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Customer Churn – How to Predict and Reduce Churn in Business

Spoiler Alert: The reality is you cannot avoid customer churn because several factors are out of your control.

We didn’t scare you. Did we? 

Why are my customers leaving? Are we not good enough for them? – This question plagues every business in the world. In today’s competitive market, customers switch brands all the time. 

But it doesn’t mean you can ignore the customers who leave because retention is your primary driver to recurring revenue.

And no, we didn’t just contradict ourselves.

The key here is to target the right customers, i.e., the ones with the potential for higher repurchase and long-term loyalty.

Because even though you cannot stop attrition, you can control it to balance the revenue lost with incoming profits from retained customers to ensure growth.

As you’ll discover in the following sections, even 1-2% improvement in churn rate can add hundreds or thousands of dollars to annual revenue and give you the competitive advantage you need.

And that’s what we have for you in the store today. We have listed some practical ways to reduce customer churn in your business. We will also go through tactics to predict the customer’s churn probability so they don’t slip out your hand unnoticed.

So, let’s begin.

What is Customer Churn?

Customer churn is the number of customers that walk out of the door in a given period. It includes customers who moved over to the competition and the ones who terminated the services or stopped purchasing the product from you.

In its simplest form, customer churn rate is the percentage of people that stopped doing business with you during a given period.

Customer churn = [ (customers at the start of the period + newly acquired customers – customers at the end of the period) / total customers during that period ] x 100

Customer churn, when uncontrolled, is a serious problem for a business. To give you an idea about its impact on your business, let’s crunch some numbers.

Say there are two companies that acquire the same number of customers per year and earn an average of $2000 per customer. But the churn rate of company A is 5%, and that of company B is 15%.

Let’s see how they fare after five years:

Company A          
Year Starting customers New customers Churned customers (5%) Existing customers Total revenue
I 0 100 5 95 190,000
II 95 100 10 185 370,000
III 185 100 14 271 542,000
IV 271 100 19 352 704,000
V 352 100 23 429 858,000
74 (Total lost customers) 2,664,000

Company B          
Year Starting customers New customers Churned customers (15%) Existing customers Total revenue
I 0 100 15 85 170000
II 85 100 28 157 314000
III 157 100 39 218 436000
IV 218 100 48 270 540000
V 270 100 56 314 628000
184 (Total lost customers) 2088000

We can clearly see that:

  • In five years, company B earned over 27% less than its competitor, company A. This amount equates to $576,000.
  • In the 5th year, the difference between the annual revenues of the two companies was a staggering 58%.
  • When we talk about the difference in customer base, company B lost double the customers than company A which is not good for brand image.

In the above example, we averaged all the customer types to calculate the revenue. What if you were to calculate the effect of churn using only high-value customer segments. The loss would be even higher for both companies.

Pretty scary scenario indeed!

That’s why you have to understand why this happens and how to deal with it.

Types of Customer Churn & Their Causes

If you want to reduce unnecessary churn, you first need to spot it and find out its cause. Only then can you implement the measures to retain the customer before they hit the road.

So, there are primarily two types of churn behavior that can stem from your end or the customer’s side.

Voluntary Customer Churn

Voluntary churn is when the customer decides to terminate the services on purpose. Businesses need to keep a sharp eye for this type of churn as it might be due to serious product issues or problems with your support services. 

As to what causes this behavior, multiple factors can contribute to it:

a.) Change in Prices

It can make a product unaffordable for some customers prompting them to look for alternatives. Run a pricing analysis before changing your pricing structure. You can add a small survey on your website or app to gauge customer preference and how they perceive your current pricing tiers.

b.) Business Shutdown

This one is pretty much out of control, and you cannot do anything about it.

c.) Unsatisfactory Services & Support

If your customers face constant product issues and their grievances are not addressed on time, they are bound to look for better shores.

d.) Better Value for Money Offered by the Competition

People are always looking for better services, prices, and product value. If your competition has a better product offering, you will lose even your loyal customers in the long run. That’s why it is necessary to run competition analysis to stay ahead in the race.

