No one wants to lose customers. You work so hard to acquire each and every one. After they sign up for your product or service, you pour your energy into meeting and exceeding their expectations. So when you get that call or email, it can be devastating - both financially and emotionally. In this piece, we look at the importance of studying customer churn, and how to prevent customers from taking their business elsewhere once they’ve indicated they’re considering doing so. Businesses that retain their customers win.
What Is Customer Churn?
Customer churn is the percentage of customers that stopped using your company's product or service during a certain time frame. The churn rate is calculated by dividing the number of customers lost during a specific time period by the number of customers you had at the beginning of that time period.
Customer Retention is Key for Profitability
A study by the Harvard Business Review states that a five percent reduction in customer defection has the potential to double profits. How could such a small decrease in cancellations result in a doubling of profits? Those customers that stay with you make more purchases, take less of your time, and refer other new customers.
Responding to a Cancellation Request: What to Say to Retain and Keep Customers Coming Back
So, how can you make your best effort to keep customers from taking their business elsewhere?
Here are some critical steps to take to ensure your customer base not only sticks with your brand for the long term but is also receptive to staying in business with you when they’ve become upset with something that has happened regarding your business.
Gather Information: Why Do They Want to Cancel?
Customers need to contact your business to cancel their accounts. Make sure to ask why they want to end their relationship with your company. In many cases, they’ll be required to call you (rather than using online channels) in order to cancel.
If they contact you via email, consider calling them back so you can ask some probing questions. You may need more information than the “why.” For example, if they had a bad experience with your service, ask them to describe what happened in more detail. And make sure to let the customer know ahead of time the reason you’re asking, so you can learn from the experience and make sure it doesn’t happen again.
Get Creative: What Can You Do to Save This Customer
After listening to your customer’s reasons for leaving, consider what you could do to resolve their concerns and keep them on. Was the customer disappointed with a product that you could easily replace? Even if the solution isn’t obvious, you’ve got them on the phone, so just ask!
Tell your customer that you’re sorry they are unhappy and that you value their business, and ask if there’s anything you can do to change their mind. The solution they propose may be something you hadn’t thought of, and possibly less costly than what you had in mind.
When offering concessions, be aware of the cost of your efforts to save the customer, but also remember another important measure of success: Customer Lifetime Value (CLV). If your CLV dwarfs the cost to save your customer, the odds are in your favor to do what’s necessary to keep them around.
Reduce Future Customer Churn: Determine How to Measure Success
If your customer accepts your offer and decides not to cancel, let them know you want to check in to make sure your product or service is meeting their needs. Keep the frequency at a reasonable rate to respect your customer’s time as they aren’t interested in hearing from you every day.
However, an infrequent check-in that only takes a minute or two of their time shows customers that you really do value their business.
So let’s say you use these efforts and are able to retain your customer. That’s great - but don’t let this experience pass you by. Take some proactive steps with your customer base to ensure you limit the number of customer cancellation attempts in the future.
Measure What Matters: Regularly Review Customer Data
Purchase history, inbound call volume, chat logs, interaction on your site, and new customer referrals are all inputs that could be critical to your business. Evaluate the data you collect to determine the right metrics and create a dashboard that you can quickly review on a regular basis.
Look for signs that customers are disengaging or dissatisfied via drop-off in purchase history or site visits, or an increase in customer service calls. Determine a proactive plan to reach out to customers who meet specific warning signs so you can get ahead of potential cancellations. This proactive data analysis can point to a place in your service where the appropriate value isn’t being felt by your customers. Sure up this area to increase your customer retention and lifetime value.
Build Loyalty: Reward Your Customers
You probably know this from your own consumer behavior, and studies prove it as well: customers make more repeat purchases when they are rewarded for their loyalty. According to the 2016 Bond Loyalty Report, 81% of consumers are more likely to continue doing business with brands that offer loyalty programs.
If creating a loyalty program seems over your head, create incentives for customers that are easy to manage. Rewards for customers can be as straightforward as receiving a twenty percent discount after spending over a certain threshold, or free two-day shipping.
Iterate: Add Customer Value
What’s the best way to support customers in your industry? Is it a constantly evolving product or service that requires new content to guide the customer, or is your customer base a specific demographic that prefers online chat to other communication channels?
Think about ways to give customers extras that make their relationship with your business more valuable. And don’t be afraid to ask - some of the best ideas can come directly from customers. Surveys are a great way to gather feedback.
Customer cancellations are an unfortunate side effect of doing business. You can’t eliminate them completely, but with the right tools, you can minimize their occurrence and improve your products and services in the process.
Keep Clients Coming Back with Invoiced
The Invoiced platform was designed from the ground up with the end user in mind. We win when our customers win, and our customers win when they’re retaining their client base. Among its many customer-pleasing features, the customer payment portal most directly reduces customer churn as customer payment friction is reduced, which keeps your customers happy by providing a consistent online experience.