How to Reduce and Prevent Churn?

Every business loses some customers and acquires new ones. The number of customers fluctuates even in the most successful subscription businesses in the world.

The problem arises when many customers stop buying products from a business or cancel subscriptions within a specific period.

This percentage of customers that abandon a business is called a churn rate. In this article, we’ll explain how to prevent and reduce churn to retain old customers and boost recurring revenue.

How to Reduce Churn?

Apply the following strategies to reduce the customer churn rate and offer services that keep customers satisfied.

1. Analyze Churn

The first task is to identify the cause of increased churn. If customers are leaving, contact the churned customers and see what happened.

Sending a follow-up email or providing an exit survey are two practical options, but they’re a bit impersonal.

Calling a churned customer on the phone is more effective. Since customers often quit using services because they feel neglected or mistreated, personal contact is a better option. Customers are more likely to discuss such problems in person and explain what made them leave

Use these insights to improve services and reduce churn rate.

2. Analyze the Audience

Failing to target the right audience is another common cause of churn. In the beginning, many merchants don’t tailor their offer to a specific audience because they want to acquire a large base of potential customers.

This strategy works fine in the initial stage of business operations, but it’s not practical in the long run. After some time, conduct a thorough audience analysis to see which buyers become repeat customers and which churn.

After that, focus on customers that have shown more interest in the products and services.

It doesn’t pay to try to regain all churned customers. Still, examining this segment is a must in case there are any valuable buyers worth the effort of winning back.

3. Analyze Service

Timely and adequate customer service is at the heart of churn prevention.

Customers hate waiting on hold when calling customer support. The fact that they’re calling isn’t a good sign already. If they’re left to wait, they’ll probably not only hang up on the customer support but on the entire brand, as well.

Work with the support team to minimize wait times.

Customers might also get lost on the business website or blog. If they can’t find what they’re looking for, they leave. Use chatbots to keep customers on the website and direct them to a place where they can find the information they need or get customer assistance.

The more committed customer service is, the lower the churn rate.

4. Analyze and Categorize Customers

Treating all customers the same way is not the best strategy for customer retention.

An economic principle called the Pareto Rule claims that 80% of results come from 20% of causes. Translated to the language of ecommerce and other online niches: a smaller portion of buyers bring most of the revenue.

Analyze and categorize customers based on their purchase history. Developing an internal plan based on different segments of buyers is a smart thing to do to prevent churn, and especially to retain valuable customers.

Use a tiered pricing model once you determine the different segments of buyers. This tactic reduces and prevents churn because different segments of customers can find the right tier for their needs.

5. Customer Engagement

Business relationships are a lot like other relationships in life – for customers to stick around, they need to be engaged.

Track the customer journey from day one. The more interest, attention, and care customers get, the less likely they are to churn.

Providing omnichannel customer service and support is a powerful strategy to adequately follow and assist customers.

6. Customer Education

Some customers leave a business because they don’t know enough about it. Show customers why their tools and services make a difference.

Here are some practical ways to educate customers:

Note: Consider using a paywall. Offer parts of webinars for free and charge for premium content to attract a wider audience.

7. Use Incentives

Using the usual incentives such as promotional offers, discounts, and free products significantly reduces the churn rate.

There are also some advanced incentives, like offering premium services for free for a limited time and providing more personalized support.

Use incentives to win back customers that are likely to churn and improve your renewal rate.

Note: All customers like freebies and discounts, but not all merchants can afford them. Calculate the costs and benefits of these incentives. Offer such features to their most valuable customers first.

8. Analyze Complaints

Customers who complain want someone to react to their requests. A study published by Microsoft shows that 53% of shoppers think that no one uses their feedback to improve business services.

Merchants that don’t take customers’ complaints seriously usually experience high churn. Consequently, they eventually spend more assets on acquiring new customers than they would on providing additional assistance to their current customers.

Customers that complain need to receive a personalized response from the customer service team. Emails, phone calls, and chats are all adequate communication channels to contact such customers.

Note: When dealing with more serious complaints, a phone call should be the preferred means of communication.

Complaints help detect weaknesses, as well. Properly handle such interactions and use the customer’s input to resolve potential problems and improve services.

Conclusion

Preventing and reducing churn is the key prerequisite for ensuring steady revenue and constant business growth.

Follow this guide to develop several strategies for different customer groups to keep them by your side.