Targeting different customer types with small market research surveys can go a long way in establishing customers’ purchase preferences and expectations from your brand. You can then look into your competitors to deliver a better experience.

e.) Change in Product Requirements or Business Model

This situation is also out of your hands. In this case, the only way to stop churn is to analyze the customer’s new requirements and see if your product solution fits into them.

f.) Lack of Product Updates or New Features

Innovation is the key to increasing customer engagement and retention in today’s world. If your product is not evolving with technological advancements, you may lose your customers to competitors offering new and improved features to make work easier. 

Involuntary Customer Churn

Involuntary churn is when a customer cancels their services or subscription due to an unforeseeable situation or incident. Payment issues are one of the primary reasons for involuntary churn, especially for a subscription-based pricing model.

Some of these instances include:

  • Payment failures due to card declination
  • Issues at checkout
  • Failure to update payment information
  • Loss of customer account or card

All these factors represent a loss of a customer who was willing to provide you revenue. The good news is, involuntary customer churn is easily avoidable using simple measures:

  • To monitor such behavior, you can set triggers that remind customers about their upcoming payments.
  • Encourage them to set up auto-payment in their account to prevent subscription cancellation.
  • Deliver automatic notifications about payment failures to customers via email and SMS and remind them to update the card information to avoid service cancellation.
  • Set an alert at your end whenever a service is canceled due to payment failure so you can quickly follow up and take necessary actions to prevent customer churn.

Importance of Monitoring Customer Churn in Business

Curbing customer churn promotes higher customer retention, which means higher lifetime value and more revenue.

When you see that companies lose over $136 billion every year in the U.S. alone due to customers switching leaving the business, it becomes evident that you need to monitor the customer churn.

Customer attribution analysis helps plug the unwanted revenue leaks among your customer base, which can be voluntary or involuntary. You can predict the probability of customers’ churn based on their behavior and prevent it before it’s too late. 

For example:

  • It helps to identify the customers with a high risk of churn. And if you are analyzing high-value assets, it can help you retain a customer with a potential for more than average purchase value and long-term loyalty.
  • If an average customer carries a churn risk, You can evaluate if you have recovered the acquisition cost from them or not. Plus, you can analyze if the retention of such customers adds unnecessary costs to your business and develop a sound strategy for the future.
  • If you have a subscription-based revenue structure, you can estimate the recurring revenue for the next year based on the past and current churn trends. It can help you to plan your budget accordingly.

Disadvantages of Customer Churn

Uncontrolled customer churn in business is bad for your revenue stream, damaging your brand image and customer relations.

Let’s see what else leaving customers take away from you:

1. Reduced Monthly or Annually Recurring Revenue

Lost customers equal lost revenue.

If you offer SaaS-based product solutions, a higher churn rate will hurt your recurring revenue. You may acquire more customers with time, but a significant portion of the potential revenue is lost that could have been earned had the customers not left.

We saw this when we calculated the revenues for our hypothetical companies A and B. 

By the time you read this, company B has gone through severe budget cuts. We feel bad for it, but it didn’t take the hint for five straight years.

2. Lower Customer Lifetime Value

Churn affects every customer segment, and when it creeps up to your regulars and high-value assets, it leads to a shorter customer lifespan with the brand and reduced lifetime value. If customers leave before generating profits, it would also increase your overall acquisition costs.

Also Read: How to Ask For Feedback Without Annoying Your Customers

3. Shrinking Customer Base

Looking back to our hypothetical example, company B lost twice as many customers as company A. In a competitive environment, it means your competition’s customer base is growing at a much faster rate than you.

What’s more, it can create a bad brand image and negative word of mouth.

4. Added Win-Back Expenses

When customers cancel their services, you need to employ additional resources to win them back. This cost adds to your acquisition costs, making the situation worse. 

And if you are offering a discount to retain customers without adequately understanding the reasons behind the churn, you may end up losing those customers anyway. These uninformed campaigns produce almost zero ROI for the company.

