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Reducing your churn rate needs to be your first priority. You can’t afford to lose hard-won users you’ve invested time and money in converting. Dig into the article below to know more.
If you plug ‘customer churn’ into a search engine, you’ll be rewarded with pages and pages on the subject - mainly containing advice on how to prevent it. This is because customer churn is very much considered to be a bad thing - but is that always the case?
Customer churn refers to the number of customers who were once loyal to a brand but have since switched their loyalty elsewhere. This can be due to a number of factors including bad onboarding, inferior quality products, poor customer support and high levels of competition.
Lots of those pages mentioned here will tell you that customer churn should be avoided at all costs and that an annual churn rate of higher than 7% is unacceptable. Because of this, lots of brands tend to obsess over their customer churn figures and end up spending a huge amount of time on reading articles about preventing it.
While we will concede that losing customers isn’t generally something to celebrate, in some circumstances, customer churn is not necessarily a disaster and, in this article, we’ll take a look at a couple of reasons why this is the case:
1. One good churn
A high level of customer churn can be alarming but it doesn’t automatically ring the death knell for your business. If you experience an unexpected level of churn, think of this as a warning light coming on in your car rather than the engine giving up and stranding you in the middle of nowhere. An increased level of customer churn gives a brand a great opportunity to make improvements and, they can do this by:
- Using sentiment analysis tools to find out what people are saying about your brand - often, this kind of research will be incredibly revealing.
- Being proactive about asking for feedback after each and every sale.
- Asking for candid feedback on social media.
“Gathering and analysing this kind of feedback can be incredibly beneficial for a brand as it allows them to pinpoint issues, fix what went wrong and then let past and present customers know about the changes that have been made. Because of this, the odd incident of customer churn can be good news in terms of strengthening the brand long term “- says Johan Hajji, CEO & Founder UpperKey
2. Churning the tables for a perfect match
A successful brand is focused on strong and steady growth and, in most cases, this involves a degree of evolution. In order for a brand to stay relevant and competitive, change is almost always necessary.
Because of this, a degree of customer churn is not only expected but is actually welcome. For example, a brand who started out selling a very basic software program might, over a few years, have evolved to a point where it is now selling a significantly more advanced and more sophisticated product.
This may mean that the initial set of customers who were in the market for a cheap and simple product may no longer be interested in the brand due to its evolution and, these customers may then be lost.
The reason that this can be good news is that those initial customers will be replaced by a whole new set of clients who are not only interested in more sophisticated products but, also have a significantly higher level of spending power.
In instances like this, customer churn is not so much about losing customers but about gaining better ones who are a better fit for the changes being made.
With this kind of churn, its important for a brand to be transparent about taking a new direction and, as well as gaining new customers, companies can keep churn to a minimum by:
- Informing customers about changes and explaining the benefits of these changes
- Offering incentives to existing customers to try the new and improved product or service
- Offering a loyalty scheme to existing customers
3. Back to the start
One of the most common reasons for customer churn is that errors were made in the onboarding process. Onboarding new customers is, of course, a pivotal activity for brands and one which takes a great deal of time and care to be successful.
Unfortunately, a huge number of businesses are so focussed on gaining new customers that they develop tunnel vision.
Put simply, this happens when a brand becomes seriously gung-ho about using every available tool in order to attract customers and to drive them through to the checkout. Whilst this may seem like a good thing, it can actually be extremely short sighted.
This is because, in some circumstances, the brand is so focused on making sales that it's not actually considering whether or not their product or service is a good fit for the customers that they’re onboarding.
This can lead to customer churn as, after one or two purchases, a customer may discover for themselves that the brand isn’t right for them and then move on.
The silver lining here is that it gives a brand the opportunity to go back to the drawing board in order to find a more appropriate set of customers who will be a better fit and will evolve and grow with the brand. They can do this by:
- Creating a proper customer profile
- Performing in-depth research into where the ideal customer is likely to be found
- Creating a user experience which speaks to the ideal customer
- Using omnichannel marketing in order to attract the right customer
4. Trading places
Another incredibly common cause of customer churn is about competition and complacency. When a brand has enjoyed a degree of success, it's easy to assume that its work is done and that it can now sit back and enjoy the fruits of its labours. Although, to an extent, this is understandable, this kind of complacency can be harmful.
While the brand is busy congratulating itself on a job well done, there’s a good chance that the competition is making changes and improvements and stealing those customers from under the brand’s nose. This kind of customer churn happens all the time and is one of the most dangerous as winning back customers is more difficult than snagging them in the first place.
So, what’s the good news? A healthy amount of competition is essential when it comes to keeping a brand on target. When you identify the reason for the churn as that of competition, it offers brands a chance to analyse and improve their own product or service.
Not only does this mean that there’s a chance of winning back those initial customers but, an improved offering means that you’re in a great position to gain new ones. For this reason, regular competitor analysis is, quite frankly, obligatory. If you don’t know what’s out there, you quite literally are working blind and are very much at danger of losing customers for good.
While winning back churned customers is by no means easy, its certainly not impossible. Brands can use their social media and email marketing to spread the word about the improvements that have been made and to offer churned customers incentives to come back and give the product or service a second chance.
5. Staying ahead of the churn
In almost every circumstance, prevention is better than cure and, although customer churn can sometimes be a good thing, brands should also be working on predicting churn in order to minimise it. They can do this by:
Monitoring customer usage - This is important as it allows a brand to spot the warning signs; for example, a customer who used to buy every month who now only does so every few months.
Data - Collating and analysing data in an essential part of predicting customer churn and should never be under-estimated.
Modelling - Brands can use their data to create a model which will allow for effective prediction of customer churn and the reasons for that churn.
By being able to identify and predict customer churn, brands can take action to reach out to customers and to make improvements in their offerings.
While you shouldn’t, of course, be actively trying to offload customers, customer churn is only really harmful if you don’t learn from it.
As I’ve shown in this article, although your business may experience a temporary dip through customer churn, this can lead to opportunities which will allow the brand to come back bigger and stronger than ever by ensuring that it not only has new customers but it, more importantly, has the right customers!
As I’ve also shown here, brands should stop focussing on their customer churn percentages as a negative and, instead, embrace aspects of the churn as a natural and welcome evolution of their business.
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