What Is Customer Churn?
Think of customer churn as any romantic relationship. The moment you stop paying attention to and caring about your partner, you risk losing them. In practice, customers pay for your product, use it for a while, and once they feel the product and you don't meet their expectations, they leave you for the competition. Instead of focusing on generating new leads all the time, you should concentrate on retaining the ones you have. To reduce customer churn, you have to stay in touch with your clients to ensure all their problems are sorted and their feedback is heard and valued. When your churn is too high, it means that clients are dissatisfied with your products, level of communication, and customer service.
Even if you do ask them for feedback but don't act on it, it's a clear sign that you don't respect their viewpoints. Maintaining a high customer lifetime value (LTV) is essential in sustaining and increasing your revenue. This doesn't mean that you stop setting lead generation campaigns, but you can rest assured that your customers will return to you.
In This Guide, You Will Find...
- Why Is It Important To Track And Reduce Customer Churn?
- 6 Reasons Customers Abandon Companies
- 10 Tactics To Reduce Customer Churn
- How Do You Calculate Churn?
Why Is It Important To Track And Reduce Customer Churn?
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For Recurring Revenue
Monthly recurring revenue (MRR) and annual recurring revenue (ARR) are what keep many businesses alive. When you can't predict your revenue, it's difficult to make decisions regarding all aspects of your company, including investments, marketing campaigns, and hiring. Churned customers strip you of the ability to anticipate revenue and instead stress about acquiring new clients. So, if you keep losing your clientele, you will never craft SaaS growth strategies.
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It Costs More To Gain New Customers
Did you know that even a 5% increase in customer retention can boost your profits by 25% to 95%? These numbers sound preposterous, don't they? There is another compelling reason you should reduce customer churn. Customer acquisition cost (CAC) is one of the most crucial SaaS metrics to track because it is increasing a lot as years go by and the competition increases. To maintain a successful business, your CAC has to be significantly lower than your LTV. When you achieve the right balance, it means that your clients are satisfied with you, boosting your brand reputation.
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Churn Hurts Brand Image
At the top of your business pyramid lies exceptional customer service, which influences churn in business significantly. In fact, three out of four people say that a negative interaction can impact their day. Not only that, but dissatisfied customers are more likely to complain or abandon you without saying a word. Complaints are actually the best-case scenario, as they allow you to address concerns and make things right. So, it's crucial you ask for customer testimonials and avoid having too many disgruntled buyers leaving negative reviews and ratings.
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It Helps You Understand Your Audience
Your business isn't set in stone. Every single day, you make decisions and implement changes that may appear small, but they may impact your buyers. Maybe a small change on your website makes communication harder, so people start getting frustrated. If you notice increased churn after such changes, it's an indication that something isn't going according to plan. So, to reduce customer churn, keep your clientele informed and make it clear that contacting you about anything isn't just acceptable but necessary.
6 Reasons Customers Abandon Companies
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Bad Product Fit
No matter how amazing your product is or how wonderful your promotion skills are, business churn will increase if that product isn't meant for your target audience. You probably already have a steady base of customers who trust you and admire your services. Creating new products is part of any company's strategy. How do you decide on these products, though? When you only think about what you want to sell but not what your audience needs to buy, you are bound to lose many of these high-value buyers. So, take a look at your ideal buyer persona, understand their pain points, and create a relevant product. Alternatively, you may tweak your solution to better fit people's needs.
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Ineffective Pricing
Pricing is another thing that shouldn't be set in stone. If a service you're offering is significantly more expensive than similar solutions, prospects will probably churn and choose your competition. Additionally, corporate buyers may be able to afford a high-priced product at the start of the year but not toward the end. Or maybe you don't offer enough pricing options, including various business levels and subscription models. So, when you notice too many people leaving you during the conversion stage, maybe it's an indication that your pricing is all wrong.
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Fierce Competition
The eLearning and HR fields experience fierce competition. Chances are you're having a harder time to convert clients now than ten years ago. When a B2B business is unhappy with your services, it will likely not renew its contract or subscription and instead pick a competitor. To reduce customer churn, you should explore your competition. What do other businesses offer that you don't, and what are their prices? Even if your product is superior, many of your prospects will pick them if their prices are lower. That is, unless you find a way to differentiate your product and prove that you don't offer just the basics. Case studies will help you prove this. You should also know how to ask for reviews so your top clients can paint a triumphant narrative regarding your company.