How to Predict Customer Churn in Business?

Prevention is better than cure. Don’t wait till the end. Learn to study your customer’s intent and behavior to catch them in the churn act.

Except for one-time shoppers or low-value customers, a large percentage of your regulars won’t simply turn their back on you instantly. They change purchase frequency, account usage, or lower the purchase amount if they start to feel unsatisfied with your products and services.

And you can track these behavioral cues to predict the probability of churn and act on it to prevent customer attribution.

Here are a few ways to approach this problem:

1. Using Customer Experience(CX) Score

When we say CX score, we mean tracking metrics like NPS, CSAT, and CES. It is one of the most effective ways to predict customer churn probability. You get data points directly from the customer to understand their current perception of your brand.

It is pretty simple too.

Want to see how it’s done in real life? We have the perfect example for you.
MonetizeCX developed a CX score (NPS) vs. spend matrix to identify the churn probability and revenue potential for different customer segments.

How did they predict churn with NPS score?

The NPS survey is scored on a scale of 0-10, and respondents are divided into three groups:

  • Detractors (0-6)
  • Passives (7-8)
  • Promoters (9-10)
Create a NPS survey

The team observed the customers with above-average spending who scored low on the NPS scale (0-6). These represented 20% of the total customers.

These high-spending customers carried a high risk of churn as they were unsatisfied with the brand. So, it was decided to address their pain points and issues to retain them.

But no action was taken to retain detracting customers with below-average spending as it would add unnecessary acquisition and retention costs.

The results:

  • A 20% boost in the NPS score in a few weeks means an increase in loyalty. 
  • A 4% increase in the customer lifetime value of high-spending detracting customers, indicating improvements in retention rate.

So you see, a simple NPS survey combined with the customer’s purchase value can help in customer churn analysis.

In the same way, you can keep an eye on other metrics like CSAT and CES for different customer segments to predict their behavior and churn probability.

And the best part is, simple targeted CX surveys also let you collect more in-depth information about your customers’ preferences, pain points, and issues so you can resolve them in time.

Here’s how:

  • Add simple follow-up questions to your CX surveys to explore the reasons behind their previous answers.
ask feedback question with user about any issue which you facing in app or website
  • Once you have the CX scores and other feedback data, you can combine these data points with different customer tiers to visualize which group has the highest probability of attrition and requires immediate attention.
  • Then, feed these findings to different teams to plan the next course of action to retain the customers.

If you’re having trouble getting started, numerous survey tools are available with pre-built survey templates and question repositories.

Advanced tools like Qualaroo also provide in-depth targeting options to ask the right questions to the right audience at the right time based on their behavior and actions. Plus, advanced techniques like sentiment analysis can help make feedback analysis faster.

Related Read: What Is Customer Experience Management | A Detailed Guide

2. With Customer Data

Use your internal data. If you have 100 good customers, what is their profile? Who are they, where are they from? What are they doing, and What is their LTV? How can you find more people like these?

– Justin Wu, CEO at Growth.ly

Another important tracking mechanism is your internal customer data. With the help of a robust CRM like BIGContacts, you can see customers’ activity trends with time and spot any changes that may indicate the possibility of churn.

That’s what we do at ProProfs to prevent and analyze churn for our high-value customers:

  • Our marketing team receives auto-alerts in the CRM about customer activity, such as status change, inactivity in the last 30-45 days, account cancellation, and more.
  • The team then dives into the customer data using our CRM to study the customer’s behavior and scan their account activity logs like last login date, last payment, number of surveys created, current users, and more.
  • The next step is to get in touch with the customer and convince them to reactivate the account. 
  • We also display the cancellation survey when a customer cancels the subscription to collect more information about their decision.
Use qualaroo to ask feedback from cusomers

3. With Advanced Techniques Like M/C Learning

If you have a large customer base, it would be uneconomical to track each customer’s behavior manually. That’s where AI-based predictive algorithms come in handy.

Today, companies are putting resources into building and implementing frameworks that work on machine learning to analyze customer actions and highlight customers with high churn automatically.

