Effective churn management is pivotal for businesses as it saves them time and effort, which otherwise goes into frivolous marketing to acquire new customers and retain existing ones.
Business-centric churn strategies lead to early intervention and increase customer touchpoints while prioritizing customer satisfaction.
What is Churn Management and Why is it Important?
Churn or attrition is the loss of customers over time. This metric is often used as an indicator of customer satisfaction and to assess retention strategies for their effectiveness. It is used to prevent customers from bouncing off to a competitor business.
Churn management is the process or practice of;
- Understanding the reasons behind churn
- Anticipating attrition rates
- Predicting churn
- Mitigating churn
At Qwary, we have integrated churn management into our customer relationship management (CRM) strategies. By doing so, we identify customers at risk of leaving and take preventative measures to prevent them from leaving.
Types of Churn
Active Churn or Voluntary Churn
It occurs when customers consciously decide to leave or cancel subscriptions for reasons including:
- Dissatisfaction
- Competition
- Issues with product or service
Passive Churn or Involuntary Churn
It’s when customers leave unwantedly due to failed recurring payments or technical issues.
Did you know that involuntary churn accounts for around 35% to 40% of attrition?
Revenue Churn
This metric measures the loss of revenue a business records due to customers leaving in a certain time period.
Reasons include customers failing to pay for the services acquired.
What I have observed is that sometimes businesses don’t even realize they are experiencing churn. Until they realize it’s too late to come back from a high level of customer churn. So, here are a few indicators you can keep an eye out for;
- Customers Are Leaving Or Abandoning: Check for trends where you observe more people are leaving than becoming a customer. As customers leave regularly, you won’t generate new revenue, hurting the business’s sustainability.
- Low Customer Lifetime Value: When customers fail to stay with your business for a long time, it amounts to churn and an unsustainable business.
- Low Subscription Rate: Check for trends where customers are downgrading subscription plans more frequently than usual. While this is an indicator of potential at-risk churn, which means the customers don’t recognize the full value of your product.
- Low User Activity: When customers are not spending as much time on your product’s main features or use it as frequently as they should, consider the possibility that they are looking for other services.
Why is Churn Management Important?
Managing churn means being proactive in fixing the issues that are making customers leave. In 2020, the customer acquisition rate for one customer was $1.63 as compared to $0.62, which is the cost of upselling to existing customers.
The CAC rate has increased by 60% between 2014 and 2019, which signifies the importance of optimizing your marketing efforts and strategies. Going forward, businesses must further boil down their marketing efforts to ensure they are getting the best buck out of every dollar spent.
- Customer Retention Over Customer Acquisition
You should never stop acquiring new customers, but in this, don’t ignore keeping the existing ones happy and satisfied. By retaining existing customers, you tap into a reliable source of revenue who are already paying you for the services, which means half the job is already done. So, you will be freeing up resources that can be utilized for acquisition.
- Identify The Cause Of Customer Churn
Customer churn is a symptom of your business’s incapabilities to diagnose underlying issues. It can be a confusing product interface, failure to satisfy customer expectations, or anything else. You can identify the issue by tapping into customer churn trends and identifying the problem areas. Identifying the cause means you can fix the issue and improve customer experience, effectively preventing churn.
- Identify At-Risk Customers
Customer churn management helps segregate at-risk customers from others. Analyzing customer behavior, sentiments, and purchase history helps with early detection. Knowing the costumes who are on the verge of leaving, you can build targeted intervention strategies. Sending personalized emails, offering exclusive offers, and providing proactive customer support reignites the customer’s interest in your product and successfully prevents them from leaving.
- Improves The Customer Experience
One of the biggest reasons for customer churn is bad customer experience. So things like inefficient customer service, low-quality products, or a complex customer onboarding experience, anything and everything contributes to customer experience. Effective customer churn management involves listening to customers, analyzing churn data, and identifying the reasons for the churn. Once identified, fix these issues to turn your customers into brand advocates. As I have said before, you cannot eliminate churn. But you can do a lot to limit churn or, on the other end, do enough to get new customers so that the ones leaving won’t leave a big hole in your list of customers. With this said, let me share a few reasons why customers churn.
Factors Contributing to Customer Churn
Effective churn management depends on identifying why customers are leaving. Hence, before sharing the strategies to prevent churn, I want you to know the reasons behind churn.
Out of the following, some of them we have experienced at Qwary. But we were quick to take respective action and resolve the issue to re-engage the customers. This is because the probability of making a sale with a new lead is 5% to 20%, but the same with an existing customer is more than 60%.
- Product Market Fit Failure
This is when your product’s value proposition fails to bridge the gap between market requirements and expectations. This means you can have a fantastic product, but if it doesn’t address a genuine customer need or solve their problem, nobody will use it, and churn becomes inevitable.
