Why you have customer churn - and what to do about it

customer support reps analyzing customer churn

What if the biggest problem with your business was happening right under your nose?

Modern companies spend a lot of time and money attempting to bring in new customers. However, when they don't dedicate the same attention to existing customers, these companies may have a big problem in their hands with customer churn.

While a common reaction to rising churn rates might be to acquire new customers, that's not the smartest response to the issue – it's like putting a band-aid on a bullet wound. Instead, smart and customer-centric companies focus on customer retention and excellent customer experience throughout the journey.

If you're worried about your churn rates, fear not – here's how to identify it and change your approach to reduce the issue.


What is customer churn?

Customer churn is a metric that assesses how many customers you have lost within a given timeframe. As valuable as it is to know how many new customers you have brought in, it's equally important to understand how many customers you are losing and how many you are retaining.

By tracking the churn rate, you can effectively quantify how good you are at retaining your existing customers. And if you plan to initiate any customer loyalty programs in the near future, tracking the churn rate will help you generate and measure specific KPIs related to customer retention.

 

Why it's important to measure churn

The most basic reason why measuring churn is important is because it represents a tangible financial loss to your company. According to the US CallMiner Churn Index 2020, US businesses lose a staggering $136 billion a year due to avoidable customer churn.

In addition, measuring churn helps you assess how good your business is at keeping your customers and if you're providing them with a good experience. Considering that on average it's five times more expensive to acquire a new customer than to retain an existing one, investing in customer retention is a number-one rule that every business should follow. Not only does it make financial sense, but a strong customer-centric approach is a primary driver of business growth.


3 common causes of customer churn – and how to solve them

The reasons behind customer churn are different for each business. Here are some of the most common ones to help you identify where your organization might be having issues.

 

1. Poor customer service

Sometimes there is a direct cause-and-effect relationship behind your churn rate. For example, if your company hasn't invested enough in customer support, it's not surprising that your customers don't stick around. According to research by Zendesk, 66% of customers terminate their relationship with a business due to poor customer service.

In addition, research has found that a whopping 96% of customers will leave a company if they get inadequate support. And considering that switching companies is easier than ever, we can't stress enough that it's in every business's best interest to invest in customer service if they don't want to see their customer base flocking to their competitors.

If your customers need to wait a long time in order to get help, it's hard to reach your customer support team, there aren't a lot of options for customers to contact you (for example, the only way to reach your team is by phone), or if customers need to repeat their issue a dozen times to a dozen different people, your customer service could probably do with an improvement.

How to solve it

  • Make sure all of your customer support representatives are properly and regularly trained to solve customer issues.
  • Make sure customers can reach you in the most convenient way for them, such as enabling customer support by phone, email and live chat.
  • Install chatbots and other automations on your website to empower your customers to get immediate help on the most common and simple issues.
  • Sync customer data two ways between your tools. This will ensure that everyone in your organization can instantly access a customer's entire history with your company and help them much more quickly.

 

2. Your value proposition isn't clear

Another common cause of churn is that your customers may not fully understand the value proposition of your company, and it's not clear to them how you can help them. And if they see a competitor that seemingly offers better products or services, they are likely to make a switch.

In addition, it's possible that your product is missing a critical feature that would make all the difference to your customers.

How to solve it

  • Review the copy on your website to make sure your messaging is crystal clear and addresses how you solve specific problems for your customers.
  • Listen to feedback from your customers and communicate with them about updates to your product.
  • Publish plenty of educational content about your product to help your customers understand everything about it, such as blog posts, ebooks, videos, and infographics.

 

3. You're targeting the wrong audience

If you haven't figured out who your ideal customer is and how you can solve their specific pain points, you'll keep attracting bad-fit customers that are unlikely to stay with you in the long run – simply because they're not the ones who need you most. Meanwhile, the customers who do need your product are out there, unaware that you even exist.

Focusing on attracting a huge quantity of customers can also be an issue. If you're throwing everything at the wall and hoping something sticks, you're wasting a lot of valuable time and resources that could otherwise be spent on strategies that bring a better ROI.

How to solve it

  • Create a buyer persona that embodies everything about your ideal customer, including their background, pain points, goals, and any other information about them that is relevant to your organization.
  • Value quality over quantity. Target your marketing efforts at market segments that are most likely to benefit from your product or service.
  • Focus is key. Concentrate on generating quality leads to maximize conversion rates and bring in loyal customers that stick with you in the long run.

