Customer Experience

Customer Churn Risk: Key Indicators and Mitigation Tactics

Manoj Rana
July 26, 2024
5
min read
Customer Churn Risk: Key Indicators and Mitigation Tactics
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With the cut-throat competition in the market, your business doesn't need to face churn, but it is probable. After all, your product cannot be the market superstar, right? Well, I have seen that there is a customer rush for some time as soon as a new product with a slightly low price is released.

This is where the churn happens. The bad thing about customer churn is that you will not notice it initially, but after some time, it will be visible in your revenue. While some degree of customer or revenue churn is imperative, if it goes beyond a certain limit (over 5-7% annually), it is not healthy.

So, in the end, if you do not keep oversight over customer churn, it is possible that you might lose your customers, and not only this, but your revenue and overall repo in the market may also decline.

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What is Churn Risk?

Churn risk is a necessary parameter indicating that you need to take action to reduce churn. 

Churn risk is a scenario where new customers or existing customers are on the verge of churning or stop doing business with you. They could have subscribed to your services and products, but now they are in the at-risk customer category.

If you take one wrong step, let’s say, increase the price of your subscription, the customer will churn. There are several parameters and in-app or website activities that a business has to analyze to know about the customer that is at risk of churn.

Why Identifying Customer Churn Risk is Important?

Well, when it comes to churn risk identification and analysis, I need to tell you that it takes 4 to 5 times more to acquire a customer than to retain one. Hence, if you want to boost customer retention, periodic oversight of customer churn is necessary.

Here are some reasons to keep an eye on your churn rate.

Customer retention

As I highlighted above, the key reason for churn analysis is customer retention. We all know that there can be several reasons why customers may churn, such as bad products, low product value, high prices, product bugs, market dynamics, etc.

While many of these factors are in your control, there are some that you can’t; they will change based on the business and market needs. Hence, some customers are surefire to churn.

You need to filter out the factors that you can control and analyze certain aspects, including NPS, product usage, MRR, number of support tickets, business reviews, etc., to know about customer churn and work on methods to boost customer retention.

Reengagement plan to retain at-risk customers

Your app or site may have several pages that customers visit on a regular basis. Focus on shortlisting these pages and monitor the visits over time. If these pages experience a low visit rate, there is a risk of churn. Feature tagging is a great way to check if the customers are engaging with a feature or not.

Moreover, you can check the customers' inactivity. Check how long it has been since the customer logged into your website or app and for how much time they engage with the app. Based on this, you can estimate the possibility of customer churn and build re-engagement plans. These re-engagement plans can include launching a VIP program for loyal customers, offering incentives, etc.

Zomato offers a Gold program to its customers that integrates exciting food offers with reduced food delivery charges.

Increase key feature adoption by educating at-risk users

One reason why customers may churn is because of less awareness. There may be some customers who are not aware of the features of your app. For example, some food delivery apps allow customers to make reservations at restaurants and order groceries besides ordering food.

With churn identification, you can educate your customers regarding such features to retain customers. There are several ways to do this.

  • Integrate this educating feature in the onboarding process
  • Notify them via in-app messaging
  • In-app announcements
  • In-app guidance
  • Opening the app to the features page

Swiggy is a food-delivery app that offers features like Swiggy Instamart for groceries and Swiggy Dineout for reservations.

Optimizing messages and ad campaigns to elevate product value.

A good thing about identifying churn risk is that you get to solve a lot of issues. For example, if your business is experiencing customer churn, working on counteracting measures can boost customer experience, customer satisfaction, and customer engagement.

With the customer churn analysis, you have a chance to improve and optimize your messages and ad campaigns for better results. With the analysis of NPS data, CSAT data, MRR, and product usage activity, more targeted ads can be created for at-risk customers. This enhances the product's value by highlighting its pros.

What are the Primary Aspects or Indicators of Churn Risk?

NPS Score Calculation

Well, I believe that churn identification is not a one-time process. It is a never-ending process as long as you are in a competitive market. In the churn analysis process, there are certain factors and methods that clearly indicate customer churn. Here are some of those methods and indicators!

Net promoter score

Net promoter score is a critical aspect that helps in measuring customer satisfaction. Based on a set of two-minute survey questions, the business can know about the willingness of a customer to refer the business to their friends and acquaintances.

Based on rating provided by the customers between 0-10, they can be classified as promoters  and detractors. If there a high number for detractors, it is surefire that the churn rate is high. Check out the following image for understanding!

NPS Reporting

Note: An NPS score of over 20 is considered as good and acceptable. However, it is under 0; it needs improvement.

