12 Proven Strategies to Reduce Customer Churn Rate

Did you know that focusing more on customer acquisition than on customer retention is one of the costliest mistakes made by SaaS and eCommerce businesses today?

In fact, such businesses are estimated to lose around $1.6 trillion per year due to customer churn. Here’s proof that customer retention is the main source of revenue for most companies:

Significant-Retail-Revenue-Drivers - how to reduce customer churn rate

Source: Apogaeis

Hence, having a solid retention strategy in place and reduced customer churn rates can give an immense boost to your ROI.

Customer retention overcomes all these challenges as it focuses more on nurturing your present customers by designing personalized content, offering the best customer service, and providing ongoing value. 

So, let’s find out what is churn rate and how can you effectively reduce customer churn rate.

What is customer churn rate? 

Customer churn rate,  also known as the rate of attrition, is defined as the percentage of customers who discontinue their subscription (product or service) within a certain time frame. 

Customer churn rate is vital to understand the health of your business and how important it is to solve customers’ problems.

It can be calculated by dividing the number of lost customers by the total number of customers at the beginning of the time frame.

Customer churn rate formula - how to reduce customer churn

For example, if you had 600 customers at the beginning of the quarter, and by the end of the quarter you lost 30 of them, then your customer churn rate would be 5%.

Reducing customer churn rate is one of the most crucial metrics to be followed while evaluating your customer retention strategy. 

It can give you eye-opening insights about your customer nurturing strategies and also about the overall experience you are providing to your customers.

Why is customer churn rate important?

Do you know that just a 5% reduction can increase your profitability by up to 25%? 

Hence, measuring churn rate metrics and preventing customer attrition should be one of your top priorities. But for effectively reducing your SaaS or eCommerce customer churn, it is important to understand the underlying root cause. 

So, before understanding how to avoid churn, it is important to understand why customer attrition happens. 

Factors effecting customer loyalty - how to reduce customer churn rate

Source: Harvard Business Review

Here are a few of the top reasons why customer churn can happen are as follows:

Poor client onboarding strategy and user experience

Are you facing customer attrition within a few days of sign-ups? This may be because of your shaky onboarding process and inadequate user experience.

If your customers fail to see the value of your product/service or find it not-so-user-friendly, then they are bound to abandon you within a few days, which is why a poor onboarding experience is another major contributor to increased customer attrition rates.

Low-quality product

This is a no-brainer. A poor quality product will kill your customers’ expectations and permanently drive them away. 

Think about it. You put in a lot of money and effort into acquiring new customers for your SaaS business. But if your product lacks quality or fails to match customer expectations, then you won’t be able to prevent customer churn at any cost. 

Lack of good customer support 

Staying with your customer and supporting them throughout their journey can be a big boost to your profitability. Unfortunately, very few businesses understand the importance of providing high-quality extensive customer support. This is why numerous SaaS and eCommerce businesses are unable to prevent customer churn.

12 Proven strategies to reduce customer churn rate

As it is clear by now that you understand the impact that decreasing customer churn can have on your revenue and brand authority. Here is  the quick summary of some actionable churn prevention strategies to effectively reduce customer churn rate:

  1. Offer the best in class customer support
  2. Analyze the reasons for customer churn
  3. Improve your product
  4. Focus on delivering great customer experience
  5. Develop a loyalty program to reduce customer churn rate
  6. Engage with your customers more and more
  7. Collect customer feedback regularly
  8. Measure your churn metrics
  9. Optimize your customer onboarding plan
  10. Offer a dedicated success manager
  11. Educate your customers
  12. Identify at-risk customers

Let us now discuss the strategies to decrease customer churn and retain customers for a lifetime.

#1. Offer the best in class customer support

The essence of a good retention strategy is to provide the best customer service support possible. When you help out your customer and lead them to success, the life-time value of customers gets automatically increased.

A case study on Mention reveals how enhanced customer support and increased communications with customers decreased their churn rate by 22%. This would have led to a multiple fold increase in their revenues. Such is the importance of good customer service.

real time customer engagement - how to reduce customer churn

Gone are the days when just being reactive was enough. 

A proactive approach to customer service is the need of the hour which is why all leading businesses are leaning towards this.

Here are a few ways in which you can provide top-notch support to your customers:

  • Real-time assistance – Providing live chat customer service to issues in real time will boost your customer engagement and satisfaction levels. This also changes your brand’s perception in the minds of your customers by making them feel more valued. 
  • Personalized support – Generic solutions to issues and FAQs can be misleading and might leave your customer confused and lost. Providing personalized customer services can be an easy solution for this and you may provide the same with the use of live-chat and video chat assistance.
  • 24/7 AvailabilityAI chatbots are one of the best and easiest mediums for 24/7 customer assistance. Integrating this with your product will be a huge relief for your customers. You can also use chatbots to assist them in making buying decisions in your favor.
  • Collaboration with customers – Co-Browsing is a super-powerful and innovative tool that will get you above mediocrity. Co-browsing software facilitates an easy platform for hassle-free communication and collaboration. You can use this to guide your customers through complex workflows and ease their usability.

