Customer Churn
It’s ironic how the growth of all businesses largely relies on customer retention, yet 2 out of 3 companies have no strategy to prevent customer churn. But one must also agree that the success of a company depends upon several other factors too, like the quality of their products and how effective their sales team is. And yet, numerous companies with brilliant sales teams and exceptional products have failed quite miserably.
Customer churn has a considerable impact on a business’ health. It significantly lowers revenues and profits. It can be put it this way — if a business is unable to keep customers happy, the customers are soon going to leave. So, when a customer stops doing business with a company, the revenues are naturally affected. Therefore, for steady business growth, it is essential to address customer churn in the best ways possible.
Remember, the real success of a business truly lies in how well it is able to solve a customer’s problem. Happy customers seldom churn. Communicating with customers is one way of finding out how happy they are — which in turn makes them happier. In the age of the customer, the solution to avoid customer churn lies in providing a better customer experience as offering a great product isn’t enough anymore. Consequently, companies should constantly strive to improve customer experience and keep interacting with their customers to acquire valuable feedback.
So what is customer churn and why did companies that failed had such high churn rates? What went wrong with their business strategy? Let’s have a look at this handy guide to know more about eCommerce customer churn and ways to avoid it.
What is Customer Churn?
Customer churn or customer attrition refers to the situation when a customer ceases his/her relationship with a company. In the eCommerce world, churn is calculated by the number of customers who leave a company during a given period. In short, the churn rate shows exactly how a business is doing in retaining customers.
But why does it even matter for any business? It’s simple — it costs too much to lose a customer.
According to the statistics by Forrester research, it costs 5 times more to acquire new customers than it does to keep the existing ones.
But that’s not all, the Harvard Business School Report states that on average, a 5% increase in customer retention rates results in 25% — 95% increase in profits.
Believe it or not, but customer retention is the primary driver of a business’ revenue. So, it makes perfect sense for a business to invest time and resources to avoid altogether customer churn rather than reducing it in order to generate more profit.
4 Strategies to Avoid Customer Churn
Hand-written thank you notes are not going to woo customers anymore. To avoid churn, processes need to be automated by keeping a powerful robust system in place. Here are four topnotch ways a business could do that:
1. Analyze the root cause of churn
If a company focuses only on reducing churn, it’ll always keep seeing churn. The key is to target the root cause of the churn and eliminate it. Target that BIG problem that is causing customers to leave. Think of it this way, a customer approaches company XYZ for a solution to his problem, and unfortunately, he is disappointed with what he is offered — ideally, the company should find out what disappointed that customer and use that feedback to improve not only their product and/or services but also their relationship with the customers.
2. Engage with your customers
Customer engagement is necessary for a business to grow. A true businessman wouldn’t expect to sell to a customer to never hear from him again. Remember that is exactly what churn is, and all businesses are trying hard to avoid it.
Sometimes, using simple tools makes a great difference. Adding simple yet useful tools like feedback bar and live chat on a business website can make customers feel like their time is as important to a business as it is to them. Another way to engage with customers and get valuable feedback is through social media. People love a product with which they can take a picture — Facebook and Instagram are perfect means of asking customers for feedback and showing it off to the world. Companies that offer services can send on-boarding emails to their customers to help them get started. These are little things that go a long way.
3. Target the right audience
No matter how sophisticated a customer retention trick is, it may as well be useless if a business is unable to attract the ‘right’ audience. The right customer for a business is the one who appreciates the long term value of their products and believes in investing in good quality as an advantage. Try targeting those customers, not the ones who are only here for ‘free giveaways.’
4. Don’t ignore complaints
Nobody likes to be ignored. Do that to a customer, and he’s never coming back. Did you know that 96% of unhappy customers do not complain, and 91% of those will leave and never come back? Yes, that’s true! So, a business should keep looking for customer feedback and cherish the complaints it gets — take them seriously, for this is the only way it can improve to prevent customer churn.
Conclusion
Now that it’s officially established that a business can’t afford to lose the right customers, let’s try focusing on keeping them closer. Today, all businesses have to be more proactive in how they avoid customer churn by establishing conditions in which customers can see the benefits their product has to offer. Also, they must keep track of all the complaints that they receive and act on them to minimize customer churn rates.
