Attrition. Churn. Turnover. Call it what you like. Or, maybe you don’t even like saying these words…
I don’t blame you. The thought of losing customers – for whatever reason – is…not pleasant.
Perhaps the only worse term to hear as an entrepreneur is “defection”: losing a customer to a rival company.
Okay, enough with the scare tactics. We’re not here to glorify customer attrition; we’re here to discuss how to avoid it.
Before we dig into the best ways to reduce your customer attrition rate (and, in doing so, increase your customer retention rate), we need to go over why keeping churn rate low is essential for your business, as well as the most common reasons customers walk away from businesses in the first place.
Why Should You Worry About Customer Attrition?
It seems like a silly question, doesn’t it? Like, you’re probably asking your screen, “Uh, duh. Why wouldn’t I worry about losing customers?” But humor me, for a moment, if you will.
Sure, the first thing that springs to mind when you think of losing customers is an immediate loss of revenue. But the long-term effects of customer attrition are actually much more damaging to your business.
For one thing, if you lose a customer, that means you’ll need to gain a new one if you want to keep things status quo. But the cost of finding and onboarding a new customer can be as much as five times as much as keeping a current customer happy.
Going along with this, loyal customers are much more likely to be open to providing feedback and trying new products or services you may offer. To get new customers on board in these terms would take much more effort on your end.
Not only that, but the cost of getting a new customer to the same level of profitability as your most loyal customers costs 1600% more than it does to keep those loyal customers onboard.
And, which customers – new ones or long-time ones – do you think are more likely to become evangelists, singing your praises to their friends, family, and network of colleagues? Naturally, those who have happily been doing business with you for years.
On the other side of this coin, negative word of mouth from unhappy customers who have churned can be largely detrimental to your business.
To be clear: yes, losing customers will result in an immediate drop in revenue. But it’s the amount of time, money, and effort that you’ll need to put into finding new customers that will really be a killer.
Now that you realize just how serious you need to take your customer attrition rate, let’s take a look at some of the reasons customers churn.
Why Do Customers Leave?
In actuality, there are as many reasons for churning as there are customers who churn.
What I mean by that is: every churned customer has their own unique story, and their own unique reason for choosing not to do business with a certain company any longer.
Think about the reasons you’ve stopped wearing a certain brand of clothing, or stopped drinking a certain brand of juice, or decided against buying a specific make of automobile. Too many to list, right?
But, we can boil all of these reasons down to four main factors – the first two being the most cited, regardless of industry:
- The company provided poor customer service and overall treatment
- The product or service failed to live up to the company’s claims or provide the benefits promised
- The company didn’t accommodate to the individual needs of the customer
- The company wasn’t empathetic to the customer’s situation
Notice that only one of these four main reasons for customer attrition have to do with the actual product or service provided. The others have more to do with the way the company treated the customer, and the overall experience the customer had with the company because of this.
Keep that in mind as we dive into the best methods for reducing your customer attrition rate.
How To Reduce Your Customer Attrition Rate
Knowing what we now know about the main causes of customer attrition, we can discuss the following pieces of advice in terms that directly relate back to these causes.
As a quick side note:
Experiencing at least some customer attrition is almost unavoidable. Even hugely successful corporations with fanatical followings lose a percentage of their customers over time for one reason or another.
Being realistic, the aim is to reduce the amount of customers who churn to only those whose decision to leave was completely out of your hands.
Now, on to the strategies:
#1. Set, Meet, and Exceed Customer Expectations
Your customers wouldn’t fork over their hard-earned cash to you if they didn’t expect something in return.
When that basic exchange of currency occurs, an understanding between you and your customer has been made:
- You’ve told them what they should expect in return for their money
- They’ve agreed to your set terms, and expect you to meet them
But let’s backtrack a bit.
Before you even market your product or service (and, hence, set the bar for your future customers’ expectations), you need to know:
- What does your customer need?
- What is it they’re looking to accomplish?
- Who even are your customers?
Info Entrepreneurs provides a helpful list of questions to ask yourself about your customers (using a survey tool like Fieldboom or a more limited tool like Google Forms) before you even think about doing business with them, including the following:
- Who are they?
- What do they do?
- What are their buying habits?
- How much money do they typically spend?
- What tickles their “buying bone”?
- What do they expect from you?
- What do they think about you?
- What do they think about your competition?
Note: we tackled perceived brand value in a previous post, which explains the importance of what your customer thinks of your company.
For our purposes, the last three questions are most important. If you know the answers to these questions, you’ll know exactly what your customers expect from you (or others in your industry) before you even set the bar.