#2. Analyze the reasons for customer churn

For handling the problem of increased churn rates, it is crucial to identify why your customers are churning.

Top businesses are able to prevent customer churn, not through wild guesses and trial and error strategies. Instead, they have a thorough analysis of all possible reasons for their customer churn and build a strong retention strategy around these findings.

So, how do you get to know the reasons for customer churn?

  • Send personalized exit emails and ask them for the reasons for leaving. Groove followed this exact strategy and reduced its customer churn rate by 71% by sending emails asking their customers for feedback while leaving.
  • Interactions with your customers at every touchpoint can help you to get down to the root cause of your customer attrition rate. The best way to go about this is to collect qualitative feedback from your customers through customer interviews and meetings. You can also explore other effective options like live chat for collecting customer feedback in real-time.
  • In-app messaging can also help you get accurate customer feedback at the right time. You can push in-app messages to your customers when they are engaged in a process and ask them to pin-point the exact issue. This will help you understand the reason for customer churn in a better way.

#3. Improve your product

At the end of the day, your product quality is what matters the most for retaining your customers. So your product should match or even surpass your customer’s expectations. 

For example, many SaaS businesses offer products that lack in features and usability when compared to their competitors. However, as soon as customers find better products in the market, they are bound to leave you.

So, in order to improve product quality, dive deep, and think about what is your key offering or what is your USP. How do you plan to help solve your customers’ problems and what is the unique thing about your product?

After that, you can start with detailed customer segmentation. You may segment your audience based on the following criteria:

  • Which industry do they come from
  • Based on customer journeys or use cases
  • Based on their revenue
  • Based on their needs, usage and features required

By segregating your customers in this way, you can improve your product quality and customer retention. Here are a few things you can do:

  • Improve product usability by eliminating unwanted complexity from the product. Something that can help with this is to chalk out your ideal customer persona and think about the features that they would want. Update your product based on these features. You give them exactly what they want, and it’s a win-win.
  • Fine-tune your product messaging so as to solve all your customers’ pain points.
  • Perform market tests and collect feedback from your customers or prospects. Make improvements to your product using this continuous feedback loop.

#4. Focus on delivering great customer experience

Throughout the customer life-time, they are going to have multiple interactions with your brand. Optimizing all these customer touchpoints to provide them with the most pleasant experiences should be your top priority. The moment a customer has an unpleasant experience with your brand, they are going to start looking for better options. 

customer experience excellence engine - reduce customer churn

Source: Mckinsey

For instance, when Hotjar, a SaaS company, set out to analyze the reasons for their increased customer churn rates, they found that customer experience was one of the main factors. And by improving their customer experience, they were able to reduce customer churn rates drastically. This is why optimizing CX is very crucial for reducing churn.

So, how do you improve the customer experience?

  • Personalize their experience in all possible areas like customer support, emails, etc. Replace generic FAQs with much more personalized options such as video-chat and co-browsing.
  • Collect customer feedback regularly and remember to take action on every one of them.
  • Make the onboarding process as smooth as possible.
  • Use analytics to find out the areas where you lack customer experience and continuously improve them.

#5. Develop a loyalty program to reduce customer churn rate

Loyalty programs breed loyal customers and retain them for long.

Such customers have higher lifetime value and they require less work to convert.

Another huge benefit is that such a customer is likely to recommend you to many others and this also helps with customer acquisition.

Here’s how you can develop a loyalty program for reducing churn:

  • Understand your customers’ needs and research on which kind of rewards or incentives would they want. Then you can personalize the loyalty program to match the needs of your customers. You can do this by having personalized names for your incentives instead of using “coins” or “points”. Also, use personalized messages in your loyalty programs. Make the program as simple as possible and easily achievable for your customers. This will give them instant gratification and more and more customers would want to participate.
  • Gamify your loyalty program to engage your customers even more.
  • You can also offer a referral program that will increase your acquisitions as well.

#6. Engage with your customers more and more

Regular interaction with your customers is one of the most effective ways to stop them from churning.

Having a strong customer engagement strategy helps you to catch a potential customer churn even before it happens. By using proactive communication techniques instead of reactive ones will boost real time engagement with customers efficiently.

Here are a few means through which you can engage with your customers more:

  • Set up an intuitive and hassle-free onboarding campaign to reduce churns during the initial stages.
  • Have an effective email marketing strategy in place to keep ongoing communication easy. Add CTAs in your emails and ask your customers to reply back with any queries, concerns, or suggestions.
  • Assure them time and again by making use of 24/7 assistance.
  • Let them know the ease of using real-time assistance so that all their issues get resolved quickly and nothing is pending for long from your side.