But you don’t have to lock your developers in the basement to have a customer churn analysis system in place. 

Several tools in the market provide inbuilt AI-churn analytics to make your job easier. Here is an example of IBM’s Cognos Analytics engine that automatically tracks customer churn based on multiple factors.

advance techniques to reduce customer churn

The most significant advantage of ML-based churn analysis is that it can shift the focus from identifying high-risk customers to putting effort into stopping them from leaving, saving both time and resources.

12 Practical Tips to Reduce Customer Churn 

Now we’ll be diving into the most crucial part of this entire exercise – reducing customer churn.

Customer attrition happens along multiple stages of the customer journey:

  • Product adoption stage

When the customer tries the product or starts to use it. Here successful onboarding and efficient customer support can make a huge difference.

  • Product usage stage

When the customer experiences problems or issues while using the product. To combat this churn, you need to listen to their pain points and issues and resolve them quickly.

  • Drop-off stage

When the customer finds a better alternative or when the tool is no longer helpful. Regular product updates and new features can help fight this type of churn.

Let’s now look at some of the measures that can help you improve your churn rate at each stage:

Related Read: Best Online Customer Journey Mapping Software

1. Benchmark Your Numbers

Feeling confused about how to begin? Start by evaluating where you stand. It’s almost impossible to stop churn, so setting a benchmark for your goals is an excellent way to get things straight.

It gives you an idea about where you stand compared to your industry standards and helps to set realistic goals.

For example, the average churn rate for different industries in 2020 looked like this:

How does this help you?

Say you are into the online retail business, it means you can expect 22% customer churn in business. If the churn rate for your business is higher than this, you would want to allocate more budget and resources to reduce it.

And if you are already doing better, it will prevent you from making excessive changes at once, saving both your time and efforts. In this case, you can make subtle changes to bring down the churn rate further.

Tip: You can create your own benchmark by analyzing previous years’ customer churn to visualize the general trend.

2. Leverage Churn Rate Analysis Software

The next step is to get the house in order. For that, find a good churn rate software based on your budget and resources. As mentioned earlier, advanced churn analysis and prediction software can map customers’ behavior over time and predict the churn probability.

Some tools, like Microsoft BI, also offer recommended actions based on the reports as shown in the image below:

But suppose you cannot get a machine learning-based model in your business. In that case, you can always use your inbuilt CRM and voice of customer tools in conjunction to identify customer attrition and stop it.

Regularly Monitor Customer Experience Index

Churn, mainly when voluntary, has to do with customers’ experience with your brand. Bugs, issues with the product, unheard complaints, poor services, and other such experiences are the stimuli for customers to leave the brand.

In fact, 69% of people switch brands because of poor customer experience. So, it’s justifiable to track the customer experience index to monitor customer engagement and loyalty towards your brand.

For example:

running nps program to gain insights of customer

running nps for gain product information
  • Customer effort score (CES) measures the ease of customer service interactions and is a proven indicator of customers’ brand loyalty and repurchase probability.
create survey and ask visitor about purchasing problem

Here’s how you can use these to reduce churn:

  • Implement these at various stages of the customer journey to track any changes in the scores with time.
  • Add surveys to collect the scores and complement them with follow-up questions to gather in-depth feedback data.
  • Combine the feedback with customer data like current purchase value, last order date, etc., to see if there are any changes in the account usage.
  • If the usage has declined with time, send an offer or discount to encourage the customer to continue the services.

4. Personalize the Customer Experience

Personalization is not only a necessity; it’s also an expectation of your customers that drives higher purchase values, customer retention, loyalty, and even brand promotion.

On the other hand, a generic experience – online or in-store can frustrate valuable customers leading to a high customer churn rate.

But what is personalization?

It is the strategy that delivers relevant solutions based on customers’ preferences, choices, and past purchases.

Most businesses think they are delivering a personalized experience to the customers. But studies show a vast disparity between customer expectations and their experience.