Hence, always conduct comprehensive market research to identify the gaps and build the best possible solution for your target audience.
- Poor Customer Onboarding Experience
A confusing onboarding process frustrates customers, and they leave even before making the first purchase. As frustration sets in, the customers decide to leave.
Hence, design a clear and intuitive onboarding process, including;
- Step-by-step guides
- Interactive tutorials
- Quick customer support
To make it even better, you can try to include walkthrough animations resembling every screen and product. These elements make it easier for your users to find the service or feature they need and ensure they realize the true potential of your product.
- Customers Aren’t Able To Identify The Value Of The Product
For a customer to identify the true value of your product, they first need to understand the “WHY” behind its development. Until and unless they know the inspiration behind building the product and what problem you are solving, communicating the product’s benefits is difficult.
Hence, to make them realize the true potential of your product by showcasing success stories, key feature highlights, and tailored messages.
- Poor Customer Experience And Service
Customer service is one of the biggest reasons for churn. Some aspects of inefficient customer service include;
- Slow response times
- Unhelpful interactions
- Lack of empathy
All these aspects lead to customer dissatisfaction; hence, it's essential to identify and fix them promptly. A 2020 study reveals that around 96% of customers leave due to bad customer service.
- Price Mismatch And Lack Of Personalization
Too low or too high a price can also lead to churn. While customers leaving due to high prices seems probable, they leave when the price is set too low because they might think that the product is ineffective.
So, your pricing strategy has to account for these factors and set a price that can not punch a hole in the customer’s pocket while justifying the potential benefits of your product.
- Sales Misrepresenting The Product
When your sales pitch overpromises but underdelivers, customer churn happens by default. This is because when customers' expectations are unmet, they become disappointed and frustrated, which forces them to leave.
Hence, create honest but detailed sales pitches and marketing campaigns showcasing the product’s capabilities in a true sense.
Customers churn due to bad customer experience or inefficient products. Whether it's a high price or a visible lack of value, customers expect you to deliver the best user experience.
7 Churn Management Strategies You Need to Know Right NOW!
Until now, you might have realized that customer churn management is essential to run your business smoothly. One customer abandoning your brand may or may not talk about their experience with their friends and family.
So, you not only have to manage churn but do it proactively to minimize the impact. The strategies I am going to share will help you build a robust churn management system while implementing customer retention strategies.
- Track Customer Behavior
Track your customer’s behavior with reference to your product and brand to gauge their satisfaction levels. While tracking focus on metrics that connect customer behavior directly to;
- Product usage
- Adopting product features
- Upgrades and downgrades
- Payment behavior
- Product feedback
Don’t limit the analysis to these five aspects. A comprehensive customer behavior analysis will open up several avenues for improving your relationship with the customers through access to quick information.
With the issues identified, gather the required intelligence and tools meant to enhance customer experience and satisfaction.
- Automate the Customer Onboarding Process
Where a frustrating and confused onboarding process thwarts customer success, a smooth onboarding experience builds a rapport with them. Furthermore, automating a few key steps can fast-track onboarding, leading to;
- Streamlining the process
- Reducing friction
- Boost user engagement
Here are the things you can automate in the customer onboarding experience;
Welcome Series
Create an automated email sequence when new customers join. Include emails that introduce your product’s new features and provide basic product usage guidance.
Product Resources
Provide access to self-service resources, including video tutorials, FAQs, and articles to empower your users with product information.
Customer-Centric Onboarding Paths
You must tailor the onboarding experience for your customers based on the industry type, plan type, goals, etc. As a result, the users can discover specific features according to their requirements.
Automated Messages
Automate reminders and progress updates for your users to keep them motivated and engaged while nudging them with reminders to complete onboarding tasks.
- Improve Customer Engagement
Improving customer engagement will improve your connectivity with the customers, fostering trust and loyalty. For this purpose, I tried different combinations of strategies, and here are the ones that have worked for Qwary;
- Compelling Content: Valuable content in the form of blogs, infographics, webinars, ebooks, etc., can keep the engagement meter running while educating your customers. For best results, create content on topics relevant to your audience’s interests and challenges.
- Build a Community: Creating a dedicated forum for your customers to connect can prove to be a treasure trove of their expectations and experiences. Such a forum can also work as a learning center for the customers and an exclusive chat group for your customers.
- Interactive Product Features: Integrating quizzes, polls, contests, loyalty programs, rewards, etc., will encourage customer participation. Plus, if your budget allows, gamify a few product features to further boost engagement.
- Personalized Communication: Use customer data to personalize messages, notifications, and emails or even send special offers according to their preferences.
