Analysing customer churn to reduce churn rate
Acquiring and losing customers is part and parcel of any business, but the success and failure of your business depends on how you deal with losing customers. Therefore, focusing on customer churn analysis — understanding how many customers you have lost over a period and the reasons behind the loss — is essential for your business.
But what difference does it make if you lose a few customers? As it turns out, acquiring new customers is five times more expensive than retaining existing ones, which costs companies $1.6 trillion annually. Moreover, 80% of a company’s revenue comes from 20% of existing customers. Therefore, it is crucial to keep an eye on customer churn and work towards reducing churn rates.
Predicting customer churn
To predict customer churn, you need to understand the reasons behind the churn, which include:
- Poor customer service and feedback
- Onboarding issues
- Rigid pricing
- Limited features
- Lack of customisation
- Complicated interface
- Lack of scalability
- Too many technical bugs and errors
- Security threats
But customer churn is not a random event. Before you lose customers, there are indicators — usually a series of unsatisfactory events — that customers are likely to cancel a subscription, leave the service, or avoid purchasing the product in future. Some of the common indicators to look out for in customer churn prediction are:
- Decrease in product usage and interactions
- Lack of adoption of key product features
- Product failing customers’ expectations and satisfaction
- Reduction in support requests and engagement
- Poorer financial health resulting from product downgrades, delayed payments, or cancelled contracts
Monitoring these indicators helps you to predict customer churn and to develop strategies for prevent such a churn.
Strategies to reduce churn rate
The churn rate formula is (number of customers lost)/(total number of customers at the start of the time frame) x 100. Most managers recognise the significance of customer churn and the relevance of reducing it. However, far too many teams focus their efforts on introducing new services and acquiring new subscribers without thoroughly understanding how those improvements would affect existing customers and minimise churn. In addition to tracking and analysing customer churn indicators, some of the strategic steps to reduce customer churn rate include:
Deliver a good first impression:You have probably heard it a thousand times that first impressions last. When it comes to your product, your only chance to deliver an excellent first impression is in the onboarding process. A seamless onboarding experience — that provides a quick overview of your product and a simple start — goes a long way in making a good first impression, engaging with new customers, and convincing them to opt for a long-term commitment.
Focus on creating competitive advantage:Customers will have plenty of questions about the quality of your product. Reduction in customer churn is directly correlated to satisfactory answers to these questions. From competitive pricing and customisable features to constant upgrades, you have to focus on creating a competitive edge that would be advantageous in the long run and reduce customer churn rate.
Provide exceptional customer service:Customer service is a crucial component of customer experience and plays a critical role in customer retention. If your customer service executives resolve customers’ queries — with a quick turnaround time — you can ensure that the customers are happy and satisfied. It is also a great way to stand apart from the competition and reduce customer churn rates via higher customer satisfaction scores.
Communicate proactively to create customer community:Communicating with your customers is the key to reducing customer churn. This may mean proactively reaching out to customers to offer your services, highlighting key features that might interest your customers, outlining their journey, inviting feedback, or inviting them to a community of users. With this, you can not only engage with the customers but improve your value proposition and reduce the churn rate.
Analyse why customers are churning:No matter what you do, some customers will leave. But you can use this churn as an opportunity to understand why the customers are leaving, get feedback on reasons for leaving, and understand the indicators for the churn. You can use these insights to better predict and prevent churn for future customers.
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How can Infosys BPM help?
Infosys BPM Customer Care Services offer support through the customer lifecycle across multiple channels. With services like general enquiry, sales support, technical support, collection, up-sell and cross-sell, and retention and loyalty management, you can prioritise customer requirements, monitor end-user interactions and customer satisfaction to analyse, predict and prevent customer churn.