Learn about uncovering customer insights via surveys here!

Sentimental AI

Sentimental AI is a revolutionary method that analyzes several human interactions and parameters to help businesses improve their products and services. As AI is a groundbreaking technology of the 21st century, it can help reduce churn, too.

AI packed with powerful algorithms can analyze aspects, such as buying habits, subscription duration, website activity, etc., to detect the customer behavior. Moreover, with the help of NLP, user interactions in text messages, product reviews, and surveys can be analyzed to know which customers are likely to churn.

Collect customer feedback

Customer feedback is a weapon that you can use to carve the best product on the market. Hence, to get an idea about churn, it is necessary to get customer feedback, not only after they use the product but at every stage of the customer lifecycle.

For example, while selling the product, after selling the product, after a few weeks of use, during service duration, etc. Make sure you design your survey in a qualitative way, i.e. add open-ended questions so that users can describe their experience in detail. Moreover, also study user reviews on your website and other ecommerce sites for your product, as 98% of consumers read online reviews before making a purchase.

Customer feedback will provide you with an idea about customer churn.

Low product use

If there are more competitors of your product in the market and your customers are decreasing, it will be visible in your product usage. For example, if your website product pages have less visits, it is imperative that either the product is not relevant or the presentation is wrong.

Therefore, after you have analyzed the risk of churn, you can begin correcting the page or product to make it more useful for the audience.

Customer journey insight

The moment the customer lands on your website and the moment it leaves is covered under customer journey insight. With the use of online session replay or customer tracking tools, you can know about the entire customer journey, including the path of conversion, reasons for taking a u-turn or drop off, rage-clicking, etc.

Based on the analysis of these aspects, at-risk customers can be pinpointed and retained.

Here is more about the customer journey map!

Support tickets boost

If your customers do not find your customer support or any other resource effective, they are surefire to raise a complaint or a support ticket. Therefore, apart from the feedback, the support ticket is also a great way to know about churn risk.

If the customer support tickets are high in number, check the issues the customers are facing. If the issues are same, it is necessary to take relevant actions to prevent customer churn. Higher number of support ticket is a direct indicator of churn risk.

Apart from these aspects, there are some more indicators of churn risk!

Revenue churn

Though revenue churn is dependent on customer churn, if their is a dip in the revenue between the calculation period, it may be a sign of customer churn.

Note: It is not always possible that revenue churn will affect customer churn.

MRR

MRR is monthly recurring revenue and net MRR is defined as how much you are losing per month. It is a net aggregate of total expansions per months and total downgrades. It serves as a more accurate way to measure churn risk.

Net MRR is represented as = (Churned MRR - Expansion MRR) / Starting MRR * 100

Are There Ways to Reduce High Churn-risk Customers?

Though I have briefly highlighted some ways to reduce high churn risk, let’s have a more comprehensive look at the methods to reduce churn risk.

Re-engagement methods

Once you know that which of your customers are not doing any activity, i.e. visiting your website or logging in, you need to bring them back with innovative and lucrative re-engagement methods.

There are several ways to do that, such as

  1. Offering incentives like discounts and loyalty points
  2. Create a community to let customers discuss their issues and receive answers.
  3. Create a proactive customer support team for faster issue resolution.
  4. Establish a new and easy-to-understand onboarding process.

Knowledge management

Knowledge management is an excellent way to keep customers from churning. For example, if  a person wants to know something about your product, i.e., a digital product, it will be easier for them to access your website than to find the email that has the link to the specific page.

Therefore, keep a knowledge base page on your website for faster access. I like Snapchat a lot in this case. As the customer base of the brand is big, the website version has a Support section that has answers to all possible customer questions.

Snapchat Knowledge Base Example

Source

Customer feedback-backed products

Collecting feedback from the customers should be a closed loop. It means that if you are collecting feedback from the customers, you need to act on it too. For example, if your customers are interested in a new feature in the app, you need to implement it for churn reduction.

Further, you need to keep a tab on their feedback for fixing bugs and errors in the product. In the end, it will not only reduce customer churn but also improve customer success.

An example of this is an AI startup, Ceros, that uses customer feedback to integrate features into its content editor.

Learn from at-risk customers.

I think that it’s just a matter of perspective because your at-risk customers can be your greatest allies. If you have identified the customers that are at the brisk of churning, you can engage with them and talk about the issues they are facing.

Unlike other customers, they will provide you with more comprehensive and honest feedback about your products and services, leading you to make them better.