How to analyze and lower your churn rate

Identifying the root cause of your churn rate is just the tip of the iceberg. Here are some strategies that can help you carry out an in-depth analysis of customer churn and get it back on track. It's important to note that not every strategy will work well for every company, so keep your company needs front of mind to figure out what will work best for you.

 

Get in touch with churned customers directly

We pointed out that you need to figure out the cause of churn before you try to solve it. That is why you must analyze your existing customers and customer service to determine more exactly where the problem is.

It may be tempting to simply gather data with things like customer exit surveys. But this may cement the idea that your company doesn't want to directly speak to customers. Instead, try contacting churned customers by phone or email and directly ask them about their experiences.

This is a good idea for two reasons: first, it provides the most direct way to learn what has driven your previous customers away. Second, the very act of reaching out to your customers directly underscores their importance.

The key to getting this strategy right, however, is to actually listen to what your customers are saying and make changes. It's also important to communicate the changes you're making to your business and why you're making them – this kind of transparency goes a long way in letting customers know that you're taking their feedback into consideration. If what they're asking for can't be done, such as an additional feature to your product, let them know why and what they can do instead to get around the issue.

 

Educate customers

If you're hearing from too many churned customers that they're leaving because they don't understand enough about your product, it's time to start publishing more educational content.

For example, you might already have a brief product demo on your site. But consider adding a frequently asked questions section as well as instructional videos on how to best use the product. Your blog is also an excellent resource to use: make sure to publish regular blog posts about your product, as well as detailed product updates.

Approach everything from a customer-centric perspective: that means asking yourself what might confuse your newest customers. Even if something seems obvious to you, it might not be obvious to the end user.

It's also crucial to use clear, simple language. If you use a lot of jargon, complicated expressions or region-specific metaphors, you might only further alienate customers – no one wants to decipher a handful of jargon and buzzwords when they're looking for a solution to a real problem.

 

Increase customer engagement

At this point, you hear the term "customer engagement" so often that it may feel like nothing but a buzzword. In reality, though, better customer engagement is at the heart of any strategy to reduce churn.

Basic engagement means keeping customers in the loop about your products. This might come in the form of product updates, company news, newsletters, and even upcoming deals.

Customer engagement can also come from email marketing. This tried-and-true marketing strategy still works well, and it forms the cornerstone of most company's relationship marketing strategies. Email is likely to be the first touchpoint with new customers, after all, so you want to make sure you do it right.

And one of the best customer engagement strategies comes from social listening. This means monitoring references to your company across different social media platforms. You can selectively respond to these mentions to keep customers engaged and stay on their minds, even as you keep your finger on the pulse of people's sentiment about your company.

 

Identify churn risk

Some customers are at a higher risk of churning than others. In order to best utilize your resources, you should identify and focus on those who are most at risk and prevent churn before it happens.

You can start by identifying customers that haven't contacted you or purchased anything for a while. You can also identify any customers who have reached out for additional information and were accidentally overlooked.

It's also crucial to keep an eye on customer surveys, bad reviews and negative feedback. Identify customers who have reacted badly to your product or services, reach out to them directly, and respond to their concerns as soon as possible.

Simply reaching out to these customers via phone or email may be enough to bring them back into the fold. Or if they tell you what drove them away, you can take the opportunity to make things right.

Whatever you learn from these at-risk customers, you can use this to improve your marketing and customer service across the board.

 

Keep in touch with your loyal customers

While it's important to identify your at-risk customers and reach out to them, it is just as important to identify your most valuable customers. You also need to know what you're doing right, after all.

These are customers who shop frequently, take advantage of special offers, and generally exhibit a high level of engagement with your company. And it's in your company's best interest to go the extra mile in terms of offering the best service and support for these customers, as well as looking at what they like most about your company. You can use this information to set yourself apart from competitors and increase your value proposition.

 

Keep your customer data in sync between tools

Having accurate, up-to-date customer data in front of you at all times is key to increase your retention rates and put your customers front and center. The more you know them, the better you can serve them!

To ensure your customer care teams always operate with comprehensive and enriched customer data, use PieSync to sync your data between your customer support, sales and marketing apps, two ways and in real time.

This enables customers to have their questions answered promptly, allows customer service representatives to lighten their workload so that they can focus on solving more complex issues, and helps the company to spend less while offering more. It's an all-around win, no matter how you look at it.

Get started with a PieSync free trial to streamline your customer service and optimize your business results.

About Luna Campos

Luna is a writer and editor with experience in tech & creative media. She has come from Brazil to London to Ghent to join the PieSync team and sprinkle it with a bit of extra magic. She lives and breathes words, and uses her creativity and quirkiness to create amazing content for PieSync on all fronts.