5 Reasons for Customer Churn and What You Can Do About It

customer churn

Customer churn is the rate at which customers stopped using your company’s product or service during a specific time period. It’s usually calculated by dividing the number of customers lost in a quarter by the number of customers you had at the start of the quarter.  

It is also known as the customer attrition rate, and it refers to the rate at which customers who buy or subscribe to your product or service offering end their relationship with you and stop bringing in revenue for your company. 

Assume you had 500 customers at the start of the quarter and lost 25. This would result in a 5% churn rate. Churn is a major source of concern for many businesses because it demonstrates how effective (or ineffective) they are at retaining customers. Churn can have a significant impact on your business, but only if you let it. We’ll go over some strategies for lowering churn and keeping the customers you already have so you can reroute your company’s trajectory today.  

1.    Terrible Customer Service 

Of course, a great way to cut down on churn is to make sure your customers are happy. When your service reps are working to fix an issue or answer a question, they should be able to think of ways to help the customer. They might have to spend money to make things right with a customer.  

In fact, according to a report by the White House Office of Consumer Affairs, an unhappy customer will tell 9-15 people about their negative experience. Responding to customer complaints is the quickest way to ensure that they are happy with their experience and to keep them from churning. A good customer service representative can aid in the development of a strong customer relationship. All it takes to deal with some irate customers is being a good listener. Listening to and empathizing with the customer’s concerns can help to calm them down. 

Many of the well-known companies you know of, like Amazon and Tesco, are big because they focused on reaping the benefits of outbound call center services from the start.  

Excellent customer service is a great way to make your business stand out from your competitors and cut down on customer churn. 

2.    Bad Pricing Strategy 

Price is by far one of the most common reasons for customer churn. Asking customers to pay top dollar for a product – especially if they aren’t getting enough value out of it – can be a stretch that quickly wears thin with most people. 

3.    Losing Out To Competition 

You may have the best-engineered product in the world, but if your customers believe that your competitor’s product meets their needs better, you will lose them. Consider whether a competitor’s offering has a feature that yours does not and whether this is the reason some of your customers are defecting to the competitor. It can be as simple as having an extra privacy setting for teams.  

Pricing is one of the easiest ways to get ahead of the competition. Make sure your prices are fair and based on the value you provide. Be aware of how other businesses set their prices, but don’t set your own prices based on what they do. The people who buy from you will leave if your product or service isn’t better than another one and you charge more money for it. 

Look at what makes you unique. What is your unique selling point, the thing that your competitors can’t even come close to? Is your music service as good as Spotify, or is it better? What makes your company different? In your marketing and positioning, make sure to talk about that. You’ll get more loyal and long-term customers as a result. 

4.    Poor User Experience 

When key features fail to function properly, customers are quick to be disappointed and leave. The best way to avoid this is to ensure that you are assisting customers in reaching their objectives. But remember, your product is just one part of the equation. Your product training and customer service teams also play important roles.  

Furthermore, a strong emphasis on activating customers rather than just acquiring them can help reduce churn, especially if you have a freemium product on offer. Prevent customer dissatisfaction by establishing a solid onboarding process that thoroughly educates the customer on the product. Ascertain that customers are aware of which key features can meet their needs, as well as how to locate and make use of these features. 

5.    Lack Of Value 

Another major cause of customer churn is a lack of value. However, “value” should not be confused with “price.” In this case, value is a broader term that encompasses the entire customer experience. This is especially evident in the fact that 55% of customers would pay more to ensure better service rather than just the lowest price. Personalize incentives to provide value to your customers; what is important and valuable to one customer may not be the same to another. Understanding what each customer finds valuable leads back to understanding what they like. To some wealthy customers, free shipping is more appealing than a percentage-off coupon. Customizing your approach to each customer is the most effective way to provide what is perceived as good value. 

The Bottom Line 

The churn rate is a calculation that shows the percentage of a company’s subscribers who are leaving. It can also be used to calculate the percentage of employees who are leaving a company. Understanding a company’s churn rate is one metric that can help you understand its financial health and long-term prospects. 

Companies with high churn lose a large number of subscribers, resulting in little growth, which has a significant impact on revenues and profits. Companies with low customer churn rates are able to keep their customers.