When a new business sets its foot in the market there are many challenges in its way to survive and thrive. It's hard enough already to attract customers to try out your product/services and then once you do start gaining some attention and eventually start growing it is important to worry about one very important metric that is customer churn rate. It’s easy to understand what customer churn is, it is the percentage of your customers that eventually stopped coming back to your store or stopped buying your products or services over the period of time. There are many reasons contributing to this unfortunate event and there are so many benefits if you learn to control this from turning into a catastrophe for your business.
If you understand the importance of keeping it under control it can lead to:
Greater referral rate
Higher loan-to-value (LTV) leading to more customer acquisition channels
It is also important to understand that often businesses end up focusing too much on figuring out the reasons behind the churn rather than utilizing the opportunity to fix the problem and make amendments so that it can be controlled.
How do we calculate the customer churn rate?
Formula to calculate the churn rate is the number of churned customers divided by the total number of customers:
Number of churned customers/Total number of customers
Factors leading to customer churn:
Realizing the fact that your customers don’t just stop using your products based on a single bad experience, it counts, but there is always a solid reason behind their decision to turn their backs or leave negative feedback behind. Sometimes you just can’t do anything about it as some issues are beyond your powers to resolve however most of the time, issues raised by your customers can be addressed and if you are alert enough to successfully address and resolve the issues on time, you may strengthen the bond and reduce customer churn rate.
Some important reasons that lead to the churn:
1.Unpleasant customer experience: the most common and the easiest one to figure out. If your customer is unhappy or has gone through an unpleasant experience, they will eventually stop using your product. In reference to recent events, when the entire world is now almost functioning from their home offices, usage of online instant messaging systems like Slack has grown exponentially. If instant messaging applications like Skype are an alternative to the telephone, Slack has emerged as a virtual alternative for standing around the office watercooler or hanging out in the break room. Microsoft is also trying really hard to live up to the expectations of its users. The point here is that now providing high end, easy to access, dynamic, and futuristic products while keeping your customers in mind is more important than ever, long gone are days when there was lesser competition, and anyone could get away with bad customer service or faulty product features. According to a study published by American ExpressMore than half of Americans have scrapped a planned purchase or transaction because of bad service.
2.Poor customer support: delay in resolution of customer issues or lack of proper customer support services can lead to an increase in customer churn. Nobody likes to wait for their issues to get resolved. With technology updating, every day, and growing competition, improving your customer support system is the need of the hour. 33% of Americans say they’ll consider switching companies after just a single instance of poor service. According toAmerican Express
3.Lack of engagement: it can lead to a serious increase in customer churn rate, it can be fixed through multiple ways and the best is to introduce the NPS metric in your surveys. After all customer churn indicates that when a customer sees a loss of value in your product or service, they stop using them. When you use NPS you can figure out the number of detractors and reach out to them to understand further reasons behind their dissatisfaction.
The goal for businesses here should be to increase the perception of your service’s value in the eyes of your customer base before they go ahead and stop.
How to stop or reduce Customer Churn?
Understanding the churn and applying the formula is just the first step, there are more complex details involved and there is no easy way, however, in simpler terms, the customer churn rate can be reduced through innovation and improvement. According to facts, 69% of U.S. online adults shop more with retailers that offer consistent customer service both online and offline.Forrester
Using innovation to your advantage you can figure out ways to understand your customers' needs and what are the factors that can make them stick to your brand for longer, and one of the ways to do this is by giving importance to their feedback. Using platforms that provide you access to an intuitive interface, helps you see through the feedback and figure out the reasons behind customer dissatisfaction.
Improvement in your overall services, starting right from your products to your customer care services, when you make improvements customers will see and notice the changes. Businesses that look after their customers and make necessary changes in their system in order to facilitate them and promote customer-first culture end up winning back their lost customer base.
At Dropthought we believe that to build a sustainable relationship with a customer, we must value their feedback. We believe in building a situation-based and feedback-centric client engagement plan that will not only help businesses to leverage the data collected abundantly but also if done right this can turn into a long-lasting opportunity to keep your customers intact and keep the revenue bar up and running. Your customers can express their opinions through the surveys and provide suggestions about your CS team, product onboarding, and more throughout their customer journey. By doing this you are better able to retain your current customers