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What is Customer Churn and How To Prevent It

Customer churn is the percentage of customers you lost during a certain period. Say, for example, you start Quarter 1 with 400 customers and at the end of the quarter, you have 380 customers. Your customer churn rate is 5%. You lost 20, i.e, 5% of your customers in the quarter.

Dividing the number of customers you lose during the stipulated period by the total number of customers at the start of the period is what gives you your customer churn rate. It is a critical metric that growing businesses must evaluate to know more about your customer retention and better understand how you can bump up customer retention.

As mentioned earlier, it is normal for any business to lose some customers along the way. And while it’s important to focus on acquiring new customers, it’s equally important to retain the existing ones. While the percentage of lost customers over a specific period is the most common way to calculate churn rate, you could also just calculate the number of customers lost or even the value of revenue loss.

Why is it important to measure customer churn?

If losing some customers is so normal, why do we need to measure the churn rate? It may seem like a 3-5% churn rate is not so bad after all, but in the long run, you will be losing a lot more than just customers. Acquiring new customers is much more expensive than retaining the ones you already have. Additionally, existing customers already have a relationship with your business so they are more likely to spend more than new customers who are still building a relationship with your products and services.

Think of all the things you invest in when trying to acquire new customers — marketing, acquisition, promotions, advertisements and proving yourself to be better than your competitors. You don’t have to do all that with existing customers! All you need to do is offer great customer service and quality products and services and they will keep coming back for more!

Not just business and revenue, existing customers also contribute to your brand’s reputation as they are more likely to recommend you to others, engage with you on social platforms, help maximise reach and get more visibility.

How to reduce customer churn?

Whether you’re a small business, a medium one or a large one — winning a new customer is always exciting, and losing one is always disappointing.

No matter what your products and services are, some customers will move on to another brand, or maybe just stop using what you offer. However, the right customer retention strategy and a focus on customer retention at every step can help you keep your customers and continue doing business with them.

Here’s a list of things that can help you reduce customer churn and prevent losing your customers:

1. Customer Service and Support

Exceptional customer service and support go a long way in retaining customers. Statistics show that 89% of customers switch to doing business with a competitor because of lack of, or poor, customer service. Customer support extends beyond helping them during the buying journey. You need to be proactive and offer support from time to time to let the customer know you care. For example, if there’s a better/higher version of the product/service they have bought from you, suggest it to them. Whether it’s on a social platform, or through emails, communicate with your customers and show them you’re there to help them every step of the way and beyond.

2. Communicate and Engage

Think of all and different ways you can communicate and engage with your customers to stay top of mind! Newsletters, promotional emails, recommendations, feedback, surveys are all different ways you can regularly initiate conversations with your customers. This not just helps them know about all the new products and services you have, but also makes them regularly think of your brand, and thus come back for more.

3. Personalization

Everyone likes to feel special! Personalized messaging, via emails or other communication channels, makes your customers feel like they’re special. Using first names, remembering birthdays or anniversaries, sending season’s greetings or remembering their favourites are all a way to make them feel like you care about them. This also helps build brand loyalty and builds a strong brand recall.

4. Value Loyalty

A lot of times we get so busy trying to bring in and charm new customers, we tend to forget about those who’ve been around — our valued existing customers. It’ll be a bigger loss to your business when your valued long-term customers move to a competitor. Make sure you reach out to them from time to time to let them know how much you value them. You could offer a loyalty program, exclusive promotions or discounts, or just a simple ‘Thank You’ email to let them know you’re willing to go the extra mile to keep them happy and satisfied.

5. Analyze The Churn

While churn may be inevitable, analyse the possible reasons for it. At what step of the customer journey are you losing them? What could be the ‘trigger’ for a customer to leave your brand? Possible reasons could be lack of product/service quality, bad customer support, not enough communication, or any other possible reason. Knowing the possible reasons can help you better your products, services, support, or communication to make sure customers stay on.

Don’t Lose Your Most Valued Asset — Your Customers!

Breakups are hard.

When a customer breaks up with your business you might be disappointed but the good news is that you can prevent it. Customer churn rate is a valuable metric that not only helps you keep your customers but also helps you strengthen your way of doing business to reduce churn. Analyze churn rate from time to time to know what you’re doing right, and what more you could do to convert existing customers into loyal and repeat customers.

Don’t stop reaching out and trying to acquire new customers, but don’t ignore the existing ones in the process.

If you have any questions, please feel free to leave a comment below.

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