There isn’t a single business out there that hasn’t lost customers. Learning how to reduce customer churn is a vital tactic in preserving growth.
Neither fast-growing startups nor decade-old enterprises are immune.
Unfortunately, combating churn is an uphill and ongoing struggle that every business will face as long as they exist.
But with customer retention being five times cheaper than acquiring new customers, it’s a battle well worth fighting.
We’re going to aid you in this quest by shedding more light on:
- what is churn and why you should worry about it,
- the four biggest causes of churn,
- how reviewing your churned customers’ support conversations can help,
- and six actionable tips to prevent churn.
So without further ado, let’s get into it!
Why should you worry about churn?
Customer churn or churn rate is the rate at which customers stop doing business with your company.
And, crucially, it has a very direct effect on your bottom line.
Trying to replace every customer you lose would force you to spend money on marketing, sales, and onboarding all over again.
Furthermore, the ROI on retention far outweighs new customer acquisition. According to Bain & Company, a mere 5% increase in retention can help you increase profitability by up to 95%.
You could try and combat churn with growth. However, this strategy is like trying to fill a leaky bucket with more water.
Eventually, growth will hit a wall and it just won’t be feasible to acquire more customers.
So rather than worry about churn and all the potential revenue you’ve lost then, it makes sense to retain as many customers as possible right from now.
The biggest causes of customer churn
The four biggest causes of churn and how to resolve them
- Attracting the wrong audience → Update your buyer persona, implement lead qualifying standards, and improve messaging
- Customers don’t see value fast enough → Tweak onboarding flow to bridge the gap between sign up and first success or “aha” moment.
- Lack of ongoing customer success → Have a dedicated customer success manager for your most valuable clients and gather feedback from customers over their lifetime.
- Poor customer support → Train your agents, provide proactive support, and track metrics to identify areas of improvement.
If you’re going to try and reduce the churn rate at your business, you first need to identify the potential causes of churn. So below, we’ve outlined the four biggest reasons users tend to churn.
You’re attracting the wrong audience
Your product isn’t meant for everybody. And sometimes there’s a disconnect between what a customer believes your product can do, and what it can actually do.
This can be a result of:
- a lack of understanding of what your ideal customer looks like,
- issues with your lead qualifying standards,
- or unclear messaging.
And while attracting such customers can boost numbers in the short term, they’re unlikely to stay for long and will eventually churn.
When customers sign up for your product, they do so to achieve very specific outcomes.
So if they don’t understand how to navigate your tool and achieve these goals quickly, they’ll get dissatisfied and churn.
Simply put, if achieving that first moment of success takes too long, the customer will be gone.
The easiest solution for this is tweaking your onboarding flow to more effectively guiding customers to achieving their goals more quickly. This gap between sign-up and success is called “Time to Value” or TTV and is a critical metric for SaaS products.
Lack of ongoing customer success
Helping your new customers achieve value is a nice early win for you. But it doesn’t end there. In fact, it only really means that you’ve bought yourself a bit more time.
You’ll need your product to consistently deliver value to your customers and help them achieve mini-goals that drive them closer to their ultimate objective.
Customer loyalty and retention go hand in hand.
So for your most valuable clients, it might be worth having a dedicated customer success manager to help them get the most out of your product at every stage of their journey. For other customers, make it easy for them to provide feedback throughout their lifecycle. That way you can respond quickly if they start to show signs of dissatisfaction.
Poor customer support
No matter how good your product, your customers are bound to eventually run into issues.
But if you want to prevent these issues from becoming dealbreakers, you need your support to be accessible, responsive, and effective across all your support channels.
Here are few things you should do:
- Set clear customer service goals and implement systems to achieve them
- Provide training that helps your agents perform to the best of their abilities
- Regularly track your customer service metrics to identify areas of improvement
Make customer support a priority and you’ll start reaping the benefits, including preventing churn.
Now, this isn’t an exhaustive list by any means, just the most common causes. Other reasons for churn could include things like product bugginess, a difficult user experience, cheaper alternatives, or a loss of key stakeholders, etc.
Knowing the major causes is a good start in understanding how to reduce customer churn. But now you need a way to identify if they’re happening at your organization.
And this is exactly where conversation reviews come in.
How to reduce customer churn with support reviews
Reviewing your support interactions can help you:
✨ Understand reasons for churn
✨ Identify trends and patterns
✨ Highlight parts of your process that are broken
Conversation reviews are a systematic way to assess how well your agents’ responses meet your internal quality standards. Doing regular conversations reviews are a great way to help your agents improve and enhance the quality of your support.
It’s also a great way to help you combat churn because it allows you to:
Understand why users have churned
Uncovering why customers have canceled in the first place is essential to preventing it from happening again in the future.