After gathering this information, it’ll be much easier for you to meet your customer’s expectations…
…and completely demolish them.
Now, I’m not talking about gaming your customers (you know the saying: “Under promise, over deliver”).
I’m talking about setting expectations that will take hard work to meet – and working even harder. I’m talking about making your “par for the course” leaps and bounds above the industry standard, and your unique selling point something your competitors have never even thought of offering.
For examples of what I mean, check out these killer examples of customer service.
The phrase “gold standard” is somewhat overused by today’s standards – but only because companies that aren’t the best in the business use it to pretend they are. The best way to ensure your customer retention rate stays high and your attrition rate stays low is to be, without a doubt, the gold standard in your industry.
#2. Streamline the Customer Onboarding Process
So, you’ve gotten a prospect to convert. Time to sit back and relax, right?
Yea…you knew it wouldn’t be that easy.
Sure, making an initial sale feels good because it’s the first time you’ve experienced success with this individual customer.
But there’s something important to realize here:
You may have already experienced success from the transaction. But your customer hasn’t.
In fact, because they’ve already given you their money, they’re working at a loss until they start to see some results from using your product or service.
And if they don’t quickly reach a point where they at least feel like they’ve broke even, they’re going to cut their losses and leave you behind in search of someone else who can better meet their needs.
So, rather than defining an onboarded customer by the fact that they’ve converted and paid you, define them by the amount of success they’ve experienced with your service.
Side note: Since we’re aiming to reach that “gold standard” level, we can even go as far to say that a customer is never truly “onboarded,” as there will always be a higher level of success they can attain while utilizing your services. This mindset will keep you focused on continually providing for your customers, and never taking them for granted.
But, for the sake of logistics, let’s define onboarding as “getting your customer acquainted with your service to the point that they can use it on their own.”
To get them to this point, you’ll need to implement what educators refer to as the gradual release of responsibility.
Think about how you might teach a child to fish. You wouldn’t give him an empty fishing pole, a spool of line, some bait, and a sharp hook and tell him to get going, right? If you did, they might try to figure out what to do for about two minutes before they toss the pole into the lake and swear off fishing for good.
You’d first teach them to cast from a pole you’ve already set up. Then next week you’d teach them to bait the hook. Then you’d have them string the line, bait the hook, and cast on their own. And so on until they can go through every step without your help. At that point, the process will be second nature to the kid – and you’ll have created a fisherman for life.
The same goes for onboarding new customers:
If you throw them into a situation in which they have little to no idea how to use your service, they’re likely to get flustered and frustrated – and ultimately walk away.
But if you break down the use of your service into manageable chunks, they’ll be able to focus on one area at a time – and eventually understand how all of these areas come together to make up the full service you provide.
Once your customer is ready to fully utilize your services: let them. Create your onboarding experience so that individual customers can learn at their own pace and decide for themselves when it’s time to dive in. Providing too much assistance – and creating barriers to your service in the process – can be just as limiting (and annoying) as providing no help at all.
One more parallel to note between our fishing metaphor and customer onboarding:
In the ineffective examples (in which the teacher simply tossed materials at the learner and essentially said “good luck”), the parties failed to capitalize on an opportunity to forge a meaningful relationship between one another.
In the effective examples, it’s incredibly clear that the teacher truly cares about the learner, and will put in whatever time and energy is necessary to see them succeed.
The message: Show your new customers you care about them, and you’ll have a loyal customer for life.
#3. Be Proactive
We mentioned earlier the importance of not taking your customers for granted – even if they’ve been loyal followers of your brand for years.
Assuming that your best customers will always be there to generate revenue is a sure path to complacency. And it will all but ensure your attrition rate eventually skyrockets.
Rather than reacting passively to your customers actions and decisions, you should remain actively involved in their lives (as pertaining to your services) – no matter where they are in the sales cycle.
It’s well known that people generally dislike change. Knowing this, it’s essential that you keep your customers in the loop at all times regarding improvements or changes to your service.
At the very least, you should keep your customers apprised of changes you plan on making in the future. This includes an explanation of why you’re making the change, and what it means to them as the customer (and how they will benefit).
(Case in point: In early 2016, Starbucks made a seemingly-overnight change to its rewards program with almost no explanation as to why the change was made. While the coffee giant was able to weather the initial firestorm of dissatisfied customers, a much smaller business likely wouldn’t have been so lucky.)
