A Quick Guide to Churn
Did you know that acquiring new customers can be 5 times more expensive than retaining existing customers?
If you think about it, it makes sense. To get a new customer, you need to spend money on sales, marketing, delivery, and even production.
Conversely, keeping an existing customer can be as cheap as one good customer support interaction.
That’s why improving your churn rate can only mean profits.
What Is Churn Rate?
In simple terms, the churn rate is the rate of customers your business loses in a given period of time. It’s easy to calculate too. You divide the number of customers you lost in a time frame by the number of total customers in said time frame, then multiply all of that with 100.
While the concept of the churn rate, and how you calculate it, are both simple, the insights provided by this metric are extremely valuable. Understanding your churn rate (and how it evolves over time) can help you optimize the processes in your business that help you grow.
For an ecommerce store, churn rate can be a bit trickier to calculate. But not impossible. The easiest way to do so is to calculate the time frame at which your customers usually buy again. Then, you should use that time frame as a reference for when you calculate churn.
Alternatively, you can also view churn as the number of customers that didn’t finish the checkout process. But that’s technically “cart abandonment”, so for the purposes of churn, it’s easier to stick to people that actually finished a purchase.
Even then, there’s more to this topic than just knowing a percentage.
To truly improve your churn rate, you also need to understand why people stop buying your products.
“Why Is” Churn Rate?
If you want repeat customers, it’s not enough to identify the business you lost. You also need to understand why you lost it.
Understanding whether churn happened because of your product, support, service, price, or positioning lets you double down on the things you did right, and overcome the things you’re doing wrong.
To do this, your ear should be glued to what your customers are saying. Here’s how you can do it:
● Read and respond to reviews thoroughly. If you want to grow your business, negative or mixed reviews are nothing to be scared of. You should welcome them as constructive criticism to understand what your audience wants from your products.
● Follow-up on orders, especially big ones. Send a thoughtful email to your customers after a purchase to let them know you appreciate them, and see if they’re making the most out of your product.
● Survey your customer base. This is especially easy to do if you have a mailing list that you can send out a questionnaire to. Just create one with Typeform, Google Forms, or Survey Monkey and send it in a newsletter.
● Read emails and private messages on social media. If a lot of people are complaining about your pricing, it might be time to rework it.
We’ll give you a lot of tips on improving your churn rate. But the best strategy will always be the one that your business needs. So if you strive to understand the complaints of your particular customers, you’ll be best-equipped to improve your churn rate.
Generally, the tips we’ll outline below work best to retain customers. But it’s up to you to understand which will provide the best results.
Onboard Customers Successfully
Onboarding is a huge undertaking in the service industry, but it shouldn’t be overlooked for products either. If your customers make the most out of your products, they’re more likely to repeat purchases, or buy consumables for their initial product from you.
So focus on delighting them with a customer success strategy. This can be as simple as a thorough product manual, or as complex as a campaign to reach out to existing customers, and provide assistance in the way they use your products.
The form will depend on a case by case basis.
But as long as you’re focused on helping your audience use your products, you’re improving your churn rate.
Provide Flawless Customer Support
Imagine this – one of your customers is dissatisfied. They’re regretting their purchase, they’re unhappy with your product, and they might even be looking into your competitors.
And before they delete your number and never visit your site again… They tell you all about it.
That’s exactly what a lot of customer support interactions are.
Disgruntled buyers telling you what’s bothering them.
Opportunities to retain customers.
So if you want to improve your churn rate, improve your customer support. Employ support procedures that help your agents assist customers. Equip your support team with incentives they can provide customers to stay, like coupons or discounts.
Implement Changes Based On Customer Feedback
Earlier in this article we mentioned that it’s key to understand why your customers are abandoning your business. The next logical step to that is to optimize your business based on the feedback you get from customers.
For example, if a lot of your customers complain about “Not having their needs met” or “Not being able to use the product to the maximum extent” you might need to evaluate your customer service, especially your onboarding efforts.
Remember that in our era of communication, people will express what bothers them.
As long as you’re willing to listen, you can easily adjust your mix to grow your business, and of course, improve your churn rate.
Knowing your churn rate, and how it develops over time, won’t be enough. If you want to understand how your business loses customers, it’s important to also look at conversion rate, email open rate, CTR, average order size, and a ton of other metrics.
Then, once you’re tracking your customer interactions, you need to analyze these numbers in time. Only with a clear default to data can you understand how to better retain customers.
Improving your churn rate isn’t something you can do overnight. Since churn is calculated in given time periods, you’ll need a lot of cycles to understand what you need to do, implement changes, and then track the effects of your hard work.
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