Why You Have Customer Churn and What You Can Do About It
Read all about why you have customer churn, why this metric is more important than customer acquisition, and what you can do to reduce it.
Churn. Don’t you hate that word? Churn. What’s the usual knee-jerk response to customer churn? Acquiring more customers and closing more sales.
But that’s not the smart response. Just take a look at this killer example from Gainsight which totally elucidates why customer acquisition, while important, isn’t the customer churn slayer:
The metrics are almost identical, but the customer churn rate of Retention Inc. is 15% lower than that of Churn Co. As a result, Retention Inc’s revenue is 40% greater than Churn Co’s revenue. This gap only gets wider as the years pass.
As you can see in the long run, customer churn will win – unless you play it smart.
So what is the smart response?
Noah Fleming, Marketing Expert, Consultant and Author said in a recent article “ The problem, I think, is too many organizations have been overly-inspired by Alec Baldwin’s classic “Always Be Closing” speech in the film Glengarry Glen Ross. I don’t believe you “close” a sale— you “open” a relationship.”
Right on Noah! That right there is the key to killing customer churn – opening relationships.
But there’s no point offering loyalty points to your customers, only to find out your customer churn hinges on your poorly structured onboarding flow.
Before you rush out and start trying to open relationships with all your customers, the first port of call is to find out what is causing your customer churn.
Customer Churn expert Brian Rogers wrote in his e-book, “A Simple Guide to Churn Analysis”, “It’s very typical to find customers who will churn at a higher rate during the beginning of their subscription compared to a few months in. This can happen for a variety of reasons such as poor expectation setting during sales, sudden shifts in priorities, poor onboarding program, poor support, etc. As customers mature, their churn rate will stabilize.”
Key point there – as customers mature their churn rates stabilize – why? Because you’ve built a relationship with them. A recent survey found that businesses believe that 70% of their revenue came from loyal customers.
But while ramping up your customer loyalty programs will help to keep your customers loyal, you do need to make sure you find out the reason for your customer churn.
Four big reasons for customer churn
Bad Customer Service
Everyone has the memo, customer service is the new marketing. But what is the definition of bad customer service? You might think it’s a rude representative, someone else might think it’s long hold times, it varies.
42% of people surveyed by Zendesk said that their definition of bad customer service is having to speak to multiple agents and starting over every time.
You’ll be surprised to know that this reason trumps “rude representatives” which only got 13% of the vote.
According to this survey, your customers would rather talk to a rude (but efficient) representative, than have to repeat something over and over again. Although, I don’t recommend testing this out.
How to deliver better customer support
- Make sure you have transparent internal communication. This ensures that if customers have to be handled by separate representatives, each representative knows the customer’s story. You can achieve this by ensuring all your customer data is in sync across the sales, marketing, and customer care platforms, so your team has access to the most up to date information when they need it. (Psst! PieSync can help you sync your customer data. Read more about the benefits of syncing your customer data here.)
- Brush up on the 5 critical customer service skills.
- And implement a customer recovery plan – in the event of a customer service disaster.
A lot of businesses go overboard with the onboarding. Some spam their new customer to death with so many trigger emails, that the customer gets annoyed and opts out. Or worse, some businesses drop the ball entirely; perhaps their onboarding process for the product isn’t clear or it’s complicated and requires more hand holding.
While some customers will tell you what’s wrong (this feedback is gold!) a majority won’t say a thing. They will simply click “unsubscribe” and not bother with you again. Fin.
How to improve customer onboarding
- Use tools like Walkme to guide customers through the onboarding process.
- Test your onboarding experience with services like UserTesting.
- Get inspiration from UserOnboard’s teardowns. They walk you through the onboarding process of big names like ZenDesk.
Your Product is Missing Something
It can be that your product is also missing a critical feature that your customers want. Listen to your customers. If you keep getting the same message over and over again “Great product, but you really need feature X.” Figure out how to implement feature X, pronto.
Natural Customer Churn
Every business, even the best and biggest, have natural customer churn rates. Customers no longer need your product for a variety of reasons. Often there’s not much you can do but be dignified and let them leave with a pleasant memory of using your product and dealing with your company. After all, studies have found that customer who have purchased from you before, and then come back later spend on almost two times as much as first times customers!
One big tip is to always ask the customer why they are leaving. Whether you send a customer exit survey, or a friendly email asking them to respond, this information can provide deeper insight.
Ruben Gamez, Founder of Bidsketch, takes the exit survey a step further, and holds exit interviews which he calls “Jobs To Be Done Cancel Interviews.” The aim is to dig deep into the reasons behind customer churn and gain actionable insight. Gamez says,
“In the past, we relied heavily on exit surveys that people fill out as they’re canceling their account. Initially, we made this a freeform text box that we would manually export into a spreadsheet, and categorize (to quantify the data). This gave us some actionable information but eventually, we moved to doing deep dive cancellation interviews (45 min to 1 hour) with people that canceled.”