So, you may think you are delivering optimal solutions, but you might be missing the mark altogether, driving the customers away through the cracks.

Why is it so?

It’s because brands do not listen to their customers or average all the customers in one group, leaving customers frustrated and unhappy.

The simple fix is using a voice of customer program and personalization systems at your end:

  • Segment your users based on demographics, value, and other factors to create suitable personas that define their tastes, shopping behavior, frequency, lifestyle, and preferences.
  • Install sophisticated survey tools like Qualaroo on your website or mobile app to map customers’ issues, likes, and dislikes to personalize their experience.
  • Use advanced experience personalization software like Yieldify that automatically tracks customer actions and behavior to suggest experience personalization options.
  • Send offers, recommendations, and discounts based on past purchases.

As of 2020, Over 78% of brands have a personalization strategy to drive more sales and customers to their business.

personalization program strategy

And here are some ways they are doing it:

  • Streaming services like Netflix offer recommended programs based on viewers’ watch history.
  • Social media platforms like Facebook and Instagram show relevant posts based on your engagement and clicks.
  • Online retail brands send email and SMS notifications about discounted prices of the products you purchased in the past to entice you into ordering them at a lower price.

Related Read: 25 Best A/B Testing Tools to Help You Convert

5. Close the Feedback Loop Quickly

We also mentioned the importance of the VOC or feedback management system in the last point because over 78% of customers favor brands that regularly ask for and accept customer feedback.

Now suppose you have a feedback system in place. But are you taking timely actions on customers’ feedback? Because it’s all for nothing if you cannot close the feedback loop quickly.

According to a study, more than half of the customers feel that their feedback goes unheard by brands.

how brands take customer feedback action

So, one out of every two customers believes that their suggestions and concerns fall on deaf ears.

Now, put yourself into that customer’s shoes and imagine how long it would be before they get frustrated with your services and switch the brand.

That’s why it is vital to have a feedback system in place and act on the responses quickly.

According to a 2021 study by FutureofSaas, closing the customer feedback loop is the second most used strategy by businesses to combat customer churn.

churn rate reduction strategies

Here are some ways to extract valuable insights from customer feedback:

Related Read: Surveys as a Growth Engine: Using Positive and Negative Loop

a. Use Advanced Analysis Techniques

There are several advanced feedback and user research tools in the market to make your job easier:

  • Sentiment analysis engines can automatically categorize the feedback based on user moods so you can prioritize negative responses.
  • Text analytics engines can highlight key phrases and words in the responses to help you spot any mentions of issues or bugs in real-time.
Learn more about product feedback

Auto-generated NPS and CSAT charts can track the CX scores in real-time without any manual work.

CX scores in real-time

b. Integrate Feedback Tool With Your Workspace Tools

Another way to stay on top of every feedback is to use integration APIs to synchronize the data among your workspace tools.

For example, if you work with Slack, you can integrate it with Qualaroo to automatically receive every response to the survey on the desired Slack channel.

Feedback Tool response notification function

In this way, the team can quickly pick the feedback data, analyze it and take the required action.

c. Monitor Social Media Channels

Social media monitoring tools like Hootsuite provide a centralized hub to manage your social communications. You can track users’ comments on your page or posts, reply to them, track your brand’s mentions, and monitor the hashtags. It can help manage the feedback from social channels and improve brand image.

d. Set Alerts for Complaint Emails and Service Calls

Several CRM tools let you set alerts about customer complaint emails or urgent service calls. These simple notifications keep the important emails and communications separate from general emails so you can act on them quickly.

A Case Study in Customer Churn Analysis From Belron

Let’s take a look at the real-world example of our client Belron, a company that maintains an NPS score of 80 by utilizing AI-based sentiment analysis to enhance customer experience.

Belron, a leading windshield repair company, aims at providing the best and easiest experience to every customer. And the only way to do it is by understanding the customers and their needs.

The company gives special attention to churned customers to find the missing gaps in their store experience. 

The team runs targeted surveys to collect in-depth information about the customers’ experience and analyze the data using Qualaroo’s sentiment analysis engine to uncover valuable sights in real-time. 

