HOW TO REDUCE CUSTOMER CHURN

Every company that wants to grow must focus on ways to reduce customer churn. It’s never fun to discover that a customer you’ve been serving wants to stop being a customer. This is especially true because your company’s ability to reduce customer churn is tied directly to your long-term growth.

In this article we’ll dig into the fundamentals of customer churn:

  • Why is customer churn important?
  • Why do customers churn? And most importantly,
  • How can you prevent customer churn?

Why Is Customer Churn Important?

Customer churn is important because all companies need to retain their customers in order to grow. In the simplest terms, any time you lose a customer, your company has to work to win another just to stay in place. That means your marketing team, sales team and customer success team all have to work harder so that the company can hold its ground.

When companies can reduce customer churn, it means that every new customer helps your company grow. Instead of losing ground or treading water, you’re getting to the next level. This is true for all businesses, but particularly obvious in recurring revenue businesses, such as software as a service companies that sell to other businesses (aka B2B SaaS).

To understand how customer churn is impacting your company, you have to measure it. While customer churn is an important metric for all companies, at Alignmint we’ve seen leaders who wish to ignore or minimize churn. They make excuses instead of leaning into the important learning that comes from losing customers.

Actively evaluate your company’s churn rate. Having tools like a churn rate calculator or a churn rate formula are good starts – but the trick is to use them consistently.

It’s a little bit like going to the gym. Signing up for the membership doesn’t get you in shape. Only by showing up, week after week, will you see results. For companies, those results come from tracking and measuring turnover on a regular cadence.

Why Do Customers Churn?

Customers churn when they no longer trust you to help them succeed. Sometimes customers churn because of a major failure. Most of the time, however, they churn based on a number of small, preventable errors. We call that “avoidable churn.”

Sometimes churn is unavoidable. Companies go out of business or stop needing the products and services you provide. But that’s not the kind of turnover we’re talking about. We’re talking about avoidable customer churn, when you lose a customer due to issues at your company.

Avoidable churn is tied directly to trust. Ask yourself the following questions:

  • Can customers trust your team to deliver on its promises?
  • Are customers confident in your team’s quality of work?
  • Is your company creating barriers to trust in communication, product delivery or other gaps between what customers purchased and what they get in reality?

How Can Your Prevent Customer Churn?

Preventing customer churn begins by evaluating your answers to the above questions. Be vigilant to discover any gaps between expectation and reality in your customer’s experience with your company to achieve customer experience best practices.

Churn prevention begins by putting yourself in your customers’ shoes to identify the areas that need improvement. At Alignmint, we often find that companies look to their customer service teams as the singular place to prevent customer churn. The reality is more complex. Customer experience is a cross-functional discipline.

As stated in CMS Wire, “Customer experience is not a department. It’s a philosophy for engagement across all departments. It’s the role of company leadership to articulate and prioritize a company-wide initiative for CX. This approach must put customers at the center of the initiative. Anything less asks customers to care about your company’s structure, conflicts and culture.”

Once you understand the drivers of customer’s decisions you can begin churn management for better outcomes.

  • Align your company’s thinking about customer experience.
  • Develop a clear understanding of your customers, including what builds – or blocks – long-term loyalty.
  • Design a customer experience to enhance the loyalty builders and eliminate (or reduce) the blockers.
  • And finally, create playbooks that show every member of your team how to successfully deliver clear and consistent excellence.

With those four steps in place, companies prevent customer churn and achieve next-level growth.

Learn how to design your company’s path to next-level growth with Alignmint.