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What is Customer Churn and How Do You Reduce It?

What is Customer Churn and How Do You Reduce It?

In today’s digital consumer world, it’s a lot easier to acquire new customers than to retain existing ones. But if you could figure out how to get your customers to stick around, you have a great chance of building a successful business.f

If you’re dealing with churn, know you are not alone. There is not a single business that has never lost a customer. Every company deals with it differently: some quickly start looking for new customers to replace the loss; others put all their energy into analyzing what went wrong and how to stop others from running away.

Calculating churn rate

Here is the formula to calculate your churn rate:

Churn Rate = total number of customers lost / total number of customers

For example, let’s say that you started the month with 500 customers and lost 25. That would give you a churn rate of 5%.

Why Is Reducing Customer Churn Rate a Priority?

The truth is, if your churn rate is higher than your new customer acquisition rate, your business will struggle or even fail. Keep in mind, 80 percent of your future profits will come from just 20 percent of your existing customers. 

That is why it’s critical to implement strategies to reduce customer churn and increase retention.

How to Reduce Your Churn Rate

Step 1. Do a Retention Analysis

The first step to reducing churn is to dig deep to understand it. A retention analysis will help you better understand why your customers are leaving and offer insight into how to change it to keep more of them. There’s no doubt, it will take some time and effort to analyze your customers, but it’s critical so you could have the data you need to make changes to increase your retention rate

To get the most accurate data from your retention analysis, you’ll need to figure out the number of customers who are staying and for what length of time. Then figure out the number that leaves and at what point. Finally, you will want to track customer behaviors throughout their lifecycle to determine when they churn to figure out the cause. 

Creating customer personas will help you understand who your customers are and are able to personalize ads for the various groups. You also want to track each action the customer takes back to its acquisition source to evaluate which ads and sources are working best for retention.

Step 2. Customer Retention Strategy

Once you complete your retention analysis and understand your customers better, the actions they take, and when they churn, you should implement changes to reduce churn. Common reasons for customer churn that you should include in your retention strategy are:

Provide Unbeatable Customer service 

We all know companies that are known for their phenomenal customer service, like Zappos. When you provide exceptional customer service, your retention rate will easily be higher than others with mediocre service. 

Mindful consumers today are willing to pay slightly more for products and services in exchange for great service. If your customers feel valued, appreciated, taken care of, and have a positive experience with your brand, they are more likely to become loyal to your brand and won’t be easily persuaded to go to a competitor. 

If you want to grow your business and reduce churn, ensuring your customers are happy should be a top priority. 

Even if a customer is returning a product, if they receive excellent service, it will leave a lasting positive impression and possibly come back. Savvy consumers nowadays, especially millennials, expect service quickly and from all channels, including phone, email, SMS, live chat, and social media. With the internet so easily accessible, many customers do their shopping at all hours, even when your business is closed, and expect great service fast then too. 

The most successful businesses have customer service agents available 24/7 through all the typical channels used. If you don’t have the means to hire full-time customer service agents in-house, not to worry, outsourcing is an effective solution. When you outsource your service, you have agents who specialize in providing excellent service and making customers happy, which adds to a positive buying experience to reduce churn.

The truth is, if a customer receives bad service or products, only 1 in 26 will complain – the rest will churn without you even knowing why. The higher the churn rate, the more negative impact it has on your business. An unhappy customer will tell around 9-15 people about their poor experience with your company, leaving a bad name for your brand. 

Your Site Must Be User-friendly 

You have experienced trying to navigate a website or app and ran into roadblock after roadblock where you were unable to get the information or make the purchase you wanted, so you just left the site. It’s so frustrating and a great way to lose a customer. 

A user-friendly site is crucial for the success of your business. You will have high bounce rates and frustrated customers if your site isn’t easy to get the information needed and quickly purchase. 

If your site is currently getting high bounce rates, it’s a smart idea to invest in a new site for the future success of your business. 

To add to a positive buying experience for your customers and reduce your churn rate, you need to make it super easy to make a purchase. One way to do this is to save your customer’s information and payment details to their account so they could just log in and click a couple of buttons to complete a purchase.  

Step 3. Build Relationships

Naturally, when customers feel appreciated and valued, they will go out of their way to please you. If you show them how much you mean to them, they are more likely to become loyal, reducing your churn rate. 

A great way to show appreciation is by creating a loyalty program and promoting it to your customers. A loyalty program will encourage them to continue purchasing through you to gain rewards and reduce your churn. 

When you analyze your customers, you will have a better understanding of their buying habits and personalize offers and campaigns to keep them coming back for more. 

The Takeaway

Customer churn sucks, but it happens to even the best of businesses. Thankfully, there are ways to reduce customer churn and build more loyal customers. Doing a retention analysis will give you the insights you need to understand your customers more and when they churn. Then, with the data you receive from your analysis, you can make tweaks to your processes to reduce your churn rate. 

If you offer competitive pricing and great products, the main reason many customers churn is their experience with your brand. A positive customer experience includes the ease of using your site and making a purchase and exceptional customer service. The idea is to build close relationships with your customers so they love your brand and become extremely loyal where not even cheaper products or services will make them churn. 

Here at Awesome CX, we provide first-class personalized customer service 24/7 through phone, email, live chat, SMS, and social media. We will handle all of your service requests and wow your customers with exceptionally friendly service quickly to help build a ton of extremely loyal customers for your brand to increase revenue and reduce churn. So contact us today, and we will show you how awesome we really are.



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