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Poor User Experience
Take yourself as an example. What would you do if you visited a website and it took ages to load? Even if it loaded quickly, would you like it if you couldn't find what you needed and everything looked confusing? This is exactly how your users think. If your website offers a poor user experience, people will bounce. So, to ensure client churn is low, update and organize your website. Everything should be easily discoverable, with clear CTA buttons and accessibility features. You should also ensure that your site is mobile-friendly, as a large majority of people browse the web through their mobile devices. These improvements will also help you get indexed on AI search engines.
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Lack Of Customer Support
One core reason why your customers stay loyal to you is that they feel connected to your brand. Sure, they love using your product, too, but it's the interpersonal relationships that create unique bonds. When you don't communicate enough during the onboarding phase, you are bound to lose their trust. The after-purchase period is crucial for retention. You show people that you don't only care about taking their money but also about supporting them throughout their buyer journey. So, it's crucial you take a look at the best B2B customer service examples to understand what you can improve.
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Misinterpretation Of Your Target Audience
This one is connected to bad product fit. In this case, you don't necessarily have an irrelevant product. You're just promoting it to the wrong audience. Maybe you haven't identified the right buyers, and your current target audience is uninterested in what you're offering. Or maybe you know very little about your audience. So, to reduce customer churn and generate high-quality business leads, you should dig deep into which types of B2B buyers are interested in your services. Find out their challenges, needs, and preferences to understand how to best reach them.
10 Tactics To Reduce Customer Churn
1. Improve Onboarding And Educate People
One of the mistakes responsible for customer turnover is poor onboarding. That's why you should make this stage a priority. Treat it like an educational journey. You should offer new users all the tools they need to understand how your product works. You may use how-to guides, tutorials, frequent calls, and email sequences. One of the best email marketing tips we can share is to send messages weekly to ensure everything is going smoothly. Include brochures and guides in these emails so they can check whenever they have questions. Alternatively, you should be ready to answer questions and jump on calls as often as necessary. If they can't understand how to use your product to reach their goals, they might churn.
2. Enhance Your Support
Customer service is nothing like any sales pitch example. It takes more than promises and charm to help customers navigate their new product and solve their struggles. In fact, customer service support begins early on in people's buyer journey. You should showcase impeccable customer experiences along the way, whether someone is in the awareness or loyalty stages. So, be proactive and monitor how much each buyer uses your product. If they are not using it frequently, reach out and ask them if anything is troubling them. Don't send generic messages. Personalize your approach according to individual needs, which is among the best email marketing practices.
Additionally, offer various communication channels for anyone to reach you, including email, phone, and chat. Your team members should be trained well enough to handle all situations efficiently. Lastly, gather feedback and grab the opportunity to ask for reviews. Niche directories are especially useful when it comes to gathering software reviews and increasing website visits.
3. Make Every Interaction Personal
In the SaaS world, clients usually spend a lot of money on products and services. You should take the extra step to make them feel unique and reduce customer churn proactively. How can you do that besides adding their first names in your emails? Let's say that you notice someone is using mainly two of the four features of your product. For starters, you can ask them why they are not using the other two. Do they need help, or do they not need them? Then, you can make recommendations regarding optimum usage and even upsell or cross-sell if possible.
4. Identify Your Weaknesses And Your Advantages
The whole point of reviews and customer feedback is identifying areas for improvement. Don't wait until a client doesn't return to ask them why they are leaving. Make feedback a continuous process and take people's comments into consideration. Engage with your buyers to further understand why they are having trouble. Once you pinpoint a weakness, work hard to overcome it. There is no point in gathering feedback if you aren't going to do anything about it. Your customers understand this, and they want to see you get better. That's why they are usually more than willing to offer you feedback.
Additionally, what makes you better than your competitors? What would your clients miss if they left you? This is where you flaunt your advantages and let them know why you are the best partner for them.