Streamline the onboarding process.

Ok, here is a thing. When you use a product, and you don’t get to know how to use it, what do you do? I would directly Google the thing to know about it, but that would be a long process. To ensure that your customers don’t have to unturn multiple stones, make sure you teach them how to use the app as they enter the app.

There are several apps that provide information about every functionality as the users enter the app. These apps use arrows to help the user navigate the features in the app, thereby streamlining the onboarding process.

An example of such an app is the HDFC Payzapp, which helps users learn about its features by using guidance arrows.

Invest in a customer support community.

To improve customer churn rate, it is not just necessary to get feedback and solve their issue. Customer churn rate can also be reduced with the help of building a customer support community. I have an example to share here. I use a Dell laptop. Usually, when I face any issue with it, I Google the issue, and I find the solution to the issue on the Dell community website.

It has been a great resource for me and many other users. Similarly, developing a customer support community website can help prevent churn and help a number of customers at the same time.

How Qwary Helps You Reduce Churn Risk Factors?

Well, when it comes to reducing churn risk, Qwary can be of great help. The tool is packed with a bunch of utilitarian features that help you monitor and reduce churn.

  1. Targeted user Feedback (in product survey)

Qwary features an in-product survey utility. In this, businesses can create in-app product surveys that can be targeted at the users based on an internal event of the app. For example, if a user has used a new feature or completed a purchase.

With the help of a quick NPS survey, you can find out the performance of the feature and assess the possibility of churn risk.

  1. Feature Usage Insights (Session Replay & Heatmap)

While the in-app survey unravels the feedback regarding the new features, with session replays and heatmaps in the Qwary tool, you can learn about how the user interacts with the website, app, and its features.

You can add trigger events in the app so as to begin recording based on that event. It can be a new sign-up or a repeat visit. With a comprehensive review of the session recording, you can pinpoint the aspects that are keeping the users engaged. You will also learn about the parts that are making them leave based on rage clicks and U-turns.

  1. Product Adoption (Customer Funnel Analytics)

Customer funnel analytics is a feature of Qwary that helps you understand the viability of your product features. For example, with conversion funnel analytics, you can learn about the stages where user interest peaks and declines.

Furthermore, you can analyze user behavior regarding product adoption and fix UX issues based on comprehensive data analysis. The tool can help you seamlessly integrate data from all the data sources.

  1. Churn Dashboard

Churn data of multiple customers can be tough to analyze. Therefore, Qwary offers you a churn dashboard where you can easily view data regarding churn analysis. The tool allows you to view the customer satisfaction score divided between three options: not satisfied, neutral, and satisfied.

On top of that, you can also learn about key factors that drive the satisfaction rate of the customers and the satisfaction score by customer segment.

  1. Customer Journey insight (Customer profile activities)

Customer profile activities can help you uncover several aspects where the customer gets stuck while using the products. Through video session recordings and heatmaps, you can find out these user progressions and drop-off points and fix them to reduce churn and boost conversions.

  1. Closed Feedback Loop

A closed feedback loop system is all about taking action based on customer feedback. With Qwary, you can collect real-time feedback from the customers. The tool allows integration with major ticketing systems like Zendesk and Salesforce to receive support tickets from the users directly.

Furthermore, the case management system of the tool allows you to capture a detailed view of customer issues and feedback, enabling your support teams to resolve the issue faster and more efficiently.

Conclusion

I believe that every customer is unique. Each of them has their unique needs. Therefore, you need to understand that there will always be some who are not satisfied. However, there are several customers who love your products and services. Make sure that you keep the right customers and do everything in your power to prevent them from becoming high-risk customers.

I know that it is not easy to predict churn. Therefore, I have a suggestion for you regarding a tool that can help you identify high-risk customers and boost customer acquisition. As elaborated in the previous section, Qwary is a remarkable asset for your customer success team to leverage. Hence, get in now and rule the market!

FAQs

  1. What is churn risk?

Churn risk is a scenario where a customer is at the edge of terminating the services or product use from a business. It can be due to several reasons, including bad products, low value, market dynamics, better alternatives, etc.

  1. What does churn risk mean?

Churn risk means that your customers are about to exit from your business workflow. It affects your overall revenue, customer satisfaction, reputation, and market image.

  1. How do you calculate churn risk?

There is no exact formula to calculate churn risk, but there are some parameters that can indicate churn risk, such as NPS, CSAT, MRR, etc. Further, there is a way to calculate churn rate, which is the ratio of lost customers to the total number of customers at the beginning of the period.