Earn more, churn less: 5 ways to manage churn and create customers for life
Now that you have created that customer-first culture and things are going smoothly, it is time to manage that success and keep your top customers.
Meet Jane. Jane is the proud owner of an event business specializing in executing large corporate events. Due to the size of these events, she is often working with multiple vendors, partners, and customers to ensure that every detail is flawlessly delivered. Recently, however, she has been frustrated with a new cloud-based SaaS product that was intended to help her streamline and organize her communications, billings, contracts, and staff workflows. Too busy to contact support again and figure out why the product is not working the way it should, Jane decides to cancel the monthly subscription plan and move over to a different cloud-based SaaS product.
It’s happened to the best of us. Even with the right marketing and sales strategy, poor customer experiences can quickly lead to heavy churn. In fact, 33% of Americans say they’ll consider switching companies after just a single instance of poor service (Customer Service Barometer, American Express, 2017) and an estimated $62 billion is lost by U.S. businesses each year following bad customer experiences (Serial switchers strikes again, NewVoiceMedia, 2016).
Customer churn is the rate at which customers stop doing business with you. Churn is a natural part of business, and it’s okay if it’s planned for and exceeded by growth. There is good churn and bad churn. Good churn occurs when a customer is not a good fit for your business. Perhaps their needs are outside of your core services, you are spending an extraordinary amount of time with them or they no longer fit your business model. Bad churn is when you lose a valuable customer because their needs weren’t met.
The acceptable rate of churn
Churn rate is a critical indicator of the health of your business and helps to benchmark your customer satisfaction. To calculate churn rate, divide the number of customers lost during a time period by the total number of customers you had at the beginning of the same time period. An acceptable churn rate is generally in the 5-7% range (annually). If you are experiencing a churn rate higher than 7%, you may want to explore why customers are leaving. While there is not often a single answer, some reasons churn occurs is lack of engagement, poor product fit, product defects, difficult user experience, or lack of product support.
5 ways to minimize churn
Managing churn may seem like a daunting task. However, done right, it can help determine revenue predictability and business growth. A great way to manage churn is by instilling a customer-first culture at every stage of the customer journey. This means looking at your existing or new customer base and taking proactive steps to turn customers into brand ambassadors.
To minimize churn, use some of these common retention tactics:
- Thorough onboarding – customers purchased your product for a reason, and they’re often excited to get started. Ensure you have a proper onboarding process that includes training, how-to guides, and on-demand tutorials to thoroughly drive adoption and usage. The better your customers understand your product, and the more they use it, the likelier they will be to have a positive experience. Usage has a direct correlation with churn and your operational excellence is a major factor.
- Special promotions – we often focus so much on acquiring that next big client that we forget about putting the work in to keep our most loyal customers. Create an incentive program exclusively for your best customers. They’ll feel valued, and you’ll maintain relevance in their eyes. Take Discover Card for example. Discover it® will match all the cash back you’ve earned at the end of your first year, automatically. This encourages users to engage with their product more and to instantly see the benefits of doing business with Discover.
- Consistent communication – Schedule quarterly quality assurance meetings with your customers. If you give them the opportunity, and are willing to listen, customers will tell you exactly how to create the experiences they desire. And if you’re doing a great job, a quick sync on how the relationship is going will remind your customers of the value you deliver.
- Easy access to support – Make every employee a Customer Success Manager. Whether they’re in billing or marketing, every employee is a representative of the company, and should be empowered to say “yes” to customers. If your clients don’t have to go through a laborious process to get the answers they need, they’ll be more likely to continue doing business with you—and to recommend your business to others.
- Targeted customer feedback – Listen to your customers. Customer surveys, social media, digital forums—there are innumerable ways to collect feedback from clients that can help you strengthen your competitive advantages and correct any shortcomings.
These details are explained further in our Customers for Life eBook. Read it and share it with your whole team. It is all about Operational Excellence. Watch this video to learn more about a customer first culture.
It’s important to note that customers don’t expect you to be perfect. Like most of us, Jane purchased the SaaS product to help solve a problem. Based on the information about the product, she had an expectation of how it would work for her. She trusted the SaaS company to deliver as expected. And when it didn’t, the customer support wasn’t responsive enough to meet her needs at the speed of business.
Remember, it’s how you respond when a customer has an issue—how you maintain that trusting relationship—that is the true test of a customer first culture.
Learn more about how to create your own Customers for Life strategy in later blogs in this series, as well as at our webinars and our next monthly insider call. See our US SMB Partner HUB for all the details. https://partner.microsoft.com/en-us/marketing/business-applications-smb