5. Know Who Is About To Churn
How can you know who is a churn risk? Search your contact list and keep a note of customers you haven't contacted in a while. Maybe some people sent you an email requesting something, but you forgot to get back to them. Also, you might have sent a Net Promoter Score (NPS) survey and received a few mediocre scores. These clients probably have complaints they'd like to discuss. Start setting up meetings with all of them to understand what they are missing from your collaboration. During your conversations, you will uncover tactics you never added to your arsenal when you should have. As a result, you will prevent churn and improve your practices.
6. Know Your Loyal Customers
If you want to reduce customer churn and not launch a new customer acquisition strategy in the coming days, it's best that you gather a list of your top customers. While everyone doing business with you is important, those who have been renewing contracts for years now are a little bit more crucial for your success. Loyal clients are probably paying a lot more for your services than newcomers who might want to try out your product before investing more. So, go the extra mile with your most loyal buyers and show them that you care deeply about them. Does your product help them meet their needs? What problems do they have that you can help with? You can separate your clients based on profitability, willingness to leave, and positive attitude toward staying with you.
7. Improve Your Pricing Strategy
Regardless of how amazing your product is, an exorbitant price can make or break a business deal. You should conduct a market intelligence report to check how your competitors price their products and what features they offer. For example, many SaaS businesses offer a freemium so users can experience their services before deciding to purchase a subscription. Users can fully understand the value of your product, making it easier for them to put their hands in their pockets. Also, check how your target audience likes to pay. You can try a tiered pricing model, monthly or annual models, or pay-as-you-go plans.
8. Run Retention Campaigns
One of email marketing's benefits is that you can run retention campaigns. There is so much you can do to keep your clientele engaged and loyal to you. Do you have a new feature being released soon? Give them access earlier through a free trial. Also, you can offer special discounts for new subscriptions or arrange customer appreciation events if possible. You may even run a loyalty program. Basically, all your campaigns should make customers feel special. For example, if you have a new eBook coming out, let them know so they can download it for free. Or if you have a webinar coming up, allow them to book their spot before your promo goes officially live.
9. Foster A Community
Something that will help you in your customer churn analysis and improve your retention is creating a sense of community. This tactic not only helps you reduce customer churn but also boosts your brand image. You may create a forum on your website where everyone can ask questions and engage with one another and you. You can even create a Facebook or LinkedIn group.
It's important to request reviews from these top-value customers. When an eLearning and HR directory is filled with positive product and company reviews, future buyers are swayed more easily.
10. Deal With Cancellations Graciously
Your most experienced salespeople must not only know how to close a sale but also how to handle a cancellation. Choose people who have empathy and can listen to customers' complaints and worries without judging or rushing them. Also, these team members must be convincing and explain clearly why a client shouldn't abandon you. Even if they finally decide to leave, it's best to leave things on good terms. Such an ending still maintains a positive brand image.
How Do You Calculate Churn?
To calculate your churn rate, divide the number of your customers at the start of a period by the churned customers at the end of the period. So, let's say you started with 400 customers, but you ended up with 380. This gives you a 5% churn rate. Obviously, your goal should be 0%, but no one said it's an easy feat. To keep your churn close to zero, you should never stop tracking it and treating this process as a top priority. It's pretty much like an online reputation management strategy. Don't you often check online reviews and answer them? Similarly, you should standardize a customer feedback loop and identify churn risk before it's too late.
Once you know who is close to leaving you, you can start communicating more. You may arrange an interview so you can talk at length about their worries and problems. For example, they may not be happy with your onboarding communication. This allows you to fix your practices and start showing more attention to buyers during this period. Remember that churn has nothing to do with your selling skills. Unless you show buyers that you value and respect them, they will opt for your competition.
Key Takeaway
Customer churn and retention are two burning topics for most B2B businesses in the competitive landscape we operate in. Increased churn hurts your business in so many ways. Your brand image suffers, and your expenses rise to generate targeted leads. So, make sure you are promoting a product to the right audience and your website is user-friendly and accessible. Once you get a sale, don't sit back and exhale. Start working hard toward maintaining an open communication path with customers, answering questions, and offering onboarding guidance. Check who is close to churning and ensure they don't. Retention campaigns help engage with people and offer them incentives.
But, to reduce customer churn and generate new customers, it takes more than just including your company in directory submission sites. You also need to include reviews and testimonials. So, make it your mission to create feedback loops and request your clients' opinions.