These data points are then used to improve every touchpoint for future customers, i.e., from front-end technicians to support staff.

6. Install Omnichannel Service Points

Have you ever waited for half an hour on call to get in touch with a technical support engineer and then didn’t get the resolution to your issues? How did it make you feel?

We know you must have become irate or may have even switched the brand.

Now, put yourself in your customers’ shoes to understand the impact of support service on reducing customer churn in business.

According to Microsoft’s customer service report, over 90% of the customers see customer service as an important factor that affects their brand choice and loyalty. And this is the global average.

In the US, the number soars to 94%.

How  important is customer service

The same study also shows that customer service directly affects the customer churn in a business, with over two-thirds of the customers willing to terminate the relationship with a brand due to poor services.

US & UK Stats

Even Gartner shows that low-effort service experiences promote higher repurchase probability and customer loyalty.

gartner customer service

Now, let’s talk about the state of self-service. After calls and emails, self-service is the most used channel worldwide.

Global Average 2019

Yes, you heard it right!!!

Self-service is the third most-used channel by the customers. Because instead of waiting on a call or email, they prefer to find the necessary information themselves.

And with so many points of interaction, people tend to use multiple channels to reach support services, often switching channels in the middle of an interaction. For example, moving from live chat to call to get the query resolved.

So, What Are the Takeaways Here?

  • Studies after studies indicate the same thing – provide the best possible customer service to build a loyal customer base and reduce customer churn rate.
  • Instant gratification is the new normal, and businesses need to deliver it to reduce customer churn. 
  • Don’t focus on any one channel. Instead, develop omnichannel service touchpoints to make it easier for the customers to contact you.

How to Create an Omnichannel Service Platform to Combat Churn:

  • Use feedback forms and surveys on your website and mobile app. You can also add a feedback sidebar to promote unsolicited feedback.
  • Install a knowledge base to help customers find the required information with ease.
  • Have a social media team to monitor mentions of your brand on sites like Facebook, LinkedIn, Instagram, and others.
  • Reply and interact with customers’ comments online to increase engagement. Also, you can create a dedicated company page on Twitter to handle complaints and suggestions.
  • Build a feedback board to collect new ideas and showcase your product roadmap.
  • Add a live chat widget to your website, mobile app, and other portals.
  • Use AI-based chatbots to provide 24×7 support to customers.
  • Monitor the performance of your service teams like TATs, the number of tickets or calls handled, satisfaction ratings, etc.

7. Release Regular Product Updates

MySpace was a social networking giant in 2005 when Facebook was in its early stages, and it felt that it would rule the market forever.

But while MySpace remained almost the same over the years, Facebook continuously upgraded its layouts and added new features to provide an immersive experience.

These include wall feeds, news, games, ads, photos, likes, live feeds, and more. Facebook delivered what users wanted, reacting quickly to market shifts and trends. And in 2009, Facebook surpassed the unique active users in the U.S.

After that, MySpace has experienced a continuous decline in users, and Facebook has acquired almost 3 billion users. 

Here’s another example to further clarify the picture:

Gina Gotthilf, Former VP of Duolingo, says – ‘You know the red dot on your app which indicates a new notification or something unresolved? That led to an increase of 1.6% in the DAUs (daily active users).

Duolingo also followed the product-led growth model to increase their users from 5M to 200M in just five years. By constantly updating their app, adding new features and languages, and ensuring a seamless adoption, they made the app addictive.

The moral of the story is that regular product updates are necessary to make the product better and bring in new customers.

It shows you are constantly listening to customers’ suggestions and feedback to improve the product for them.

8. Run Pricing Analysis

Your pricing strategy can significantly impact customer churn, especially for new users in the adoption stage.

If they find the price too high or don’t get the value for money, they will probably leave the services.

In the same way, if changing the pricing structure hurt someone’s budget, those customers would carry a high risk of churn.

