There can be many reasons why a customer might stop buying products from a brand or lessen the number of products that they used to buy from a particular brand. The number of customers that leave your brand over a specific period of time is known as the churn rate. Higher churn rates indicate that more people are leaving your brand! This is why churn rate is an important metric for every retailer. Today, we will discuss how you can reduce this churn rate and turn the tables around in your favor.
Let’s start with some important statistics about the churn rate that will widen your eyes!
- A business can increase its profits by 25-125% by reducing the churn rate by just 5%.
- Companies lose $1.6 trillion per year due to customer churn.
- 82% of consumers have stopped doing business with a company because of bad customer service.
So, what is the churn rate, exactly?
Churn rate refers to the percentage of customers reduced/decremented over a specific period of time. Some customers' involuntary churn may be due to billing issues or they may move out of the town or due to some tragedy. Some customers churn voluntarily means they stop buying products from a company. Some customers churn partially which means they decrease the number of products they used to buy from a brand.
Most brands focus on voluntary churn as it affects their business the most. Moreover, it is less expensive to retain a customer than to find a new customer all over again and go through their customer lifecycle. Decreasing the churn rate even by a few percent can bring immense changes in your profits.
Customer churn rate is generally calculated by dividing the number of customers lost in a given period by the total number of customers at the beginning of that period. For example, if a company began 2021 with 80,000 customers, lost 4,500 but also acquired 1,500 over that same year, the churn rate would be 3.75%.
Why is churn rate so important?
By now you must have known why we are stressing over the churn rate metric. If not then these points will make things more clear.
- Churn rate helps businesses in understanding the long term stability of a business and its growth over a certain period of time.
- Churn rate is a very important metric for subscription-based companies as it can help in forecasting their growth.
- The churn rate indicates customer satisfaction. If the churn rate is low, it means more customers are happy with your business.
Ways to Reduce Churn Rate
Now comes the most important part of the blog. How can you reduce the churn rate and enhance your business?
1. Improve your customer service
If you really want to enhance your customer churn rate, be prepared to create outstanding customer service. Customer service is one of the main reasons why customers leave a brand. There are many ways to enhance your customer service like:
- Send personalized messages to your customers. Instead of sending a one-size-fits-all message to your customers, start curating messages based on the preferences of different customers.
- Do not just reply with generic responses. Make the conversations with your customers more meaningful. Most customers also appreciate when they communicate with the same customer support executive every time they interact with the company.
- Always follow up! If a customer has filed a complaint or whether they have mentioned you in a comment on social media, always reply. Take responsibility for your mistakes and see the magic.
2. Make the onboarding smooth
When someone is getting to know your brand, it is the best time to strengthen your relations. After all, we know that the first impression is the last. Generally, you will have not more than 20 seconds before a visitor decides to switch back from your Instagram profile or leave your website. So make those 20 seconds count!
- Focus on what makes you unique and how you are solving customers’ problems.
- Guide your customers about the basic functionality of your app or website so that they know where to find new products, how to check out, etc. These things might seem easy but introducing yourself to your customers makes a good impression.
3. Keep reminding your customers about your value
A customer signed up for your brand or bought something from you once does not mean that they are going to remember you always. It is your duty to keep reminding them of your awesomeness so that they keep buying products from you.
- Send emails from time to time to remind your customers about the features of your products and how you aim to bring value in their lives.
- Share tutorials, infographics, and other informative content with your customers and promote your brand.
- You can even share what other customers say about you or how using your products/services changed their lives for the better.
4. Reward your customers
Improving the churn rate can be regarded as finding ways to retain customers. What’s better than rewarding loyal customers and making them feel special? If you want customers to keep coming back, you need to invest in building a relationship with them. There are many ways to do that, like:
- Give discounts to attract customers to your brand. For example, you can give a 10% discount to every new customer, exclude the shipping charges if a customer buys a product of more than a certain price value, or give them an extra discount if they sign up for your newsletter.
- Freebies are also a kind of reward that attracts customers. Freebies are of great value and can make a customer fall in love with your brand. For example, you can give a free sample of your new product to the first 100 lucky customers.
5. Try to determine why churn is happening
Do not let the customers go. Find why they are leaving you and whether there is still some hope left. This can be done in three ways. First, you can send them an exit survey where the customer will provide their feedback. Second, you can call the customer and try to find out what they did not like. Third, you can send them a personalized email.
- Make sure to ask only relevant things from your customers as it would drive them off otherwise.
- Do not hesitate in giving them a discount or apologizing for the inconvenience that they faced because of your service.
- Not only must you apologize and make amends but you must work on improving your service or correcting your mistakes.
6. Build your community
Creating a strong community can help you create a better reputation with your customers and competitors. Building community means connecting your loyal customers together, say through email interaction, surveys, Facebook groups, etc.
- You can conduct giveaways and engage your audience on social media with you. The more people will participate in your giveaway, the more promotion your brand will get.
- Encourage your customers to interact with each other and help each other. For example, they can share their problems/queries and solve them for each other.
- You must make it about your customers and not your brand. The more valued you will make them feel, the better it will be for your business.
7. Do not lose your spark
Many businesses lose customers because they do not evolve. In other words, they do nothing to stay in the competition. One must understand that with time the demand of the market will change and you must change yourself accordingly.
- Focus on the shopping behaviors of your customers and identify the changes. You must know who your best customers are, what they want, where they live, what their preferences are, and so on.
- If you have business in multiple locations, find out which ones are expected to grow further and which are underperforming and can be closed.
- You must invest in a good business CRM that can help you create customer profiles and segment your customers in a better way by collecting data from different marketing platforms/ touch points.
This was all about churn rate, its importance, and different ways how you can decrease the customer churn rate for your business. Retaining customers is the key to the success of a business and that can be done only if you make your customers find value from what you are offering to them. Personalizing their journey, giving them incentives, building a community, and staying competitive are some of the best ways to reduce customer churn rates. Start incorporating these tips to enhance your business for the better.