. Analyze your survey results and the responses to your feedback requests to reveal any recurring issues.<\/p>\n A very common reason for churn is poor customer service.\u00a0 Depending on your industry, good customer service may include responding quickly, demonstrating deep knowledge, and resolving an issue in a minimal number of interactions.\u00a0 First-time resolution<\/span><\/a> may be tricky to deliver, but it\u2019s a noble goal. Consider that customers are often not very forgiving when their expectations are not met, driving more and more customers to abandon a company solely based on poor customer service.<\/span><\/p>\n Even a simple failure to reply to customers on social media can increase churn by up to 15%<\/a>. Other common problems that can lead to customer churn include technical issues during an online purchase and a lack of payment and delivery options. If any of these issues crop up multiple times in your data, addressing them should become a priority.<\/p>\n The final step of your churn prevention strategy is to choose which customers to focus your efforts on. Not every customer is worth fighting for! When making your decisions, consider both the likelihood of a customer churning and their profit margin potential. There may be little point spending time, money, and effort on convincing an infrequent low spender to make one last purchase — but a previously lucrative customer who\u2019s at risk after a bad experience could be a prime target. When using incentives, you\u2019ll want to target those customers who are likely to provide a high return on your investment if you can convince them to stay.<\/p>\n Once you have identified your targets, reach out.<\/p>\n Have your customers grown more distant over time? Incentives are usually an effective strategy to entice people back: 75% of customers say that they\u2019ll often make another purchase after receiving an incentive<\/a>. Do also check in via email if possible — a brief \u201chello, we\u2019ve missed you\u201d message at the right time can help a customer to reconnect with your brand again.<\/p>\n And what if there\u2019s a specific issue that is pushing some customers away? If a problem has been flagged, be proactive and resolve it as soon as possible. Timely action is important: as many as 25 out of 26 customers choose to take their business elsewhere rather than make a complaint.<\/a> Show your customers that you value them, and that you\u2019re putting effort into making things right. This can encourage them to give your company another chance instead of turning to a competitor.<\/p>\nMeasure your customer churn rate<\/b><\/h2>\n
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<\/div>\nIdentify the customers who are at a high risk of churning<\/b><\/h2>\n
Understand why your customers are leaving<\/b><\/h2>\n
Choose your targets carefully<\/b><\/h2>\n
Take action<\/b><\/h2>\n