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6 Ways Small Businesses can Reduce Customer Churn



Understanding customer churn numbers is very important for startup owners as it plays a crucial role in deciding the success or failure of their business. Customer churn rate directly impacts customer lifetime value and the ability to grow business. It also leads to:

  • Lower business performance due to revenue loss
  • Reduced profitability
  • Increased re-acquisition and marketing costs

So, what does customer churn actually mean?

It is the percentage of customers who leave your company during a given time period.

And why does churn rate matters too much for a company?

Well, because it costs a lot to lose customers. When existing customers leave, you need to acquire new ones to make up for that loss and this leads to greater costs for the company.

According to Forrester research, it costs 5 times more to acquire new customers than it does to keep the existing ones.

What’s more serious is that Harvard Business School report says that on average, a 5% increase in customer retention rates results in 25% – 95% increase of profits.

Therefore companies, especially small businesses, must make an effort to reduce customer churn rate as acquiring new customers is a very expensive affair. Below are 6 ways to reduce churn and do your best to retain the existing customers:

Find Out why Churn Occurs

It is critical for a business owner to know why customers leave. If you know the reasons behind churn, you will be in a better position to rectify the problem areas and improve your business processes to minimize churn rate. Gathering customer feedback through emails, social media or phone calls is the best way to identify why customers cancel. This can give you actionable insights of what your customers expected and why they left. Is it because your product didn’t meet their requirements or due to poor customer service? Talking to your customers over phone helps a lot as it demonstrates that you care. Communicating with the customers does wonders in scrutinizing customer churn.

Ensure that you have an Amazing Product

Make sure that your product adds value to your customers’ lives. Spending exorbitantly on marketing activities for a shoddy product is simply a waste of money. If the product is awesome, it will definitely find a place in the market. Even if you are able make a good amount of money by selling your crappy product, you can’t create loyal customers and ensure retention as customers will shortly realize that they are getting little value of money and would look forward to switch to a competitor.

Know your Target Demographic

Targeting customers who are a good fit and who see real value and advantages in your product are the ones who will not leave and continue using your product. Instead of trying to appeal everyone, it’s better to aim at your ideal customers. Gather customer data and analyze so as to determine your ideal customers. Segregating your target demographic into various customer personas and understanding them well is the key to reduce churn and keep your customers happy and loyal.

Set Appropriate Customer Expectations

Never promise what you can’t deliver. Initially, hyped up sales pitches might get you more customers but they will soon leave if you don’t keep your promises. Rather, set clear expectations from the initial sales call and keep up to them in order to retain customers.   It is recommended to under-promise and over-deliver to delight your customers as they love it when you exceed their expectations.  

Leverage your Competitive Advantage

What separates you from your competitors? Are you offering any additional benefits as opposed to your competitors?

You need to offer some unique advantage for people to become your customers. Give your customers a reason to choose you over others. Either offer low prices or great customer value or distinguished benefits that can justify the higher price than your competitors.

Know about your “at Risk” Customers

Try to analyze the reasons for customer churn. Spot the common actions which all your churned customers made. Did they contact you less often? Did they try your product but didn’t get the desired results? Did you forget to follow-up with them on a frequent basis?

If you observe someone with these commonalities or who are behaving similarly as your previously churned customers, you can take proactive measures to prevent churn. Once you have identified “at risk” customers, conduct a survey and ask the following questions:

  • How happy are you with the speed and efficiency at which we are able to respond to your requests?
  • How happy are you with our attention to detail and thoroughness?
  • How much collaborative and proactive we are in the way that we work with your organization?
  • Are we able to help you learn and provide recommendations that are in the best interest of your organisation?
  • Overall, how satisfied are you with our service?
  • Will you recommend our products to your friends or colleagues?

Listen to your customers’ feedback properly and based on these answers, you can take corrective measures and outline the future plan of action before they churn.



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