How to Reduce Customer Churn and Prevent It From Happening
by Michael O'Mara, on Jul 20, 2022 9:51:54 AM
In order to grow, you need to know. Everything from your successes and struggles impacts how your business grows. Part of that equation is understanding one of the most important metrics you can have: customer churn rate.
It’d be nice if every one of your customers kept coming back over and over without any interruption, right? Well, that’s just not how it works. Customer churn is customers leaving or choosing not to use your goods and services over a period of time.
How to Calculate Your Customer Churn Rate
Calculate your customer churn rate by dividing the number of customers you lost in a given timeframe by the number of customers you started with. You can do this same calculation with revenue as well.
This does not mean you compare the numbers at the start of the time period and the end. That leaves out many variables. This is solely about your churn rate.
Here’s Why You Need To Know Your Churn Rate
The closer your churn rate is to 0%, the better. That means you avoid spending more time and money bringing new customers in, only to make up for the revenue you lost due to churn. This is an expensive way to do business, and it won’t serve you well in the long run. Instead, focus on spending more time nurturing and building lasting business relationships with your community and ideal customer.
Think how challenging it can be to sell a product or close a deal. If a customer or client is weighing their options, that can affect your mood, performance, revenue, and success. Reducing churn means you do that way less and your existing customers will be happier because you’re spending time with them and their work more. And since they already made the decision to do business, it is much easier to retain and sell more goods and services.
Two Ways to Reduce Customer Churn and Prevent It in the Future
1. Treat All of Your Customers Like Your Best Customers
It doesn’t matter if they’re the most profitable or the smallest customer. Treat them with the same respect, give them your time, and make sure they know that you understand how to solve their problems. Businesses can fall into a nasty habit of prioritizing customers that generate more revenue. That is okay to a point. Just be careful not to reduce service quality if you’re spending less time engaging with smaller customers. Remember, customers are people too. It might be simple, but treating them the way you’d like to be treated goes a long way. That’s how you delight!
2. Understand Why Customers Leave and Don’t Come Back
This can be a challenge, but everything that is necessary isn’t always easy. Gathering important data about why customers choose to stop working with or buying goods from you is essential to identify what went wrong and how to keep that from happening in the future. Sometimes, a customer leaves for a reason that has nothing to do with you. And that’s okay! But because you took the time to ask or discover why you are now informed and prepared for the future.
Here are a few tools you can use to understand why customers leave:
- Ratings and reviews: Do you have bad ratings or reviews? Did that customer leave a bad rating? That’s a pretty clear indicator of how they feel, which will impact the perception of your business and communicate to future customers exactly one thing: go elsewhere.
- Surveys: Basic questions tailored to the customer journey help you identify if your marketing is effective, why a customer decides to engage with your business, and why they leave. If you build surveys, you must develop clear, closed questions instead of open-ended prompts. Closed questions are simple, direct, and seek to ask a hypothesized question: why did you leave? When you answer that, you reduce churn.
- Zoom: Call them up! Set a meeting and time to hash this out. Make it clear you’re not going to try and win them back. Just that you want to learn how to be better. This may or may not work, but it shows that you’re a business willing to improve. It’s nice to do and a good feeling to grow as a professional. If you do this, I have one tip: shut up and listen.
Reduce Customer Churn with a Rock-Solid Strategy from Sauce Marketing
When you build a strategy that works, you experience less churn. Instead of starting a business or trying to fix one without a plan in place, work with our team here at Sauce Marketing to boost customer retention and reduce your churn rate. That’s how you #GrowSmarter.
Click here to schedule a free call with one of our Growth Guides. We’ll align on the approach that’s right for you, ask you all the right questions to understand your core problems, and work together to create lasting, productive solutions.