It’s no secret that every business loses customers at some point in time. This could be caused by a variety of factors, such as wrong pricing, poor user experience, poor product fit, etc.

There’s a term for this phenomenon — customer churn.

Only in business can there be a word for someone leaving, I swear 🤦

Anyway, let me get back to the point. Customer churn rate is a useful metric to track during sales analysis. Why? Because tracking this allows you to identify when customers are leaving in big numbers and take necessary measures to reduce this in the initial stages itself. Wouldn’t you hate to lose valuable customers to an issue that could have been resolved easily?

Now, you might be wondering, “How exactly do we reduce customer churn and how to increase sales?”

Well, I’ve got some useful tips for you. Keep reading to find out.

What is customer churn?

Customer churn refers to the percentage of customers who stop buying your products or services during a specific timespan.

Tracking customer churn rate and taking necessary steps to prevent customers from leaving is crucial for business growth. This can be done by prioritising your best customers, offering irresistible offers, taking customer feedback into consideration, staying ahead of competitors, and much more.

How to calculate customer churn rate?

Customer churn rate = (Number of lost customers / Total number of customers at the beginning of the time period) * 100

What are the main causes of customer churn?

Poor user experience

Customers look for a brand that is practical and easy to use. If your app or website is confusing and difficult to use, customers will search for something better. It’s important to take every measure to ensure that your app or website fits the bill.

Pricing-related issues

If a customer gets a better price elsewhere, they are likely to leave. Or, sometimes even when initially they were okay with your pricing, they could be compelled to withdraw if their budget changed.

Poor understanding of target audience

Customer churn could also happen if you aren’t clear about the needs of your target audience. You could put in every effort into your product or service, but if that’s not what your customers want, they are bound to leave. No matter how much you try, you can’t sell high-end enterprise software to startups struggling to break even. If your product doesn’t match customer needs, they’ll leave. So, take time to understand customer needs and deliver well.

Renewal offers aren’t appealing enough

Usually when it’s time to renew a product or service, customers contemplate a bit about the value you’re providing and whether there are better options elsewhere. If your renewal offers don’t hit the mark, customers are most likely to leave.

Competitors with better deals

If your competitor offers better features or better pricing than you, customers are likely to choose their product or service over yours.

Poor customer service

Customers often tend to leave if they have a bad experience with your company’s customer service. It’s important to ensure that the queries and needs of your customers are addressed respectfully and that they are satisfied.

Changes in customers needs/circumstances

Sometimes there’s nothing you can do to keep some customers from leaving — that's where sales forecasting helps plan ahead. A change in their business circumstances could make them decide to stop using your product or service. In these situations, you can simply thank them for using your product and ask them to reach out again if their circumstances ever change.

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Why is tracking customer churn important for your business?

• To measure the effectiveness of marketing strategies: Customer churn rate determines the state of your business. If there’s a high customer churn rate, the business is likely to fail if the churn isn’t addressed well and quickly. However, if you put some effort into your customer acquisition and marketing strategies, you will definitely see improvement. This, in turn, will drive growth.

• Cost-effective retention: It’s no secret that it’s easier to retain a customer than to acquire new ones. The costs of customer acquisition are greater than that of customer retention. When you address the needs of existing customers and retain them successfully, your sales pipeline becomes more efficient.

• To enhance brand identity: When you have a strong brand image, your customers understand your purpose and relate to you better. It also helps you stand out from your competitors. 
  
  By analysing customer churn, you can take necessary steps to ensure that customers’ needs are taken care of and that they feel satisfied. Customers are more likely to stick around with a brand they know they can trust. When your brand is viewed as trustworthy by customers, your brand identity automatically gets enhanced.

• To improve customer experience: Analysing customer churn allows companies to take necessary steps to provide better customer experience. If, suppose, the churn rate goes up, necessary measures can be taken to address the issue at hand. It is no secret that when customers are happy, they stick around longer.

How to reduce customer churn in your business?

🔍 Identify customer churn reasons in the initial stage

The best way to solve a problem is to cut it at its root. When you get the slightest feeling that something isn’t working well, address it as soon as possible.

🥇 Prioritise your best customers’ needs

Some of your customers are more valuable than others, as they bring more revenue. Take extra steps to ensure that they are always satisfied and address their concerns and needs as soon as possible. Retaining them is extremely crucial for your business.

✍️ Take feedback seriously

Feedback that your customers provide is useful in improving your product or service, and it’s important that you don’t neglect it. If a lot of customers are giving the same feedback, stop everything and address that issue immediately.

When customers feel that their feedback is heard, they are more likely to stick around.

🛒 Offer discounts

The right offer at the right time can change your whole game and may even retain a customer who considered leaving. If you get the slightest inkling that a customer is about to churn, offer them a discount they can’t overlook.

🤙 Ensuring consistent communication and transparency

Transparency is key to ensuring that your customers trust you. This can be achieved by openly communicating with your customers and making them feel heard and cared for. Customers continue purchasing from a brand they know they can trust.

In order to reach a wide base of customers, you can produce engaging content on social media or other platforms.

🚪 Make onboarding easy for new customers

Having a versatile onboarding process ensures that new customers feel welcome and acts as a good start to your new relationship. Provide them tutorials, educational materials, and FAQs to support onboarding through clear sales process steps. They will be grateful and will stick around longer.

🏃 Be two steps ahead of your competitors

Your competitors are going to consistently try and get ahead of you. You’ve got to ensure that you’re always two steps ahead — a mindset shaped through strong sales strategy.

🧘 Flexibility in terms of pricing

If possible, offer a range of pricing options to customers so that they are free to choose something that actually suits them – one of many smart sales promotions tactics.