May 23, 2019

6 Ways To Reduce Customer Churn and Keep it Down

Do you know how much it really costs to lose a customer?

Probably more than you think.

Let’s say your organization’s average contract size is $10,000. If just one customer churns, you’ve lost that much in annual recurring revenue — but that’s not all.

You’ve also lost the potential to upsell or cross-sell to that customer. If your company’s average annual expansion revenue goal is 20%, then you’ve also lost the potential for an additional $2,000 in revenue.

But that’s not all.

In addition to the $12,000 you’ve lost, all of the money and resources you used to acquire that customer in the first place goes down the sink. If your average customer acquisition cost (CAC) is $500, then your total loss sits at approximately $12,500.

Now imagine you churn 5–10 customers per year. See how that cost adds up?

You can’t afford high rates of customer churn. Here are six ways to reduce customer churn and keep it down.

1. Make sure you’re closing the right customers.

Long-term customer success begins with your customer acquisition strategy.

If you’re experiencing high churn rates, first ask yourself:

  • Are you marketing to the right customers?
  • Are you reaching them through the right channels?
  • Are you delivering the right kinds of messages?

Additionally, take the time to understand whether or not your entire organization — from marketing to sales to service/support — is aligned on the same definition of a “good” customer.

If your marketing team is sending out different messages than your sales team is sending, and your sales team is making promises that your services team can’t keep, then you’re probably going to have a problem with customer churn.

Maybe you revisit your customer acquisition strategy and realize that you’ve been targeting the wrong buyer personas in the first place. That’s OK. Bring your team together to develop truly high-fit buyer personas for your business and adjust your customer acquisition strategy accordingly.

By taking the time to develop robust, accurate and comprehensive buyer personas, you can ensure you’re marketing to the right prospects via the right channels with the right messaging.

That consistency will carry through the entire customer experience and help you delight and retain customers more effectively.

2. Make sure you’re solving for the customer efficiently and within scope.

Once you’ve confirmed that your buyer personas and customer acquisition strategy are in good working order, take a look at the way your customer success and/or services teams are operating.

According to a Customer Experience Impact Report by Oracle, the two main reasons behind customer churn are:

  1. Incompetent and rude staff, and
  2. Unbearably slow service.

So the old adage, “the customer is always right,” still holds true. Customers will feel more loyalty to your company if you’re quick, knowledgeable and friendly — but don’t let that need to make the customer happy get in the way of budgeting your time effectively.

Yes, you should always be emphasizing customer satisfaction, but if responding to customer requests is taking more time, money and effort than you budgeted for your initial contract, then you’re going to have an issue with customer satisfaction. (And you probably don’t have a solid business model.)

One good way to avoid this is by creating a service-level agreement with each of your new customers. Revisit the initial goals and expectations you set at the beginning, and don’t be afraid to reset those expectations as needed.

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3. Measure your customer success team on, well, customer success.

Sounds obvious, right?

Wrong. Often, the goals a company sets for their success and services teams are misaligned with the goals of their customers; they emphasize recurring revenue and upsells over actual customer happiness.

The result? Customer happiness falls by the wayside.

But by measuring your success and services teams by retention rates, NPS scores, customer satisfaction surveys, feedback and other indicators of the true health of an account, you can make sure that your team always has the customer’s best interests in mind.

And when the customer knows you have their best interests in mind, they’re more likely to stick with your company even through any challenges or hurdles they might need to overcome during the lifetime of the engagement.

As we like to say it here at New Breed: “When you succeed, we succeed.”

4. Streamline the onboarding process.

The first 30–90 days of an engagement are the most critical for setting a customer up for success.

In fact, some studies show that a poor onboarding experience could cause businesses to lose up to 80 percent of their customers within the first week — for SaaS companies in particular.

If customers can’t immediately understand the value they could get from your product and have the ability to extract that value, they’re not going to be happy with their purchase. To reduce customer churn, you have to make a push to streamline the onboarding experience.

So what does a good onboarding experience look like? There are 4 steps that need to happen during the onboarding process:

  1. Define and solidify the expectations and goals for the engagement.
  2. Learn everything there is to know about your customer and customize the onboarding process for them.
  3. Focus on building a relationship with that customer; build trust and show value.
  4. Be available to your customers if they have any questions or concerns.

Additionally, don’t be afraid to over communicate. Regular check-ins and progress updates will help keep you and your customers on the same page.

5. Ask for feedback.

Not sure if your customers are happy or if they’re getting ready to churn? That’s easy — just ask.

Sending out regular feedback surveys and measuring customer sentiment through the NPS score should be baked into your client success process if it isn’t already. Some of these tasks can be automated; HubSpot’s Services Hub includes an automated NPS survey that you can send out to your customers at preset intervals.

Additionally, make sure your clients all have the chance to meet for regular check-ins with your CSM or account success team. If they haven’t been responding to the NPS survey, that’s a great time to ask them in person how they feel about the health of the engagement.

As Guido Bartolacci, New Breed’s Head of Demand Generation Marketing, puts it: “You need to do the things that don’t scale now. Because if you don’t do them now, you’re not going to learn enough.”

So don’t leave it all up to an automated email, especially not in the early stages of your company’s growth.

6. Know when it’s time to say goodbye — and end amicably.

Sometimes, customer churn is inevitable.

If you’ve done all you could to delight and retain a customer and things still just don’t work out, accept your loss and divert your time and effort into delighting the customers who are more likely to stay.

Some experts recommend that you focus more of your retention efforts into the most profitable customers who are on the brink of churning, rather than just any customer on the brink of churning. While this strategy can help you save money on your retention targeting endeavors, it’s important that you don’t throw up your hands and completely give up on satisfying the low-fit, low-value customers before they leave.

Letting a customer leave on a bad note can lead to poor reviews and long-term reputational damage for your company. Do your best to patch the relationship and wish them luck when they choose to go.

The Takeaway

Customer churn happens. But with thousands, potentially millions of dollars on the line, you should still try to minimize it as much as possible.

By taking steps to delight your customers every step of the way — from streamlining the sales-to-services handoff to meeting or exceeding the expectations you set at the beginning of the engagement — you can reduce customer churn and keep it down.

Ultimately, when it comes to customer churn, the one thing that should always be on your mind is: Add value. If you can provide more benefit than your product or service costs, your customers will be more likely to stick around.

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Tag(s): Reporting & ROI

Elizabeth Burnam

Elizabeth is a former New Breeder.


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