x

Reducing Churn: 4 Methods All Founders Should Know

by / ⠀Startup Advice / June 6, 2022
reducing churn

In any business or company, churn is one of the most important statistics that a founder will need to pay attention to. Not focusing on reducing churn can break a company.

What is Churn?

Churn, also known as customer churn, customer attrition, or customer defection, refers to the loss of customers from the company. Basically, it refers to customers who are no longer interested in your products or services and decided to go somewhere else.

This can be a tricky situation for those caught off guard by the prospect of it. There are multiple factors that can cause any reason for a customer to churn. These include poor products, competition, changes in the market, bad customer service, poor user experience, and so much more. Sometimes these factors are just simply not in your control and there is often little you can do about them. However, there are problems that can be solved by you and your workforce. Losing customers is of course a bad thing, but there is a silver lining to it.

For instance, for many startups, customers can be churned out because they either are not interested in your product, or those who have received your product do not need your business any further. This can be a good churn that “filters” out customers that you do not need to market to and instead, focus on the core customer base. Churn is sure important to the business and reducing churn by just a measly 5% can boost profits between 25%-95% as well as influence and boost other statistics like customer and employee retention.

What is the Churn Rate?

If you or your company wants to take on the loss of customers, then the first step is to calculate and understand the churn rate. The churn rate, also known as the rate of attrition, is a simple math equation. It is the percentage of users who stopped using your products in a given period.

Studies indicate that the average churn rate is about 2% – 8% with the 2% being good. While the loss of customers is inevitable, there are certain things you can do to reduce churn.

Fix Onboarding Processes

What this refers to is that having a first impression matters, even for a product or service. A well-designed, easy-to-navigate onboarding process that helps customers get familiar with whatever it is that they are buying. Customers want to have an easy time when it comes to buying so that they have more free time. So make sure that the navigation process is easy and that they gain value from it. This will cause them to be more likely to stay with your product. User support such as FAQs, demos, and tutorials will help keep customers where they are.

Churn Analysis

Churn analysis is the process of gathering and understanding why customers are no longer interested in your products or services. Data gathering is then needed to understand what went wrong. Look at customer engagement, customer usage, and product or service usage and length. Once you start figuring out where the drop in customers is coming from and why, then you can start your plan to retain your customers. Ideas like discounts, special deals, service bundles, and more can cause customers to keep sticking by you.

Make Products that Customers Want

If you start to notice a churn happening, trying to send follow-up emails about why they are leaving may actually cause them to abandon your service. Instead, focus on what problems your loyal long-time customers have dealt with. Improve your product and you will have a much higher chance of retaining customers who are about to churn. But it doesn’t just stop there. With customers who have already left, try to get in touch with them if possible. Ask about what went wrong and what you and the business can do to improve. Using the feedback of these customers is invaluable and will help you succeed. Plus, if you do implement the changes, then you may even get some of your old customers back.

Focus on the Existing Customers

Much of the time, startups tend to focus on obtaining new customers, marketing campaigns, and other such things. Yet not focus on the customer base that is already there. Trying to attract new customers is actually an expensive endeavor that often costs up to five times more than just retaining the existing customer base. This is definitely not going to be a good idea, especially when startups usually have finite financial resources.

An easier approach is to focus on the customers that you already have and reduce churn. First, the existing pool of customers that a business has has a strong loyalty to certain brands and is far less likely to churn. They are also the best advertisers because they will speak of your products and services to friends, family, co-workers, and many more. Thus, you can save a little on your marketing and focus on the wants and needs of your customers. The existing customer is what makes businesses go a long way and ensure growth.

Conclusion

Managing churn is a process that no one gets right on the first time. It is like a science experiment that requires trial and error. But, no matter what, monitoring your customer churn will provide customers with excellent service and the business will continue to succeed.

About The Author

Tristan Anderson

Hello! My name is Tristan Anderson and I live in Manhattan, Kansas. I enjoy being in nature and animals. I am also a huge geek who loves Star Wars and has a growing collection.

x