Modern companies are under enormous pressure.
Customers want and expect a great product or service, great support, and a price that beats the competition. And in times of “cancel anytime” and “no long-term commitments”, customers know that they have the upper hand. When companies fail to deliver, customers cancel and take their business to another location.
So what should companies do to reduce cancellations and foster long-term relationships? Let’s take a closer look at customer churn, how it’s calculated, and what to do about it.
What is customer churn?
In business, the term “churn” usually refers to the termination, deregistration, or other departure of customers. By adding the number of customers lost during a given period of time, a company gets the total churn metric. Churn is often tracked annually, quarterly, and / or monthly. Organizations with abnormally high churn rates can report weekly or daily, especially if they are implementing systems and programs aimed at reducing it.
How do you calculate customer churn rate?
Reducing customer churn is a top priority for businesses of all types – especially businesses that offer monthly or yearly subscription plans, such as: B. Software-as-a-Service companies, contractless wireless service providers, consulting companies for monthly customer loyalty and streaming media platforms. Unfortunately, improving churn isn’t as easy as it seems. Customer trips are complex and varied. Seasonal buying patterns create artificial peaks and valleys for registrations and cancellations. Just knowing what to focus on first can be a point of contention for many businesses.
Because of this, you need to normalize your churn data into a metric that takes into account the variability in your business. That’s where Customer churn rate is practical. The customer churn rate is usually calculated as follows:
As a simple example, let’s say your company calculates the churn rate on a monthly basis. On March 1st, you had a total of 1,000 customers. By the end of March, your company had lost 200 customers. This means your monthly churn rate was 20%. With a churn rate of 20%, you can theoretically expect all of your customers to churn within a five-month period. Or, put another way, your average retention period for a typical customer is five months.
5 tips to reduce churn
Maintaining a high rate of churn is a recipe for disaster. There’s only so much demand your sales and marketing teams can deliver. Here are five tips to consider when developing a strategy to reduce churn.
1. Know your customers (better)
Keeping up with customer orders and support requests can seem like an insurmountable task that leaves no time for strategic planning. Only by zooming out and seeing the bigger picture can your company identify issues that are leading to cancellations. Invest more time understanding your customers’ goals, needs, and needs. Customer journey mapping is an excellent starting point.
2. Surround yourself with great people, systems, and processes
Does your company have the expertise and the capacity to build a world-class customer success program? Perhaps you already have a qualified CS leader on board, but he or she is in the wrong place. Or maybe you need to hire someone who has the right mix of experience and expertise. Start by surrounding yourself with people who are invested in the customer experience. Then enable them to recommend and implement systems, processes, and technologies that are aligned with both your company’s goals and those of your customers.
3. Focus on providing great service and being customer-centric
Of course, an integral part of customer success is providing great customer service. Achieving and maintaining a one-hour response time for support tickets is not enough. Customers expect an amazing experience every step of the journey – from interacting with chatbots to accessing thorough information on your support website to receiving helpful responses from your live agents.
Check your customer journey map again and identify unnecessary friction points. What adjustments can (and should) be made to deliver a customer-centric experience? As a company, strive to be more empathetic and develop training programs that show employees how they are in the customer’s shoes. Implement processes and metrics that keep front-line workers – especially support staff – responsible for delivering great service.
4. Gather actionable data to understand why customers are leaving
Customer data is now more readily available than ever before. Every customer interaction with your website, email, and support team is another data point that you can use to improve customer satisfaction and hopefully reduce churn.
If customer data management isn’t a strength for your company, here are some data sources worth maintaining:
- Customer interviews: When a customer cancels, ask if they would be ready for a 15-minute conversation. Expect low participation rates, but also extremely useful information from those who do.
- Built-in prompts: If you have a customer-facing UI, you will be prompted to ask each customer why they are abandoning or downgrading. Synchronize this data directly with the contact or organization record in your CRM.
- Automated surveys: Use marketing automation technology to measure customer satisfaction throughout the customer journey.
These are just a few ideas to get your creative juices flowing. Collaborate with team members from support, marketing, sales, and operations and continuously look for ways to securely collect more data and improve churn.
5. Use your data to identify trends and correct course
Simply collecting large amounts of customer data is a futile undertaking unless you have a reliable way to track and manage it. Using an easy to integrate and customizable CRM like Insightly makes life easier for reps when trying to understand customer churn data. Custom objects and fields provide flexibility for organizing data in a way that aligns with your unique business model and customer journey.
Also, look for ways to leverage data that is already in your CRM. For example, your sales team is likely tracking the lost deals and cancellations. Use your CRM’s built-in dashboards and reports to visualize this data, identify churn trends, anticipate problems that will lead to churn, and develop new strategies to reduce them.
Build lasting business relationships
Ultimately, reducing churn is about building lasting business relationships. Companies that truly understand their customers, implement customer-centric systems and processes, and use data strategically are better positioned to build long-term, churn-resistant relationships.