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Customer Experience

What is Customer Churn?

What is Customer Churn?

You must’ve heard that Churn is bad for your business health. But do you know what it means?

Customer Churn (also known as Customer Attrition) happens when your existing customer (user, subscriber, or client) stops doing business with you.

Losing too many customers over a specified period depicts that something is wrong with your business. A high rate of Churn Rate implies that your customers are dissatisfied and least interested to repurchase any products and services from you. Not dealing with it at the right time will eventually have a negative impact on your business growth.

how-to-calculate-customer-churn

Do you know why reducing churn is important for your business? According to book Marketing Metrics, The probability of selling to an existing customer is 60 – 70%, while the probability of selling to a new prospect is 5-20%.

Types of Customer Churn

Customer Churn is mainly divided into two categories:

1. Voluntary Churn

It happens when customers prefer to stop doing business on their own. It can happen because of poor experience or a better competing offer. The best way to combat this type of churn is to improve your Customer Satisfaction Scores.

Use Cases: Cancellation of subscriptions

2. Involuntary Churn

It happens when customers don’t opt to stop doing business with you on their own. It’s the most common type of churn that occurs in SaaS businesses. This type of churn occurs due to issues related to the payment process.

Use Cases: Making use of expired cards, hard declines in case of lost or stolen cards, soft decline when a card has reached out its limit, and decline of cards from banks end due to network error. 

total-customer-churn-formula

Understand why your Customers Leave

difference-between-customer-churn- and-retention

There’s isn’t a single business in the world that doesn’t lose its customers. And, the best way to combat this issue is to understand why they leave you. There can be numerous causes behind Customer Churn. Some of them are:

  • The products and services didn’t meet the customer’s expectations
  • The product was badly designed or too complex to understand
  • The product was full of bugs and issues
  • The support team was inefficient to resolve customer’s issues
  • The lack of resources to educate and guide the customers on how to use a product or service
  • The lack of proper customer engagement to maintain healthy relationships

How to Reduce Customer Churn?

The answer is quite simple – once you know the reasons behind churn, you need to create and implement the strategies to reduce Customer Churn. As rightly said by the famous management consultant and author Peter Drucker, “What gets measured, gets improved,” means you can’t improve something till the time you don’t measure it. The sample principle applies to Customer Churn.

Some of the best ways to retain your existing customers are:

1. Focus on your Loyal Customers

Practically, it’s not possible to make every customer happy, and sometimes you need to let them go. But it doesn’t mean that you’ll not try to retain your best customers. A study done by Bain & Company reveals that loyal customers are 10 times worth as their first purchase. Try to focus on customers who stay, have a repurchase intention, and spread positive word-of-mouth among their friends and family. You can also offer them a free upgrade, send a thank you note, etc.

2. Analyze Churn when it happens

Your churned customers can be a great source that helps you understand the reasons behind churn. Make an effort to engage with them, know their concerns, analyze the whole situation, and apply corrective measures to ensure it should not happen again.

3. Value your Customers

You might be offering the best products and services in the industry, but if you don’t show customers that you care and value their opinion, then they’ll not stick with you. Show empathy when your customers come with a problem and try to resolve them. You can even feature your customer’s stories on different social media platforms to make them feel valued.

4. Regular measure CSAT and NPS

If you want to know how your customers perceive your brand, whether they're happy or unhappy with your products and services, whether they're going to recommend your products or services or brand to their friends and family, then you need to keep a check on your CSAT and NPS scores.  The best way to measure it by conducting CSAT and NPS surveys at regular intervals.

If you experience high rates of Customer Churn, then don’t get frustrated. Instead, take it as an opportunity to figure out the loopholes in your products and services. Try to ensure you not only meet your customer’s expectations but surpass them.

When you know the reasons behind churn and have a customer retention strategy in place, then you can reduce it to a great extent. Moreover, it helps you to strengthen your relationships with your customers and deliver a better Customer Experience.

Published on Jul 13, 2020. Updated on Jul 15, 2020.



Megha

Written by Megha

Jul 13, 2020

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