Companies spend most of their time and revenue attracting new customers and turning them from a lead to a marketing (MQL) or sales (SQL) qualified lead. If you don’t retain the customers you’ve gained, all of your money and efforts are wasted. Customer churn can not only cost you time and money, but it can also slow your growth, hurt your brand and decrease the success of your business.
Calculate Customer Churn
The first step to reducing customer churn is to calculate it. You can’t reduce something that you don’t measure. There are two ways you can measure churn: customer churn and revenue churn (also known as MRR churn rate). Before you calculate churn, let’s define it. Customer churn occurs when customers or subscribers stop doing business with a company or service. Revenue churn is the measure of lost revenue. Aka, customer churn tells you if you’re good at retaining customers and revenue churn tells you if you’re good at retaining customer revenue.Don’t let your customers churn & burn! Let @kilterly help you increase your #CustomerRetention. Click To Tweet
Customer churn should be calculated on a monthly basis, but some companies choose to do so quarterly or annually. The ideal customer churn rate is 5% or below. Reducing customer churn by 5% can increase your company profits by up to 125%. Everything is about the bottom line, so by reducing your churn, you will increase your profit margin significantly.
How to Calculate Customer Churn:
Customer Churn Rate = (Customers at the start of timeframe – Customer at end of timeframe)/ (Customers at the start of timeframe)
How to Calculate Revenue Churn (MRR Churn Rate):
Gross Revenue Churn Rate = (Revenue lost from existing customers during the timeframe)/ (Revenue at the start of timeframe)
Discover At-Risk Customers
Some customer groups and behaviors are easier to predict that they’re going to churn than others. It is difficult to discover the behaviors proactively in order to take the necessary steps to retain at-risk customers. Understanding which customers are at-risk of churning will help you to give them the attention they need, at the right time, while strengthening your relationship with them.
More companies are using customer journey analytics to improve their ability to identify their at-risk customers. 88% to be exact, according to a recent Forrester survey. By gathering an understanding of data-driven customer preferences, it’s easier to identify and prioritize different ways to improve. Customer journey analytics can help identify which of your customers are most likely to churn, so you can prevent it from ever happening in the first place.
At-risk customers, they’re not gone yet – there’s a lot you can do to change their minds and keep them from leaving.
Engage With Customers Through Preferred Channels
The preference for self-service and digital options is becoming more well-known, specifically for online chat and mobile apps. More than 6 in 10 customers say that their go-to channel is a digital self-serve tool such as a website, mobile app, voice response system or online chat. Communicating with customers through their preferred channels will increase your likeliness of retaining your customers.Reduce #churn and increase #retention. Let @kilterly give you the tools you need! Click To Tweet
3 Ways to Communicate with Customers:
- Social Media – 7 in 10 internet users are active on social media. So if your customers spend the majority of their time online, why shouldn’t you?
- Satisfaction Survey – Short, open-ended customer surveys allow your customers to voice their opinions in an appropriate manner.
- Feedback Bar – Incorporate a feedback bar into your software to allow your customers to ask questions, leave comments or provide feedback on the product or features.
Focus On The Most Profitable Customers
Another way to reduce customer churn is to direct your attention to the customers who are least likely to leave you hanging. It would be a large misspend of resources (and revenue) if you are attracting the wrong people. It costs 5 times more to acquire new customers than it does to keep the ones you currently have. With that being said, it should seem like a no brainer to focus your efforts and funds on nurturing your existing customers.
Identify who your most profitable customers are by:
- Tracking how much the customer has spent with your company over a given period of time
- Discovering which customers have the highest number of referrals
- Understanding which customers bring in the most sales by sharing your products through an array of platforms
Reducing customer churn requires a consistent amount of focus and effort over a period of time. Don’t allow churn to take advantage of your company’s time and money. Reroute your company’s course of action and apply the ways we tapped into above to start reducing your customer churn today.
Are you looking to reduce churn in your company? Sign up for a demo and see how Kilterly can help!