Studies show that contract or subscription length also affects customer churn. Companies offering more extended contract length experience lower churn rates. The reason is that customers can only make the decision once per year instead of 12 times.

So, how would you know what’s best for you? Run Pricing Analysis

  • Use market research surveys to know how customers feel about your pricing structure.
  • Look into your competitors’ pricing strategy to understand what price tiers they are offering.
  • If possible, offer a free basic plan to let customers experience product features. This small step can significantly reduce churn during the adoption stage.
  • If you have to reconfigure the pricing tiers, add relevant features to justify the new prices.

Southwest Airlines demonstrated this when they added a premium option- business select to their current pricing structure. The option bundled the high appeal and low-cost options like priority boarding, extra frequent-flier miles, and complimentary cocktails into one inexpensive package to deliver a better customer experience. The result was an increase of $73 million in the first year.

Southwest Airlines current pricing structure

9. Perform Value Segmentation

Not all customers are equal. 

If customers A, B, and C each spend $60 a year while customer D spends $200, whom will you put more effort to retain?

The first thought maybe that since the total revenue is almost equal, I can save three customers instead of one. But let’s talk about quality.

For year-on-year spending, customer D gives higher revenue than the other three customers. Plus, small order value customers have a higher tendency to shop only when a discount or offer is available.

A customer who spends $200 per year must see some value in your brand. It also means that the customer may be a high-value asset and shows a potential for long-term brand loyalty if they are happy. They are also more receptive to upselling and cross-selling opportunities.

That’s why you need to segment the customers based on potential lifetime value or profit they can provide to your company. 

Plus, it also helps to balance acquisition costs and profits. Some customers leave before you can recover the amount you spend to acquire them. That’s where you need high-value customers as they spend more than their acquisition cost, thus, bringing in profits and balancing the cost of low-value churned customers.

So, prioritize acquiring and retaining these high-value targets first and then move to mid-tier and lower-tier customers.

Case study – Quantiz Quantiz improves its client’s retention rate by 67.5%

Quantiz, a leading advanced analytics company, was tasked by its client to maximize the returns on their marketing campaigns. The client wanted to identify the most and least profitable customer segments to develop an integrated strategy to target relevant clients.

Quantiz developed a sustainable customer success framework to understand different patterns that differentiated the customers. It helped the client develop pricing strategies and build customer relationships to drive more engagement.

The entire exercise improved the retention rate for the client by 67.5%.

The biggest reason for the increase in retention rates was the acquisition of relevant customers that offered greater value in terms of revenue and lifespan, which automatically reduced the number of customers that churned.

10. Run Incentivized Programs

Incentivized programs like discounts, loyalty programs, cash backs, and more are some of the most effective ways to reduce churn because of their three-pronged effects:

  • They give better prices for purchases.
  • Encourage customers to come back for more purchases, improving customer retention and loyalty.
  • Attach an urgency to purchase before the incentive expires. 

Everyone likes a good discount, and brands send enticing offers to active and inactive customers to convince them to return to the website or store.

Here are a few examples of how you can use incentivized offers to reduce customer churn in business:

a. Send Them an Anniversary Gift

These include birthdays, completing an entire year with your brand, and anniversaries. People like to feel special, and personalized discount email can go a long way to deliver an exceptional experience.

vimeo Anniversary Gift

b. Remind Churned Customers of New Product Updates

While you are giving away a discount to the inactive customer, take the opportunity to let them know about new product features and updates that may be useful to them. Here is the customer churn mail example from SkillShare.

how Skillshare reduce customer churn
Source: Skillshare.com

c. Give Limited-Time Access to Premium Services or Plans

If a customer used a free plan before becoming inactive, you could offer them a taste of premium features at an attractive price. Remember to make it exclusive to enhance the personalization.

sportify premium plan strategu
Source: Spotify

d. Notify Them About Loyalty Points Expiration

When the customer gets a mail that their hard-earned loyalty points are about to expire, there’s a higher probability that they might purchase to redeem those points. It is an effective way to reactivate churned customers.

your points are about to expire

d. Nail the Onboarding Process

Well begun is half done, and it fits perfectly for your customer onboarding process. A successful onboarding helps both product adoption and revenue stream.

