What is Customer Churn and How to Reduce It

Being successful as a SaaS business is hard. It is even harder to keep your customers paying you. There are a lot of reasons that encourage customers to stop using your product, and churn is inevitable. This doesn’t mean you can’t reduce it to a degree that will not be significant to your growth. In this article, we will explain what customer churn is and how you can reduce churn in 3 steps.

What is Customer Churn?

Customer churn means a customer’s ending their relationship with a company for any reason. Although churn is inevitable at a certain level, a high customer churn rate is a reason for failing to reach the business goals. Thus, customer retention is as crucial as acquisition when it comes to increasing revenue. 

Why do customers churn?

Not all the reasons for customer churn arise from the company’s performance, but the statistics show that around 91 percent of the unhappy customers churn rather than complaining. Five top reasons for customer churn are known as:

Poor customer onboarding

After their initial days with your product, are your customers aware of the value proposition of it, what it does, and how it does it? They must be. If they don’t understand what your product is due to a poor onboarding process, they will not stay for much longer.

Failure in building a relationship

You have to establish a bond of trust between your brand and your customers. If you fail to be honest about your value proposition and provide good customer support, you might experience higher churn rates than the industry average.

reduce churn customer service

Overselling

One of the reasons why your customers churn might be overselling. Overselling means that your customers’ expectations of your product might be more than what your product actually offers.

This over-expectation might result in customers that churn after realizing the real value of your product.

Poor customer services

When your customers experience a pain point, can they easily reach your customer support?

Can you solve their problems every time they contact you?

If your answer is “no” to any or both of these two questions, your customer services lack efficiency. This might be the biggest reason you are experiencing churn as customers who feel that their problems and request are not being listened to has no reason to stay with your company.

A more convincing competitor

You might be a perfect product that does everything it offers without a problem, onboard its users like a pro, and provides the best customer support there is; yet still have churn higher than average. The reason behind that can be a more convincing competitor that offers more features for a lower price. You must be aware of the competition and try to establish a favorable position in it.

How can you reduce Churn?

Customer churn is highly dangerous and it can end up killing your business. The decrease in your revenue, the negative reviews all around the web and unhappy customers will not do you any favor.

The good news is that there are ways to reduce customer churn. Here are the three steps in which you can significantly reduce churn:

1. Track and analyze the customer churn

To keep your customers subscribed to your service, start with tracking the customer churn. It is useful to know your customer churn rate and understand why the customers leave.

Customer churn rate is the ratio of the number of customers that have left to the number of your total customers for a certain period. There are some ways to predict this rate, using some quantitative models and techniques like micro-segmentation and predictive behavior modeling.

reduce churn analytics

Once you learn about your rate, figure out why your customers churn. Sending a personal e-mail is a reliable and practical option. However, the best way is probably calling the customer and trying to hear about the reason why they have left. Getting directly in touch even can help you gain your customer back. 

2. Offer better user onboarding experience

To reduce customer churn, you should keep your customers engaged with the service you provide. Try to offer an enjoyable experience rather than highlighting your company. If the customers have a successfully personalized experience, they will find it harder to leave. Therefore, customer engagement should be the focus of your company.

The user onboarding process has a strong effect on increasing customer engagement. Just like new employees, new customers also need an onboarding process to get to know your business, how your product works, and what it can do for theö. You should provide an excellent introductory service for them to understand the benefits of choosing you. Never forget that customer experience is as important as your product or service for reducing churn.

A beautifully designed user onboarding process will help your customers get to their “Aha!” moments faster, which will end up in better product adoption and feature adoption. When your customers adopt your product and all its features, they become more satisfied with your product, your retention rates increase and your churn drop.

3. Show your customers how much you care for them

Your product is already successful, and you provide a good service to your customers. But those factors might not be enough to keep your customers because you still have so many competitors. Establishing a strong relationship is essential to have loyal customers. If they know that you are easy to access and ready to help them when they need it, they will stay longer.

Let your customers know that they can communicate with you whenever they want and in different ways. Be proactive! Remind your customers that you are always here for them even before they need it. You can enhance their experience by asking questions to learn if they face any problems without waiting for them to reach you. 

Surprise your customers and make them happy. It is not directly about the service you provide, but it is something polite. You can give them recognition awards and presents of sentimental value, like notes and certificates. You should “thank” your customers for being with you. 

The customer satisfaction is the backbone of a company. You should treat your customers to keep them with you. When you lose them once, it is hard to get them back. Using the ways mentioned above, you can enhance your customers’ experience and retain them, and end up having reduced churn rates.

Selman Gokce

Selman Gokce is the Senior Inbound Marketer of UserGuiding. He is highly invested in user onboarding and digital adoption, especially for SaaS, and he writes on these topics for the UserGuiding blog. When he's not writing, you can find him either listening to LOTR soundtracks while cooking or getting angry because he lost in a video game.

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