How to prevent and reduce customer churn

Reduce churn with better churn management practices. 

Churn risk is simply a fact of doing business. It’s impossible to retain every single customer, no matter how well you’re running the show. Even if you’re doing things exactly as you should, preventing customer churn entirely is near impossible, especially because external factors often play a part. 

That being said, most companies can benefit from easily implemented churn management practices that can work to reduce churn and retain customers. Here’s everything you need to know about preventing and reducing customer churn. 

What is customer churn and customer churn rate?

Customer churn or customer attrition refers to customer retention. Are you maintaining your current customers or not? Your customer churn rate is often a key factor in evaluating the success of your business. In simple terms, if you’re losing a lot of customers, you’re losing a lot of revenue, and that’s not good.

Your customer churn rate is the percentage of customers that stopped using your product or service within a certain time, like one year. You can calculate the rate by dividing the number of clients you’ve lost by the number of customers you started with at the beginning.

For example, if you started the year with 100 clients or customers and ended with 95, you lost five clients. This means your customer churn rate is 5%.

What’s an acceptable customer churn rate?

Clearly, zero is the best customer churn rate to have, meaning you’ve maintained all your customers. But as previously stated, even if you run your business perfectly, many external factors can affect your rate, as well as internal factors. Typically, if your rate is 5% or less, you shouldn’t worry too much.

But if your rate is higher than that, don’t panic. The tips and tricks listed in this article can help you put some key things into practice that may help reduce your churn rate and better your churn management.

Think about why customer churn is happening (and don’t be afraid to get customer feedback)

It’s important to deeply analyze what’s happening to figure out why your customers are leaving, especially if your churn rate is high. Is your customer service lacking? Is your product offering poor value? Are your customers getting swept away by snazzy competitors? How are your customer communication methods?

Once you understand why customers are leaving, you can start to work on churn management in all the right ways. Creating surveys to determine why customers are satisfied or unsatisfied is an easy way to discover the reasons for churn and fix any issues to prevent churn.

Implementing systems to track churn and analyze why it’s occurring can help eliminate processes that aren’t working or grow the ones that are working. 

Prioritize customer retention 

Customer retention is often more valuable than growth or getting new customers, especially over long periods of time. And customer retention can also lead to growth. Happy customers are repeat customers, and things like word of mouth or positive reviews from maintained customers can actually lead to growth. 

So, instead of focusing so much on prospecting or new customers, take a good look at your current ones. Make them happy by optimizing current practices, and growth will follow. 

Invest in customer support  

One of the main reasons customers leave is because they’re not receiving service, support, or proper communication. Customer service significantly affects revenue — according to a survey by American Express, one-third of Americans say they’d consider switching companies after a single instance of poor service. Considering you may not get a second chance, it’s essential to do things correctly from the beginning. 

And the ideal way to do this is to hire customer success managers. Customer success managers work solely on maintaining customer loyalty and relationships. Their job is to focus on making sure all customers have a positive experience and immediately troubleshoot if or when they don’t.

CSMs, or customer success managers, should have a wide range of skills to help prevent customer churn. Not only should they be well-versed in data analysis to understand and analyze why churn is happening, but they also need excellent interpersonal and communication skills in order to best relate to customers.

These managers can work with other team members to map the consumer journey to best understand their needs and wants. By offering your customers proper communication, solid value, and innovative solutions, you’ll ensure competitors won’t be able to steal away your customers.

Get innovative

While most people don’t like change, positive innovation is always a good thing. Offering something no one else does ensures you’re coming out on top. Rolling out new prices, providing more comprehensive customer service, better value, or new features can all be positive, assuming it’s done in an organized fashion.

It’s best to go little by little to avoid massive, drastic changes that can scare customers away.

Don’t overpromise

Don’t promise things you can’t deliver — transparency is critical. While you want to work hard to please the customer, offering things you know you can’t make happen will just encourage customer churn. 

Customers appreciate being treated with respect. If you can’t make a speedy delivery happen or you know your product is out of stock, don’t make empty promises or put them off. Reduce customer churn by offering clear, honest communication with your clients.

Customer churn is inevitable, but there are solutions

Customer churn is a fact of business. 

Sometimes, customers go elsewhere. While you can’t entirely prevent churn from happening, you can reduce churn by working to keep your churn rate low. Things like data analysis, a focus on good organization and communication with customers, getting customer feedback (and listening to it), and hiring customer success managers can all help reduce and prevent churn, which, in turn, increases company revenue.