- Personalize Product Marketing Campaigns
Marketing in a crowded market is complicated and it’s not that you have an unlimited budget to try out everything at once and hope for one strategy to work. Hence, personalized the campaigns are the best way to more forward, and here are a few things to consider;
- Audience Segmentation: No single marketing strategy will work for every type of audience. Hence, segregate your audience based on demographics, behavior, and interests.
- Behavioral Customer Targeting: Every customer makes a decision based on some hardwired triggers. As you learn to understand what stimulates these triggers, it becomes easier to target your marketing messages accordingly.
The key to personalized communication is eliminating generic marketing campaigns and connecting with your customers at a deeper level. This will foster better brand loyalty and increase product adoption.
- Improve Customer Service Experiences
Effective customer service is the first responder of your business. These are the people who can also work as your last resort to prevent a customer from leaving. So, ensure your customer service team is empathic and listens well to your customers.
Equip the team with the knowledge and skills to resolve issues effectively. A confident customer service team can upsell and resell your products to the customers better. Furthermore, ensure the following for maximum impact;
- Omnichannel Support: Offer customer support across different channels, thus enabling customers to contact your team on their preferred platform.
- Increase Issue Resolution Time: Give priority to methods that will improve issue resolution time. Set clear timelines for your employees and encourage them to exceed them. A speedy resolution system signifies your commitment to improving customer experience.
- Track Product Usage And Engagement Level
Successful customer churn management also requires you to know how customers interact with your product. Check the following while doing so;
- The power users of your product
- At-risk customers
- Identify feature popularity
- Discover user trends
- Personalization of user journey
The power users are frequently active and have the highest customer lifetime value (CLTV). They are also loyal to your brand and stay committed. Hence, identify the areas these customers find important and engage with to identify their happy path and replicate it with other users.
Using product engagement and tracking metrics, you will get valuable insights into how your customers are using your product. Use this information to identify customers who need a nudge and areas that need a new thought process to personalize the user journey and reduce churn.
- Proactively Identify Customer Issues
Identifying these issues while they are in process helps prevent churn, and to get this done, do the following;
- Monitor Customer Sentiment: Conduct an ongoing customer sentiment analysis through social media mentions and online reviews. Look for recurring themes and negative feedback that can signal potential issues and correct them.
- Customer Support Trends: Analyze issues customers are raising through support channels to find anomalies in any specific features or functionalities.
- Customer Satisfaction Surveys: Send out surveys regularly to gauge customers' satisfaction with your products and services. Set up convenient questions to identify areas for improvement.
You can use Qwary’s ConverseAI to automate survey creation, designing, and sharing. Check it out here.
- Monitor Bad Reviews
No business owner will want bad reviews for their product or services, but just like churn, some bad reviews are inevitable. Instead, use these reviews to identify common complaints and analyze customer sentiment to curate a bespoke strategy for tackling such reviews.
Respond to the bad reviews in public while clearly expressing that you understand the customer’s concerns and are ready to resolve the issue. Simultaneously, privately reaching out to every customer to better understand their concerns and situation to offer bespoke solutions.
Top 5 Churn Management Software You Can Use
Conclusion
Customer churn management focuses on identifying the reasocustomers abandoning your product or service and preventing it from happening. Several methods and customer retention strategies are employed to identify, track, manage, and prevent churn.
Effective churn management is done with the help of specifically built solutions to read your customer’s pulse, just like we do at Qwary. Using Qwary, you can know your customers more closely than ever and build a solid rapport with them.
Book your Qwary demo today to know more.
FAQs
- What are the best ways to control customer churn?
While customer churn is unavoidable, you can control and manage it by easing your customers' onboarding process, personalizing communication, and making them feel valued. Listen to their issues and resolve them quickly to authenticate your empathy, and offer loyalty programs as an extra benefit.
- How can businesses recover churned customers?
Discounts, loyalty programs, and rewards are the most common strategies to recover lost customers. For best results, use personalized communication and user-centric strategies to make the maximum impact of your efforts.
- What are the ways to keep customer churn low?
Customer churn is dynamic as users may find new reasons to leave every month. You need to make continuous efforts to understand your customers and analyze behavioral patterns, trends, and sentiments while asking for feedback. This will help you take proactive steps to prevent churn and keep the rates well below your industry’s average.
- Who is responsible for customer churn?
There’s no single entity, person, or department responsible for churn because you don’t know at the time of product development that a customer may decide to leave at some point. However, it's the customer success team who is responsible for keeping their finger on customer churn and helping address the issues proactively to reduce churn.
- What are the stages of customer churn?
There are three stages of customer churn;
- Stage 1: This is when users decide to leave right after trying your product.
- Stage 2: This sort of churn happens over a longer period of time for any reason.
- Stage 3: This is when customers leave when another similar but better product enters the market.
