How to Reduce Customer Churn (5 Actionable Tips)

Are you ready to learn how to reduce your customer churn rate? If you answered yes, keep reading and I will happily answer your questions!

Put simply, customer churn is the rate customers stop using your product or service over a set amount of time. As a marketer or small business owner, a high churn rate means you’re losing customers, opportunities to build brand loyalty, and profits. In other words, a high customer churn rate is not considered a good thing.

You can calculate your churn rate by dividing the number of customers who stopped using your product or service in a given period (usually per quarter) by the total number of customers you had at the beginning of that same period. Then, you take that number and multiply it by 100.

For example, if you had 1000 customers at the start of the quarter, and 10 people decided to leave by the end, you would have a churn rate of 1%. (10/1000 = .1 x 100 = 1.0%)

The average churn rate for businesses is between 5-7% per year, so if you were in the position described above, you would be in pretty good shape if that trend continued, with your total churn being 4%.

Why Keep Customer Churn Low?

Several benefits come with keeping a low customer churn rate. Here are a few factors worth considering:

1. It costs more to acquire new customers than to keep existing ones. In fact, it costs 5x more to obtain a new customer than retaining an existing user.
2. Users who report feeling satisfied with a company are more willing to tell others about their experience and may do things like write positive reviews on your website and social media.
3. Repeat customers almost always spend more than first-time customers. The average repeat customer is estimated to be worth 10x more than users making their first purchase.
4. Customers who are happy with your product or service are less likely to consider a competitor, even if their prices are lower than yours.
5. Odds are, loyal customers will share their feedback, which means more opportunities to improve your products and brand for these customers and future visitors.

With the advantages on the table, let’s look at a few actionable strategies that you can use to start reducing your churn rate today.

Understand Your Customers’ Needs and Pain Points

If you don’t understand your target audience’s goals and pain points, you’ll likely see a high churn rate. But when you know what roadblocks your customers are facing and what they expect from your brand, you can tailor your marketing strategies and products to match their needs.

In my experience, the best way to understand your customers is to build buyer personas based on website analytics, feedback forms, and confirmed user preferences. Buyer personas, also called customer personas, are fictional profiles that define the general personalities of people who visit your site.

Here’s a simple explanation: an online pet store has multiple segments based on which type of animals their customers own. They have a segment for cats, dogs, reptiles, and birds. The pet store usually gathers this information when a visitor signs up. They could ask on the email signup form: which of the following pets do you own?

Each subscriber will see content and offers that match their interests based on their answers.

When your content and offers are tailored to each segment’s needs, people are more likely to take action and keep buying from your brand.

So, if you want to reduce churn, start segmenting your audience so you’re better equipped to consistently meet their needs and exceed their expectations.

Develop a Detailed Onboarding Program

Next, let’s talk about user onboarding. Put plainly, onboarding is the process of introducing new customers to your product, service, or brand as a whole. It’s vital to create a deep, detailed onboarding program if you want to retain as many new customers as possible.

Imagine how you would feel if you paid for a new software, opened it up, and didn’t have a single ounce of guidance explaining what to do next. Odds are, you would feel frustrated, especially if you were struggling to get it to perform basic functions.

Onboarding is designed to create the polar opposite experience. When users open your software for the first time, they’re greeted with an interactive onboarding program that shows them how to set it up and get started.

Customers who are well-informed about your product or service are more likely to be satisfied with it and less likely to cancel their subscription.

I recommend including diverse onboarding options for people with different preferences. Aside from the interactive program, you may want to create a series of online lessons that guide the user, as well as formal documentation that customers can save and browse at their own pace.

Over Deliver on Your Promises

Over-delivering on your promises is one of the best things you can do to reduce churn. When customers feel like they’re getting more than they bargained for, there’s a good chance they will renew their subscription or buy from you in the future.

Here are a few actionable ways you can go the extra mile and turn first-time buyers into loyal customers:

• Go above and beyond for shoppers. For instance, if the average delivery time is 6 days, new customers will be more than impressed if they get it within 4 business days.
• Send customers offers and product upgrades that were not a part of the original agreement. So, if someone purchased the base level of your lead generation software, you could offer them a 3-month upgrade to the next tier so they can experience the benefits without paying extra.
• Invest in a customer success team. Your success team is tasked with reaching out to new customers, usually through email, to ensure they have everything they need. This seemingly small gesture can create an experience customers will remember long after their purchase.

Over-delivering on your promises is an excellent way to build loyalty and keep customers coming back for more.

Keep an Eye on the Competition

If you want to reduce churn, keeping an eye on your competitors is a good idea. There are quite a few reasons why this is a good idea.

For one thing, it can help you identify gaps in your own marketing and website design. It’s often easier to see mistakes in what others are doing. If you’re checking a competitor’s site and notice a glaring issue, you can return to your site to see if it has a similar problem. It’s hard to ignore after you spot it once, even if you’re looking at your work.

I also suggest keeping an eye on your competitors so you stay ahead of the curve. Some companies post public roadmaps that feature upcoming products, services, and updates. If you see something like this, use it to your advantage and start working on something similar for your product so you’re not left behind.

It’s also worth mentioning that watching your competitors will help you differentiate yourself and establish your own voice and identity. It’s easier to figure out who you want to be when you’re looking at companies in a similar space.

You’ll be glad to know there are many ways to keep an eye on the competition. You can visit their websites directly, read industry news, attend local events, and use online tools like Google Alerts to track your competitors’ activities.

Have an All-Star Customer Service Team

Finally, having an all-star customer service team can drastically reduce your churn rate.

As a consumer, have you ever had a bad experience when interacting with another business? Most of us have, and the odds that we went back to that company after the fact are slim. If you ask a majority of shoppers, they say they would rather check out a competitor than risk another poor experience.

Optimizing your customer service team and ensuring they deliver a top-notch user experience is one of the best things you can do to retain existing customers and secure new sales.

I suggest having a live team available to help users as much as you can. About 63% of consumers say they’re more likely to visit a website again if live chat is an option. If someone does have a question or concern, they can easily reach your team.

When it comes to retaining existing customers, a support team is even more important. People remember when companies aren’t there to help them. You may be out for the weekend, but depending on the users’ circumstances, it could feel like a lifetime. Once you get back and help, they may decide to cancel their subscription, even if they don’t say it at the time.

We encourage all of our customers to leave their feedback at the end of each interaction so we know how we did. The data from these questionnaires have helped us fine-tune our support strategy and give more users a positive experience, which results in less churn.

Final Thoughts

As you can see, there are plenty of ways to reduce customer churn and boost satisfaction. The strategies outlined today have helped us for years, and I believe they can benefit you, too. I recommend tracking your progress from the time you start so you can track your progress and figure out what works best for your business.