Churn rate and customer disloyalty is a huge issue for many companies across a wide spectrum of industries, with some more prone to higher churn rates than others. Despite this, it’s essential that every business tries to minimise the customer churn rate in order to maximise the viability of their business – but for some industries, this is an ongoing struggle.
In this article, we’re going to look at what churn rate is and how you can go about reducing it in your sector.
What is the churn rate?
Churn rate refers to the rate at which customers leave your business and go elsewhere. For example, if you offer phone contracts and a customer exits their contract or doesn’t renew their contract in favour of going elsewhere, this is churn.
Put simply, customer churn is a direct reflection how loyal your customers are and therefore how satisfactory your business is. The higher your churn rate, the more dissatisfied customers are, and the stronger the evidence that something is amiss somewhere.
Why does churn happen?
There are many reasons why churn happens – some of which are within your control, and others not. You will always have churn because there will always be customers who want to take their business elsewhere for whatever reason, but a lot of the time, high churn rates can be attributed to three factors which are well within your control:
Poor customer support
One of the main reasons customers leave a business is due to poor customer service. There are several aspects that can make for a bad experience, from long waiting times and a convoluted contact method, to communication issues and a negative interaction with a customer support agent.
As the age-old saying goes, people tend not to speak too much about a positive experience they’ve had, but they’ll certainly speak about a negative one. Word of mouth is still incredibly influential, especially in B2C sectors, and if your business gains a reputation for poor customer service, you could find yourself with a high churn rate and a low customer acquisition.
Poor product quality
The next reason you might find your customer churn rate is high is due to poor product quality. If the actual service or product you’re offering is sub-par, customers naturally won’t want to come back. Generally speaking, you’ll have a margin of error which means you might not be discarded after one fault or bad experience, but if you have ongoing service or quality issues, then customers will start to leave.
There are so many competitors for businesses in every industry, so it’s not hard for customers to find an alternative that can provide them with a better service or product.
The value of onboarding cannot be underestimated. From the very beginning, your customers need to feel valued and appreciated. You need to make sure you make things as easy and efficient as possible for them, give them all the information they might ever need, and express your thanks to them for choosing your company. If you don’t, you’ll start on the wrong foot and may struggle to redeem yourself later on.
What is a good churn rate for my industry?
Churn rates differ from industry to industry, but on the whole, businesses that operate on a subscription-based model tend to have an overall churn of 5.6%. To further break this down, B2B businesses average a 4.91% churn, and B2C businesses average a 6.77% churn rate (Recurly Research).
This can be further broken down by sector, such as SaaS vs digital media, with the more competitive industries having higher churn rates, but anywhere around the 6% mark is good.
Why does churn matter?
Churn rates matter because they give an indication as to whether your business is sustainable and is pleasing customers. If your churn rate is extremely high, it shows that people aren’t loyal to your business, and therefore there’s likely an issue somewhere; be it with the product itself, your customer service, the price, or anything else.
Why reducing churn is important
Reducing churn should be a priority for every business. If your churn rate stays consistently high, you’ll likely amass a number of negative customer reviews which can be detrimental to new customer acquisition, meaning it will be harder for you to bring new people on.
On the other side of the same coin, a high churn rate also means you have few loyal customers, so if your existing customers leave and you’re unable to secure new ones, your business will quickly become unviable.
How can you reduce the churn rate?
So, reducing churn is a number one priority, but how exactly do you go about doing it?
Pay attention to complaints & identify why customers decide to leave
Don’t be afraid to ask your customers why they decided to leave. Engaging with your customers is the best way to identify what their problem was and how you can fix it. Odds are, many will tell you right off the bat; for those who don’t, deliver feedback surveys asking them to rate different aspects of their experience with you and use that as a basis for improvement moving forwards.
Engage with customers
One mistake a lot of businesses make is to not engage with complaints or negative reviews. Not only does this make it look like you don’t care, but it can put off prospective customers, too.
A lot of customers are accepting of the fact that mistakes happen and are more than willing to give you a second chance, but if they feel like you’re ignoring them or you haven’t engaged with them at all, they likely can’t be won over. It’s not about the problem at hand, it’s about how you deal with it.
Improve customer experience
A lot of customers leave due to bad service, so try and pinpoint any patterns you might notice about similar complaints, e.g., a slow network, and work on fixing them. When customers feel like their issue has been listened to and taken seriously, they’re more likely to stay.
Improve customer service
If you’ve found that the issue with your churn rate is because of negative customer service, take steps to rectify it. Consider investing in new technologies and training to help your staff, and think of ways you can streamline the process to make things easier for both customers and agents.
Gestures of goodwill can go a long way to retaining customers. If you are at fault, consider offering a gesture of goodwill, such as a reduced price for a month, to show your customers that you value them and want to keep them on-side.
What tools can I use to reduce churn?
At Vizolution, we provide a number of customer service agent solutions to help you enhance your customer service and retain clients.
From co-browsing solutions to screen sharing and more, we offer a myriad of modules that can improve the efficiency and first-call resolution for your teams, bridging the gap between a convoluted and negative experience and an efficient and good one.
Contact us to find out more.