Customer churn, also known as customer attrition, is usually not the most feel-good metric, but it’s an important one for companies to pay attention to. The term refers to the percentage of customers who stop using your product or service during a certain period of time. It gives you a clear picture of customer retention, which is a vital factor for business success.
Of course, businesses don’t want customers to leave, but you may think that losing some customers is normal and not a big deal. The truth is that it costs five times more to acquire new customers than to retain existing ones. Not to mention it’s also more difficult.
Loyal customers are worth their weight in gold—or revenue. Studies show that increasing customer retention by 5 percent increases profits by more than 25 percent. Therefore, reducing your churn rate can equate to a significant bump in profits. And what business doesn’t like the sound of that?
Calculating Churn Rate
To calculate the churn rate, divide the number of customers lost during a time period by the number of customers you had at the start. For example, if you start a quarter with 500 customers, and only have 480 by the end of the month, then your churn rate is four percent (20 lost customers divided by 500 customers to start).
You can also calculate or report churn rate in other ways, like the number of customers lost, the value of recurring business lost, or the percentage of recurring value lost. Use whatever method is best for your organization.
Obviously, the ideal churn rate would be zero percent, and every company’s goal should be to get as close to that as possible. That can only be accomplished when a business is on top of its churn rate and treats it as a top priority. One way to decrease your churn rate is to give your customers excellent service experience.
The Power of Customer Service
When a customer’s service experience isn’t positive, they are more likely to leave. In 2017, a Microsoft report revealed that 96 percent of people felt that customer service was a big factor in their choosing brand loyalty. When a single factor impacts the decisions of 96 percent of customers, then it’s a crucial one.
Here are some ways to provide excellent customer service and reduce your churn rate at the same time.
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Provide Service on Multiple Channels
These days, consumers expect to be able to contact a business through the channel of their choice. According to NewVoiceMedia research, the ability to get ahold of a company over any channel is a large factor in customers feeling an emotional connection with a brand. But, on average, consumers only feel emotional connections with 30 percent of companies they do business with. Being available wherever your consumers are is a simple way to set yourself above 70 percent of other companies, and encourage customers to stay with you.
Focus on Loyal Customers
Rather than focusing on incentivizing customers who are considering leaving, it may be beneficial to concentrate on your loyal, profitable customers. You could set up a loyalty rewards program, send them something over the holidays, or celebrate their anniversaries. Those loyal customers can become brand ambassadors through word of mouth and online reviews, which in turn can exert great power over other customers.
Provide Additional Service
A little extra service can go a long way. What more could your customers find useful with your products or services? Maybe educational or instructional materials or comprehensive FAQs could make your product/service easier to use. Consider if there are additional, related needs your customer demographic has that you could fill. For example, if your business sells all-natural skincare products, perhaps you can send them a free bottle of all-natural shampoo as a thank you with their next order.
Prioritize Issue Resolution
When a customer contacts you with problems, first acknowledge them, and then do all you can to find a resolution. Customers are generally less satisfied when they have to repeat their problems to multiple people, so consider structuring for total contact ownership (when a single person owns the entire resolution process from start to finish). It may require empowering customer service agents to address and resolve a variety of issues. Training customer service representatives in using emotional intelligence can help improve the experience as well. Customers will notice that your company takes their problems seriously and will value your brand for it.
Utilize Email Series
Customers go through different phases, both during and after their purchase. Setting up trigger-based emails to help them through those phases and keep them in touch with your company can help reduce churn rate. You can customize these emails for a wide variety of situations, like abandoned carts, long term users who go inactive, or those who don’t convert after a free trial. Personalizing these emails will make your customers feel important and can make a big difference in reducing churn rate. At the very least, avoid sending from a no-reply address.
Proactively Reach Out to Customers
Excellent customer service can begin before customers have problems. Rather than wait for customers to have an issue before they contact you, reach out to them first. Show them you care about their experience. It could be as simple as a check-in email or phone call. This not only helps the customer feel valued but also helps you identify and fix potential issues before a customer gets fed up enough to contact customer service. Feeling valued and getting an early fix for potential issues will both encourage customers to stick around.
Look to Your Company Culture
It may seem surprising, but improving your company culture can also improve customer experience on many levels. When you have engaged, informed employees, that translates into every forward-facing interaction. And just like it’s easier to retain existing customers than acquire new ones, it is often better for your company to retain existing employees as well. It starts with a winning employee retention strategy, empowering employees and retaining top talent, and also includes ways of effectively managing turnover.
When you provide an excellent customer service experience, customers are less likely to go elsewhere. This leads to a reduced churn rate and more profits. And that’s well worth the effort.