You can leverage it to achieve multiple goals:

  • Show unique and immersive product features to the new users
  • Educate users about the product value
  • Teach them how to use the product
  • Generate leads by adding a simple signup form

That’s why 84% of companies see onboarding as the number one tactic to reduce customer churn and improve retention.

And good onboarding produces almost 5% higher retention rates than negatively perceived onboarding.

So, if you don’t have a solid product tour to get the customers started, it’s definitely time to think about adding it to your product roadmap.

To see what does and doesn’t work for your customers, you can set up an A/B test to optimize the onboarding.

Here are a few things you can experiment with while designing the onboarding experience:

a. Add the Signup Page Before or After the Onboarding Process

Users may be reluctant to provide their email addresses before knowing the product or app. So, you can A/B test the position of the signup page. Try adding it to the front, middle, or end of the process to see what provides the best retention rate.

Pinterest onboarding process
Source: Pinterest.com

how ecommerce brand use shop now button

b. Steps in the Onboarding Process

Experiment with the length of the onboarding experience. Showing the product features is excellent but don’t make it excessively long, or customers may get frustrated. 

step by step Onboarding Process
Source An example of onboarding from Google trip

c. Add the Option to Skip

Let the customer decide whether they want to go through the onboarding process or not. Some of them may be repeat users who may have already used the product, so they don’t need to waste their time retaking the tour.

d. Experiment With Information Displays

Check whether to use videos, cards, or images to display instructions or essential messages during the product tour.

12. Establish Better Communication

Another cause of customer churn is client mismanagement which leads to loss of potential leads, prospects, and even regular customers. That’s why you need to streamline the sales pipeline to effectively manage communication with your clients.

Whether it’s 1-on-1 meetings or emails, your team needs to be aware of the current status of the customer, their previous interactions, and other necessary meta-data. 

Here’s how you can establish smooth communication with your client to increase retention:

  • Find a robust CRM software to manage your client data. You can use tools like BIGContacts or Salesforce, depending on your requirements, to consolidate all the customer information in one place.
  • Ask your team to log all the communication transcripts in the customer’s account. These include the summary of 1-on-1 calls, emails, live chat, service calls, and any other interaction.
  • Track the customer activity and set up important alerts like account cancellations in your CRM.
  • Analyze the prospects in your sales pipeline and design relevant product offerings to move them closer to conversion.
  • Assign a separate team to engage with the churned customers to act quickly and win them back.

Time to Focus More on Retention Than Acquisition 

By now, you understand that you have to bring customer churn under control because retention is necessary for growth. For that, you need to show them why they should stay with you instead of leaving.

And it comes down to understanding why customers churn and plugging those leaks with necessary steps. All you need to do is listen to what your customers have to say about your products and services, show them that you are solving their problems, make them feel important, and proactively install better touchpoints to improve the customer experience. 

And you don’t have to do this alone. Choose the right tool based on your requirements and budget to make the task easier. Use the tips listed in the article and see how they work for your business in reducing customer churn because it is five to 25 times cheaper to retain a customer than to acquire them.


How do you know if a customer has churned?

There are different ways to identify churn, such as:

  • Account cancellation
  • Service termination
  • Non-payment of dues
  • Account inactivity
  • Payment failure

Why do customers churn?

Customer churn can be voluntary or involuntary. The leading causes behind customer attrition are:

  • Change in the pricing structure
  • Closure of business
  • Change in business model
  • Payment related issues
  • Failure to update payment information
  • Better services offered by the competition
  • Lack of product updates

3. What is churn in customer service?

Churn in customer service indicates the customers that left the company due to poor services. These include delays in addressing the grievances, lack of in-depth knowledge base, long waiting time, and others.

4. Why do SaaS customers churn?

The main reasons for customer churn in SaaS-based businesses are payment issues or product problems. These can lead to the customer terminating the contract willingly or unwillingly.

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