A good way to go about this is by retrieving conversations of churned users by company ID and taking a close look at their product usage statistics, NPS survey responses, and any notes left by a customer success manager or support agent.
Additionally, considering the entire unified customer timeline is important. You not only want to understand exactly what happened during these conversations but also before and after them.
Identify things you could have done to save the relationship
If multiple users start churning for similar reasons, this is cause for concern. And you’ll need to fix this right away.
The best way to identify these trends is by reviewing support interactions, especially if the reason isn’t something you can immediately detect.
Going through support conversations is also a great way to find parts of your system that are broken. For example, let’s say you review a conversation with a customer that asks to cancel. And support processes the cancellation without further question. You might want to tweak your process to deal with these situations more effectively (ie. asking the customer why they want to cancel first).
Once you identify the causes of churn at your business, you’ll need to follow this up with more action.
So in the next section, we dive deeper into how you can use these insights with 6 actionable ways to combat churn.
6 actionable ways to combat churn
The methods mentioned here aren’t one-time quick fixes you can just implement. Rather, they’re practices you need to make a part of your process and perform consistently to see the results.
Proactively list all the reasons a new customer may churn
One of the best ways to combat churn before it becomes a problem is to prepare yourself for it.
Whenever you onboard a new customer of significant value, identify all the possible reasons why they may churn at the different stages of their journey.
Follow this up with an action plan that prevents each one of those hypothetical scenarios from taking place.
Mapping out the journey your customers take and anticipating the obstacles they may face along the way allows you to optimize the customer experience and thereby prevent churn.
Talk to your customers regularly
Building better relationships with your customers goes hand in hand with learning how to reduce customer churn.
This is the only way you’ll gain a thorough understanding of their problems, which in turn allows you to prescribe how they can best use your product and get the most out of it.
Many a time, you’ll find that your customers will struggle to articulate what exactly they need or are trying to solve. So you’ll need to do a lot of discovery to understand what they’re trying to accomplish before making any recommendations.
Additionally, if you notice many of your users facing the same problem, you could also update your product to suit their needs before they end up churning.
Be transparent and set clear expectations
You must be honest and transparent with your customers. And this needs to be consistent across your marketing, sales, and support teams.
For example, let’s say you’re beta testing a feature that will become a paid add-on after the beta. You’ll want to make sure that your customers are fully aware that this feature will cost money in the future, rather than surprising them with an invoice at the end.
The onus is completely on you to clearly communicate what your customers should and should not expect from you and your product. And for this, you’ll need all your departments to be in sync.
Make the cancellation process simple
This one might sound counterintuitive.
You obviously want to reduce the number of cancellations. But adopting practices like:
- forcing them to contact support,
- hiding unsubscribe/cancel buttons,
- or not responding to cancellation emails
will actually do you more harm than good. And this is a complete no-no.
These customers are already looking to cancel. And if you make it more difficult for them to do so, they’re likely to spread the word about your shady business practices, which will eventually ruin the reputation of your business. Not to mention, they’ll likely never return.
Keep the cancellation process straightforward. No dark patterns, no need to contact support, etc.
You are much more likely to see a return of these customers in the future, especially if you have a retention team operating.
Set clear processes for your support team to follow
You want to make sure your customer support and customer success playbooks are always up to date and provide clear direction on how to handle different situations with customers.
This is crucial if you’re going to identify and address the early dissatisfaction signals your customers show, whether that’s:
- decreased usage of your product,
- a negative mention on social media or review sites,
- or a bad interaction with your customer service team.
Clear processes will empower your agents to quickly identify and effectively deal with such situations before it’s too late.
Reach out to customers proactively with support
If you’re going to prevent churn, your customer support team will need to go above and beyond.
For example, let’s say a customer has a question about a specific feature. You’ll want to make sure your agents don’t just provide an answer but are also able to see the bigger picture.
And this may mean doing things like:
- asking additional questions to understand what users are trying to achieve,
- proactively looking at their product usage statistics,
- inviting them to discover new features, etc.
Your customer support isn’t just about being there for customers when they reach out to you. Instead, you need to proactively anticipate their needs and start conversations whenever you think it could be helpful.
Empower your agents to combat churn with Klaus
Churn can be a silent killer if you allow it to be. But hopefully, we’ve given you a path to identify and tackle it early.
And one of the best bets you can make to prevent churn is investing in your customer support team.
That means providing them with feedback and coaching that’ll help them to perform to the best of their abilities.
Luckily for you, we’ve built a tool just for that. So if you’re looking to empower your support team and learn how to reduce customer churn, it’s time to check out Klaus!