The Secret to Reducing Churn
Customers cease doing business with you when they are unhappy. It’s that easy. The more clients you lose, the slower you expand. Customer churn needs to be addressed if you want to maintain your current clientele.
The churn rate calculates the percentage of customers that terminate their contract with a firm within a specific period. Monthly, quarterly, and yearly are the timeline to measure churn rates depending on the sector and the products/services you’re selling. Most firms are selected annually as the perfect parameters, but those who provide gym membership, technology, Software as a Service (SaaS), and mobile phone providers will look monthly.
We can see churn everywhere, but it is more likely happening in SaaS companies due to their business model. To attract customers using their services, many companies offer free trials to learn and know more about their services. But even with this benefit, they choose to leave due to several reasons: (1) changed to a rival as a result of more favorable terms or service, (2) your products/services couldn’t satisfy their demands, and (3) feeling bewildered since the products/services were not as simple to use as your sales staff advertised.
”Your company will be significantly impacted by customer turnover since it affects revenues and profitability. Surprisingly, more than 2 out of 3 businesses have no plan in place to keep customers from leaving.”
Many business leaders elect to track and report the opposite of churn rate — how many customers remain (customer retention). In addition, some investors also look at it as the KPI to determine if the organization is healthy or not. According to Gravy Solutions, around 40%-60% opted not to continue its service. As a result, since retaining customers are very critical to them, Harvard Business Review believes reducing churn by 25% can increase profits up to 95%.
Why is it so important? It costs you much less money to retain your customer and incredibly 5 times more to attract a new one. When we talk about acquiring new customers we are also referring to your time and effort.
- Honeymoon period
Married couples will understand how simple it is to concentrate on the monumental event- a wedding followed soon by a honeymoon — the young couple’s two-week exciting honeymoon trip. Of course, there was a connection before the wedding and honeymoon; it is the same relationship that, ideally, will continue for a very long time.
The consumer journey is no different. Undoubtedly, closing the sale is a significant event. However, the consumer had to travel a distance to get there. Customers interacted with various people, procedures, and information in the weeks leading up to the big event — the sales funnel. Get the entire experience plotted out and organized, from the first contact through the handoff and well beyond, if you want to guarantee that onboarding is a honeymoon for consumers.
2. The Essential of Customer Onboarding Strategy
- Post-sales must be aligned with the pre-sales expectation
A client will churn more quickly if there is a preeminent disconnect between expectations and promises made during the lead generation stage. The idea is to synchronize the post-sale (Success) and pre-sale (Sales and Marketing) parties to ensure that expectations are satisfied. During the lead generation and nurturing process, customers become incredibly enthusiastic about a new product or service, only to be disappointed after making a purchase. To avoid this, we suggest people follow Kotler’s “Three levels of a product” as marketing strategies. (Figure 1).
Figure 1. Kotler’s Three Levels of a Product. Source: (Marketing Insiders, 2015)
- The KISS principle.
Besides, providing your clients with too much information at first might result at the same time can increase customer turnover for your business. Robert Kiyosaki, the author of one best-selling book: “Rich Dad, Poor Dad,” suggested using the KISS principle, an adage borrowed from the US Navy, because people frequently take things at face value. KISS stands for “Keep It Simple, Stupid” in its own right. The simplicity and directness of the message make it easy to understand for everyone.
Slack’s onboarding process is the perfect example. After registering, users are immediately presented with an onboarding situation and a few straightforward alternatives. They will start exploring the product after responding to a few simple questions. Slack also adds many values to its onboarding process with knowledge base articles, FAQs, and new-user webinars.
- Short conclusion, onboarding should be smooth, simple, and practical
Smooth, simple, and practical are three “keywords” for the onboarding procedure that clearly describe how to use your goods and emphasize their value at each step. In short, customers want quick and painless experiences onboarding process.
3. Ways to reduce churn
- Email Optimization
Email is one of the things that can be easily controlled and proven to be effective. Emails written at a third-grade reading level receive 14% more replies than emails sent at a college level, according to Boomerang. Aside from reading, they also suggest several things: (1) ask one to three questions; (2) include a topic line in your email, please! (ideally use 3–4 words); (3) use a tad bit of positivity or negativity; (4) exceed an entirely neutral tone; (5) take a position! Messages with opinions receive more responses than those that are neutral; (6) write just enough — not too much. Attempt to limit communications to 50–125 words.
- Is it possible to predict churn?
Data from the past is the fundamental foundation for forecasting future customer turnover. First, examine the information from already-churned consumers (reaction), their traits, and actions (predictors) before the churn. To anticipate the response of current customers by constructing a statistical model that connects the predictors to their reactions.
- Managers’ common mistakes when using it
HubSpot COO Erin Avery identified four blunders companies make when examining customer churn rates. By seeing the turnover rate as a given rather than an opportunity. The second is to stop thinking about turnover rate as a behavior prediction and start thinking of it as a statistic or measure. The most creative businesses use turnover rate data as a chance to prevent client loss rather than merely accept it. Third, marketers frequently become too focused on turnover rates since they think there is a magic number. Lastly, businesses often fail to understand the value of their customers because they stress costs up front and then see customers leave when they find a better deal elsewhere.
- Implementing data analytics as the basis (SaaS)
To avoid the mistakes above, many SaaS nowadays can assist and reduce this problem in different ways. Business Analytics, CRM, and DMP are proven tools to help clients reduce customer turnover rates. Mobile Premier League (MPL) is one of the latest gaming startups, which successfully addressed these problems with the assistance of CRM companies.
Conclusion
In conclusion, fixate on the root of the problem, whether it is an acquisition or a retention problem. First, always consider the clients you want to target, and concentrate on attracting the proper ones. The objective is to acquire and hold onto those customers who are both valuable to you and to whom you can offer value. Therefore, you will have a sustainable and robust business model that can overcome many uncertainties in the future.
To find out more about the definition of some words, please check the glossary.
