Sean Davis August 19th, 2021

12 Ways to Reduce Customer Churn Rate

About 44% of businesses focus on customer acquisition, while only 18% focus on customer retention.

This lack of focus on customer retention has led to considerable losses in Saas and the eCommerce industry. It is estimated that such industries lose about 1.6 trillion dollars every year because of higher churn rates. A certain amount of churn rate is unavoidable in any business. However, there are always ways to reduce it.

Customer extension is all about earning customer loyalty, and you cannot earn loyalty in a day. You need to earn it day by day. Here’s our guide to reduce churn rate and increase customer satisfaction for your business. Before we move on, let's understand what churn rate is.

What is the churn rate?

The number of customers who leave your business within a limited period measures customer churn, also known as attrition rate. The formula to calculate churn rate is:

Churn Rate% = Number of customers lost /Total no. of customers x 100

The acceptable churn rate for Saas-based companies lies between 3-5%. So, if your company's churn rate goes above this, you have a reason to worry.

What are the reasons for the high churn rates in companies?

The reasons for a person leaving your product or service are often unique and personal to each customer. However, they often fall under some basic categories, which are:

  • Price: Price is often a common factor that turns customers into other options. If your product or service has a very high price range than your competitors, you are bound to lose clients quickly.
  • User experience: User experience is a crucial factor in customer retention and satisfaction. If your product or service doesn’t provide the desired user experience to your customers, they will look for other options.
  • Customer experience: How you interact with your existing customers and engage with them plays a vital role in increasing customer loyalty and chances of customer retention. 

How to reduce the customer churn rate for your business?

Here are twelve tried and tested ways to help you reduce your customer churn rate successfully.

1. Identify the cause

For every problem, the resolution starts at finding the cause. And with a customer churn rate, the best place to start is the customers. To identify the causes of churn rate, start by:

  • Getting customer feedback: Customer feedback is a great way to know how customers feel about your products, services, and user experience.
  • Communicate with your customer success team: Your customer success team interacts with customers regularly and will have the best knowledge about customer expectations and problems. Connect with them regularly to know customer issues.

2. Increase your product quality

Studies show that 77% believe what makes them loyal to a product is its quality. So an increase in your product or service’s quality can significantly increase your client retention rates. Focus on enhancing the quality of your product by adding features that make your product more user-friendly and reliable. Add features more customers are looking for by understanding the feedback and customer complaints.

3. Create a roadmap for new products

Finding new customers is very challenging for businesses. Creating a roadmap that describes how the product should be used and benefit the customer can significantly increase sales chances.

Another critical point here is that an existing customer is 60% more likely to try your new product than a new one and is also a better source of revenue. Therefore, showing these roadmaps as videos, tutorials, webinars, etc., to existing customers can benefit even more.

4. Identify high-risk customers

There is always a certain number of customers for every business who are more likely to leave than others. Identifying and reaching out to these high-risk customers and making them stay through various tactics is one of the best ways to reduce your churn rate. The best way to identify high-risk customers is to look for those complaining about something and didn’t receive a satisfactory resolution. Or the other ones are those you have not reached out to in a long time.

 5. Enhance your customer experience

Customer experience is one of the most crucial factors to improve when improving your customer churn rate. No matter how good your product is, if the customer experience is poor, they will eventually look for better options. Some ways to elevate your customer experience include:

  • Make your product or service as user-friendly as possible.
  • Personalize your product or service according to customer behavior and traits.
  • Keep track of significant customer service metrics to identify what is lacking in the overall experience and add better experiences.
  • Set up a grievance hearing and customer support platform and act on them.
  • Don’t forget that with modern telephony solutions, it’s easier to enhance the customer experience both pre and post-sale. Once you’ve set up your business phone service, you can keep all callers happy, and monitor team performance to address service issues as well.
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6. Start loyalty programs

Loyalty cannot be bought and has to be earned. However, that doesn't mean we should not appreciate it. Find out the customers who have been loyal to your brand for a certain period and reward them for their loyalty with your loyalty programs. It will encourage them to stay with you longer and act as an incentive for relatively new customers to stay longer to earn the loyalty rewards. 

Analyze what is common among these loyal customers and what will encourage them to stay longer the most. Sometimes it can be a money incentive other times. It can be privileged rights to a particular service, choose what motivates them the most.

7. Target the right audience

You must find the right customers in the first go to reduce the churn rate. The right audience is the one that values the services you provide and understands their importance. In contrast, a customer looking for just a short-term solution or a free offer will probably stop when that ends, no matter how good your retention strategies are.

Therefore, research thoroughly for the right audience at the beginning to avoid these churns.

8. Measure your churn metrics

Like every other business strategy, client retention strategies should also have a performance measurement mechanism. Set these measurement mechanisms and measure them at set time intervals, such as monthly or quarterly, to know how well your strategies work. Change your strategy according to the progress rates you see through these mechanisms.

9. Educate your customers

One of the most common reasons for customer dissatisfaction and attraction is that customers believe they should get more than what you provide as per your initial sales pitch. This confusion often causes high churn rates. To avoid that from happening, take the following measures:

  • Be transparent about your offering at every stage of campaigning and canvassing.
  • Use easy-to-understand language when communicating with clients.
  • Explain every feature and benefit of your product and service clearly.
  • Provide educational materials such as FAQs, videos, tutorials, and tours to potential and existing customers.

10. Get a competitive edge 

Get a competitive edge against your competition by flaunting your USP in front of the customers. Also, provide consistency and higher quality in your services. 

It will help them realize they are not just paying for a service they can get anywhere easily, but for an overall experience that won’t be the same anywhere else. Use your best reps to deal with demanding clients who are likely to leave quickly. They can explain to the leaving clients what they will miss out on if they leave.

11. Be consistent with feedback

Many businesses look for feedback about product reviews at the early stages of the relationship with the clients. However, they stop giving that much attention to older clients, leading to dissatisfaction and increased churn rates. Therefore, always be regular and prompt with the feedback and resolve any issues.

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12. Don’t shy away from long-term contracts

Start offering long-term contracts after the trial period ends. It will give customers the time to see the benefits of your services in action. And also reduce the risk of sudden dismissal of projects and increase churn rates.

Wrapping up

Churns are an unavoidable part of any business. However, an unending strive for excellence and putting customer satisfaction above anything else can help you a long way in reducing the attrition rate for your business to a bare minimum. Decreasing the churn rate is not just about the loss of revenue or growth prospects but a loss of reputation in the market. Therefore, it is prime time we focus on minimizing it.

Photo by Maxim Ilyahov on Unsplash

Sean Davis

Sean Davis is a professional content developer at DashClicks, a white-label digital marketing platform for small and medium-scale agencies. He also has more than 5 years of experience as a content strategist, blogger, and digital marketer. Sean uses his expertise to spread knowledge through his writing. He is highly proficient in describing complex technical concepts with simplicity to make them widely accessible.


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