How to Identify Why Your Clients are Churning (and Why it Matters)
The goal of every marketer is to acquire more clients, and one of the easiest ways to bring your customer numbers up is to keep the numbers from going down. Reduce churn. It might be the lowest hanging fruit out there for marketers to grow their businesses client base. The old aphorism, a penny saved is a penny earned comes to mind when thinking about reducing churn. It seems less praiseworthy for someone to save a customer rather than acquiring a new customer, but the results are identical. More income.
Just to make sure we're all on the same page, customer churn is when a consumer, user, follower or subscriber ceases his/her relationship with a company and stops using its products or services. This is also called customer attrition. If you don't spend a serious amount of effort focusing on customer retention, then you've missed some incredibly low hanging fruit and I suggest you immediately invest in a customer success manager. I assure you, it's less expensive to keep existing customers than to persuade new ones.
The fundamental idea of making strategic business investments is to get a return on investment. That's why your principal aim should be to maximize your retention rates. The ROI and LTV (lifetime value) for a customer will grow exponentially. Think about it this way. If you can prove the LTV of the average customer is higher than you can afford to spend more to acquire a customer. Marketing budget can increase and sales team pressure won't be as high since it will be easier to outpace the attrition rate.
If you're interested in additional customer retention suggestions, Help Scout has a great customer retention guide that gives some additional instruction.
Now that I've beaten in the importance of client retention, let's dig into the reasons why your clients are churning.
1. Patchy or Broken Service
Regardless of whether or not customers understand the dynamics of a particular business, customers will abandon ship if they perceive that your product has unsatisfactory functionality or if the service is patchy or broken. Customers pay money for something they can trust to function. Regardless of where the blame lies, it's important to note that customers churn primarily because of patchy or broken services. Ask DirectTV how many people switched to Cable after a thunderstorm.
Action Item: Keep your ear to the ground and listen to reviews on the internet and listen to user feedback. A broken product is an obvious reason for attrition, but it's surprising how many times people ignore poor reviews or ignore user feedback.
2. Competitors: Pricing, Trust, or Better Tools
Your competitor is one of the biggest reasons for customer churn. Competitors have three primary value propositions to entice your customers away from you.
- You can depend on our service being better or more dependable. If your tool has a patchy streak or a known broken feature then the competition can easily tell someone that the problem wouldn't exist if they used their service.
- The price is cheaper and you'll get the same tools. Regardless of how your competitor matches with your own service, the price will always entice customers to leave you when they see a lower price tag. This is why promo offers are so powerful in acquiring customers. If a customer isn't satisfied, a low price tag can convince someone to test out something else.
- Your competitors offer more value either in things like customer service or in its tool capabilities. SaaS companies are constantly adding tools to their toolbelt, so one of the ways you can prevent churn is to keep evolving as a company. Offer additional tools and services or double down on a niche and provide the best service possible in that niche.
3. Loss of Trust
Deliver what you promise. Heck, overdeliver what you've promised. Clients want to work with people they can trust. If your clients can't trust you then your clients will leave you. One of the biggest lessons I've learned from freelancing is that you'll keep your clients and even gain referrals if your clients can trust your word.
Action Item: If you can take it a step further and provide something your clients didn't even expect, you gain loyalty, and loyalty is the cheapest marketing in the world. You'll retain customers and you'll add to your fan base.
4. Lack of Engagement or Perceived Value
If your clients are using your service then it won't take long for them to cancel the service. There are countless reasons a customer will stop using your service, but suffice it to say that the general reason is a lack of perceived value. If the customer really believed in the value of your service then they would be using the service.
Action Item: Provide an abundance of opportunity to educate the customer on your service or tool. Create webinars, email touches, knowledge centers, and blog articles that all aim to enforce the value of your company while lowering the barrier of entry for customer success.
5. Poor User Experience
As weird as it sounds, it won't matter how great your product or services if the tool is too difficult to use. One of the best industries to exemplify this is in CRM software. One of the best CRM's out there (regardless of the power of the tool) is Copper. It's incredibly difficult as a business owner to force your sales team to adopt a customer relationship management tool, primarily because of the incredible complexity that many CRMs offer. Copper does a fantastic job of making the tool easy to understand, and they've grown a lot in the past couple of years as a result.
Action Item: As a SaaS company Invest in UX. In general, invest in things that improve UX. You'll retain a lot more customers if you make the experience enjoyable. Humans aren't always convinced to do something based on what is most effective. I can't tell you how many times I've chosen a business over a competitor just because my experience was amazing. I'll eat at subpar restaurants and user more expensive services just for the experience. Smile more, add color, show some personality. Do things that make a customer's experience better.
6. Bad Customer Service
One of the biggest mistakes made by companies is in reducing resources directed to good client attention. It's imperative to deliver excellent customer service. According to 2011 Oracle report, 90% of client's churn in The USA is focused on Customer Service. Even 86% of them will pay more for better customer service.
- 89% of consumers began doing business with a competitor following a poor user experience.
- 79% of consumers who shared complaints about poor customer experience online had their complaints ignored.
Action Item: If you want to avoid bad customer service: Be friendly and polite, Give fast and precise answers, Never leave ringing the phone for long, Be human and social, Get conscious about what customers want (what make them feel the love). Improving your customer service gives you more than a slow down churn, it can provide your business with the ability to charge more. If you accomplish this, your clients will be happy to reward it, even by their references you could gain new leads.
7. The Product Doesn't Fit
You can't always prevent churn, and sometimes you need to let a customer go. People sign up for services and later discover that the service doesn't really satisfy their needs. As a business, you need to make sure the customer understands your service, but avoid being a pesky salesperson that harms a relationship.
Action Step: Understand your customer and care about their needs before your own. Business, like love, is about putting others before yourself. The world would be a better place if we all followed this advice. Regardless of whether you could squeeze out an additional sale by providing an unnecessary product for a client, it's more important in the long run to focus on improving brand image by treating others well.
It's important to identify customer churn because churn is an indication for growth opportunities for your company. If you are losing customers, it's important to understand why you can't keep more of your customers. If you invest in churn research you'll understand your product better, your customers better, and you'll understand the competition better.