5 Ways To Slash Your Churn Rate & Keep Customers Longer
What is churn rate?
So, what exactly is churn rate, and why is it a problem for your business?
The technical definition of churn rate, according to churn-rate.com is this:
Your churn rate is the amount of customers or subscribers who cut ties with your service or company during a given time period.
So, the lower your churn rate, the better. Imagine if you never lost a customer! If you had a zero percent churn rate, every new sale and every new customer would be adding on top of each other, accumulating into one massive customer list.
Unfortunately, this is not realistic…of course you are going to lose customers over time for one reason or another. But it is important to focus on retaining customers as long as possible so that your customer base is growing over time.
If every new customer just purchases once and then doesn’t return, you end up in the hamster wheel of new customer acquisition, never able to truly grow.
How do you calculate churn rate?
To calculate your basic churn rate, just divide the customers that you lost during a certain time period by the number of customers you started with at the beginning of that time period.
So, if you started with 100 customers in January and lost 3 during the first quarter, your churn rate for the quarter would be 3%.
Simple, right?
How can you keep your churn rate low?
First we will introduce 4 core concepts for keeping churn rate low and then reveal 5 action items to start reducing your churn rate today.
1. Quality
The first pillar of a low churn rate is quality. Quality product, quality brand. Make sure that customers are receiving at least the value that they expect from your product (and hopefully more!). A disappointed customer will most certainly have a short life with your brand.
Think of it this way: every time a customer gets a bill from your brand, they do a mental calculation on whether or not it’s worth continuing to pay. If they don’t see that they are getting enough value, they will stop paying. So make sure your product or service is of a high quality (and has a high value for the cost) so that your customers stick around.
2. Customer Care
The second pillar is customer care. Make sure to be investing in your current customers. It is much cheaper to make current customers happy than it is to acquire new ones.
Not to mention, if your customers are happy, they will be advocates of your brand. People are much more likely to buy from you if a reliable 3rd party recommends you.
Learn more about how social proof sells better than you do here.
3. Constant Improvement
The market moves fast these days. If you think that you’ve created the best product today, you can be sure you won’t be the best product tomorrow unless you continue to improve it. If you are not investing in constant improvement, your customers will jump to another brand that is.
4. Brand
Brand is your only true differentiator. Product can easily be copied (and probably a whole slew of alternatives already exist). People will spend more and stay longer if they connect with your brand, so make sure that fostering this connection with your customers is core to your strategy.
Investing in your brand is ultimate key to reducing churn rate.
How can you put your churn rate reduction into action?
1. Quick Response Time
If someone needs help or has a question about your product or brand, whether that be pre-purchase or post-purchase, response time is incredibly important. Even if you cannot fully answer the question or complaint immediately, it’s important that a customer (or potential customer) know that you’re working on it and trying to help.
We live in an instantaneous world, so people get frustrated very quickly if they don’t hear back from you right away. Aim to get back to customers within a few hours, with no customer waiting more than 24 to hear from you.
2. Back Your Product
If you have a quality product (back to what we said as a core concept above), then back it! If you don’t believe that what you are selling is backable, then you need to go back and rethink your product.
If you do believe in what you’re selling, then offer outstanding guarantees or warranties on your product in order to make customers feel more comfortable purchasing from you.
3. No Gotchas or Fine Print
Don’t trick your customers into a purchase. The days of the used car salesman approach are long gone. Be sincere in your offer and listen to feedback.
4. Consistent Communication
It’s important to stay top of mind with your customers. But don’t cloud their inboxes with meaningless communications or focus solely on promotions. Deliver value to your customers through your email and social communications.
5. Constant Improvement
As we mentioned above, constant improvement is essential to keeping customers around for the long haul. So, make sure you are launching new products, new versions, or improving your service regularly and tell your customers about it. It’s important that your customers know that they are heard and that you are working to make the best product or service out there. Otherwise someone else will come out with a product or service that is better than yours and your customers will jump to another brand.