#7. Collect customer feedback regularly

Collecting consistent customer feedback and analyzing the same is the best way to measure customer satisfaction and identify any room for improvement.

Time is one of the most important factors when it comes to collecting feedback. The best way is to collect real-time feedback through in-app, live-chat, and chatbots. 

Collecting feedback in real-time would be a 2-way conversation through which you will be able to collect more detailed feedback. This will, in turn, help you with quicker and more effective problem resolution.

Personalizing this experience will be even more effective as this will lead to more genuine feedback.

#8. Measure your churn metrics

Application of customer retention strategies without measuring churn metrics is a big waste of your time and money. At the end of the day, you will make progress only when you know which measures are working in your favor for reducing churn rate.

In fact, a SaaS metrics survey reported that the customer churn metric was voted as the key metric by 80% of SaaS companies!

These are a few things that you must keep in mind while measuring customer attrition metrics:

  • Measure churn metrics for different time frames such as monthly, quarterly or yearly. This will give you a broader perspective.
  • Measure and analyze churn metrics separately for different customer segments.
  • Analyze how your churn rate is impacting other metrics such as customer lifetime value, recurring revenue, and customer acquisition costs.
  • Set attrition rate benchmarks and check if there is an improvement with time. If not, then pivot your retention strategy and test new things out.

#9. Optimize your customer onboarding plan

Most companies face unexpected churn rates during the first few weeks after acquisition. This is probably because of a bad onboarding experience that your customers would have faced.

Here are a few tips to make a good first impression on your customers:

  • Make the onboarding as smooth as possible by providing demo videos and in-depth tutorials.
  • Avoid overcomplicating the process by asking them to work on multiple things and features. Guide your customers step-by-step with the initial setup through real-time assistance. You may add a visual progress indicator to encourage your customers to stay with you till the initial setup is complete.
  • And lastly, remember to optimize your onboarding process by incorporating all the feedback that you receive. Again, proactive communication plays a key role here.

#10. Offer a dedicated success manager

A dedicated customer success manager can prove to be a very wise investment for any business. Such a person would work with your customers throughout their journey with the main goal of enabling the right tools and support for them. 

A success manager would be dedicated to:

  • Identifying customers that are about to defect.
  • Nurture client relationships and make them stay.
  • Build strong trust with your customers so they stay with you even if they face a few small glitches from your side.

With such dedicated support, you will be able to prevent customer churn drastically and hence this should be a must-try on your list for improving your customer churn rate.

#11. Educate your customers

One of the important aspects of reducing customer churn rate is that your customers are completely aware of all that you are offering. Right from the day of sign-up, focus on continuously educating and interacting with your customers. 

Here are a few things you should do:

  • Help your customers understand each and every benefit and feature of your product in an easy to understand manner.
  • Having thorough documentation, video demos, and FAQs can be very helpful.
  • Provide easy access to all kinds of resources and also let them know about your 24/7 availability through real-time assistance. Also, make sure that your customer support links are easily accessible to them.

Note that your goal should be to educate your customers in such a way that they navigate through your product with at-most ease and also have hassle-free access to customer support.

#12. Identify at-risk customers

One of the most effective ways to reduce customer churn rate is to stop a churn from happening just before it is about to happen.

There will be definite indicators through which you will know about potential customer churn. And this is your last chance to mend your mistakes and win the customer’s loyalty back.

So, how do you identify at-risk customers?

  • Lowered interactions and product usage.
  • No email open rates or response rates in the last few days.
  • Lesser responsiveness to your communications.

Once you have identified the at-risk customers, it is time to proactively engage with them to find out what is that they are looking for. By doing so, you can find the root cause, fix the issue and retain your customers for long.

To conclude

Reducing customer churn rate is not something that can be done overnight. You need to build up and scale your retention strategy step by step. A good starting point would be to invest in the right tools which would help you to nurture better customer relationships and add more value to them.

Follow the above mentioned tips to focus on customer centric approaches right from when your customers interact with you. It will definitely help you to see a bigger picture of how measuring and decreasing customer churn rate is so important.

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Snigdha Patel
Author’s Bio

Snigdha Patel is a customer experience researcher, author, and blogger. As part of REVE Chat, she focuses on helping organizations maximize customer experience using omnichannel messaging and conversational AI.

She creates contextual, insightful, and conversational content for business audiences across a broad range of industries and categories like Customer Service, Customer Experience (CX), Chatbots, and more.

Serving as the lead content strategist, Snigdha helps the customer service teams to leverage the right technology along with AI to deliver exceptional and memorable customer experiences.

Being a customer service adherent, her goal is to show that organizations can use customer experience as a competitive advantage and win customer loyalty.

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