Gamez says that the focus of the interviews isn’t why the customer left, but on what they did. In other words, the focus is on their story. “The focus is on the story of when they first started to struggle with the product, and all the way through to them logging into cancel,” says Gamez. “By focusing on the actions, the “why” becomes pretty clear and you get much deeper insights into what’s causing retention problems.”
Also, read Groove’s excellent blog post “What I Learned Talking to 500 Customers in 4 Weeks.”
Great, so you now know why you have customer churn and hopefully, you’ve fixed the most glaring problems. That doesn’t mean you can kick back and watch the cash roll in. It means you have to continually earn your customer’s loyalty.
Gauge Customer Happiness
No news is good news, right? Wrong! While you’re calculating your MMR you customers are calculating how much your service is worth to them. Your customer may love your product, but a more engaged competitor with better deals could steal them away!
Here’s a hard fact for you: 86 percent of consumers will pay more for a better customer experience. The message is clear; when it comes to customer service, step up your game.
The first step to keeping your customers is to find out how happy they are. One way to find out about customer happiness is to take a look at customer reviews on review websites like GetApp.
Not only can you see how happy your customers are, review sites are great for boosting social proof that your product is worth the money/time investment.
You can also use Net Promoter Scores (NPS) to find out how happy your customers are. Christian Sculthorp, Marketing Director at AgencyAnalytics told me that NPS have reduced customer churn by 20 – 30%! Unlike many surveys which can be intrusive NPS are simple and non-invasive. Your customers simply indicate on a scale from 0 – 10 how happy they are and can also give commentary.
According to the NPS, customers who give a score 9-10 are your promoters – you want to hang on to these ones. Passive customers 7-8 they’re ok with you but they don’t totally love you. Any score under 6 is detractors.
“We label anybody with a score of 0-6 as high priority and make sure they’re taken care of immediately,” says Sculthorp. “Many times we’ve found that their complaints or requests are already taken care of and they just didn’t know how to do it with the software. We explain it to them and those people are rectified and will stick around. If the request or complaint is valid we add it to a Google Sheet and use it to form our company features roadmap.”
Sculthorp is right on the money when it comes to solving customer problems as soon as possible. Research shows that customers who have had a problem, and the problem has been successfully solved, are more likely to stick around than customers who have never had a problem.
Bill Price, Amazon’s first VP of Global Customer Service says, “Customer satisfaction is everything.” Or is it?
Don’t fall into the trap thinking “Ah all my customers gave me a 10 on NPS, I’m done!” The truth is, your work has only just begun.
Make it Super Easy
Research from HBR has found that customer loyalty skyrockets if you can help your customers solve their problems easily.
This boils down to convenience. Customers want convenience.
This factor is so important that it is worth spending the time and effort on making your customer experience effortless. Customer Service Expert, Shep Hyken, has pointed out in a recent article that customer convenience “…is becoming so important, that I’m willing to separate it out (from customer service). There are businesses that use convenience as their sole competitive differentiator.”
Think of Amazon and the amazing convenience they offer. They have Amazon Prime to ship your order to you without charge, Amazon Echo so you only have to speak out loud what you want – whether it’s Chinese Takeaway in half an hour, or to add toilet paper to the shopping list, it’ll instantly fulfill your wishes.
Convenience is a huge issue for customers and they will stay or leave based on this one factor alone.
You can use the Customer Effort Score to find out if you’ve made the customer experience easy enough for your customers.
Drop them a line
There is one statistic that has taken on biblical proportions because it’s so true: for every customer who complains there are 26 others who remain silent.
You’re not entirely powerless in the face of this. You can open lines of communication with your customers and invite them to talk to you.
Check-in and send an email to see if everything is going ok with the product. Here at PieSync we ask our customers three key questions:
- Is PieSync doing everything you expected it to?
- Is there anything missing in this integration?
- Are you happy with this sync solution?
It’s surprising how often we get in-depth answers to every one of these questions. It not only helps us with our development roadmap, it also gives us the opportunity to address customer concerns.
Show them how much you’re worth
You’ve got to prove to your customers your worth the investment. This is paramount if you have a service that works quietly in the background. You end up in a situation where customers forget that you exist until the next recurring payment pops up.
At the end of the month, we send our customers reports. These reports contain stats showing hours of work we’ve saved them, and how many contacts we kept in sync for them.
Find out what stats you can share with your customers that reflect the value of your product. Your customer needs to know that they’re getting value from your product. When customers see those numbers, they’ll think twice before hitting the “cancel subscription” button.
Customer churn is a metric that directly affects your bottom line. If you improve your customer churn rate, you’ll increase your MRR – I promise!