It’s also important to be proactive when you’re experiencing technical or other difficulties that will keep your customers from utilizing your services. Even when an unexpected issue on your end leaves your team scrambling for a solution, your first concern should be making your customers aware of the problem and apologizing for the inconvenience.
As your team addresses and fixes the issue, continue to keep your customers in the loop. This will prove to them that, even in the most hectic of situations, you’re always thinking of how to better serve them.
Of course, communication works both ways. And, when it comes to providing top-notch customer service, you should listen much more than you speak.
But most customers (especially unhappy ones) aren’t going to go out of their way to reach out to you to express their feelings. So it’s up to you to solicit feedback to see what you’re doing well – and how you could do better.
The best channels to utilize when reaching out to your customers are:
- Email (with which you can send out customer satisfaction surveys)
- Social media
- Comments sections of blogs (both yours and influencers within your industry)
You’re lucky enough to be running a business at a time in which you can communicate with almost all of your customers with the click of a button. Take advantage of it.
Proactively Identify and Re-Engage At-Risk Customers
As we mentioned in the above section, your unhappy customers aren’t likely to make it clear they’re unhappy. They’ll eventually just stop coming to you for help.
To proactively stop this from happening, you need to first know the major warning signs of attrition:
- Reduced use or engagement
- Late or last-minute payments
- Increased instances of help tickets opened
(By the time a customer takes an overt action, like complaining or cancelling a subscription, it’s likely too late to get them back.)
You can use tools such as predictive analytics to pinpoint individuals who have taken action (or have remained inactive, as the case may be) that indicate the possibility of churning. That way, you can utilize the communication methods discussed earlier to reach out to your at-risk customers before they lapse or, worse yet, become defectors.
#4. Be Responsive
Going along with everything we discussed in the previous section, being proactive in your outreach and customer analytics is meaningless unless you actually do something with the information you glean.
First and foremost, you must be reachable in ways that work best for your individual customers. For example, if a customer messages you on Twitter, you should respond on Twitter.
That’s just Customer Service 101: You work for your customer. Not the other way around.
Once you’ve connected with your customers (both happy and dissatisfied), and they’ve provided you with their fair share of compliments, complaints, and everything in-between…start making improvements immediately.
In the last section, we talked about keeping your customers in the loop when your company is facing difficulties. Keep this same mentality as you tweak your services to better serve those who have taken the time to make their voice heard:
- Thank them for reaching out and/or replying to your questions
- Empathize with them genuinely (read: individually – not as a blast email to everyone who responded)
- Explain to them what you’re doing to improve your services and provide better assistance to them
While you should obviously always operate with all of your customers in mind, it’s important to recognize that those who have responded to your outreach initiatives – whether positively or negatively – are, in doing so, showing you that they care.
They want to stay onboard – as long as you can continue providing for their needs. Let them down, though, and they’ll start looking for someone who can.
#5. Let Go…But Learn From Your Loss
Toward the beginning of this article, we said that experiencing at least some customer attrition is inevitable.
There are a ton of reasons a customer might decide to stop purchasing from you – some of which are completely out of your control. Maybe they’ve relocated. Maybe they’ve changed paths in life. Perhaps you’ve helped them accomplish what they set out to accomplish, and no longer need your help. And still, some people are just impossible to please.
Rather than sinking extra time, money, and resources into re-engaging with those who have little to no interest in doing business with you anymore, invest these resources into understanding why they left.
Analyze their journey as a customer and try to pinpoint those early warning signs we talked about earlier. Dig even deeper to see if there were some even earlier warning signs you may have missed.
Then, search through your current customer base for those who are showing these almost-unnoticeable signs of possible attrition. Reach out to these customers to gather feedback and see if there’s anything you can do to improve their experience with your brand. The sooner you reach an at-risk customer, the better your chances of keeping them onboard.
In the unfortunate case that a customer makes an active decision to leave your company behind, you have one last chance to gain some insight as to why they’re leaving: an exit survey (hint: make sure you use a Likert scale question if possible).
To increase the likelihood that a churned customer will respond to such outreach, make sure your message is personal, apologetic, and empathetic.
Though not every former customer who cancels a subscription will respond to an exit survey, those that do will likely provide valuable information to take with you as you improve your services for future customers.
It’s natural for entrepreneurs and business owners to instinctively hit the “panic button” when facing a growing customer attrition rate.
But doing so certainly won’t lead to you making any productive improvements in the operations of your company.
Instead of freaking out about the amount of customers you’ve lost in the past, focus on keeping your current customers as satisfied as possible. Not only will this help you avoid even further loss of revenue, but it will go a long way toward increasing the loyalty of your current customers in the process.