Introduction

In any business, a loyal customer base is crucial for long-term success. Something must have gone wrong if your products only drew a big crowd during earlier phases and then started losing customers every month! Let us help you figure out how to predict and prevent customer churn before it becomes irreversible.

An Overview Of Customer Churn Rate

It refers to a business losing customers over time  (Image source: Pexel). 

Definition

Customer churn (or Customer attrition) refers to a business losing customers over time (e.g. when they no longer use the services or products). More specifically, it measures the total percentage of customers/clients who decide not to return. 

Most companies spend their budget to attract new customers. But from our observation, keeping the ones you already have is much more cost-efficient! Keep in mind the following types of churn rates:

• Voluntary customer churn: Voluntary churn happens when customers choose to leave for better options elsewhere.
• Involuntary customer churn: Involuntary churn is inevitable when circumstances beyond the customer's control force them to look for alternatives. 

For example, if a branch relocates or stops distributing a particular product, customers have no choice but to switch to a different brand.

How It Is Measured

Below is a simple guide to calculating your business's customer turnover:

Step 1. Choose A Timeframe

Decide on a period of time for measuring churn, such as one year, one quarter, or even just one week. Look through customer data and business reports to settle on the best timeframe; for example, you can compare last month's churn to the past quarter to see the pattern.

Step 2. Count Gained Versus Lost Customers

Once you've chosen a period, determine how many customers the company gained and lost during that period. 

Again, checking the monthly customer/ business reports is the quickest and most effective solution. For example, let's say the company reportedly gained 300 new customers but lost 50 existing ones.

Step 3. Use The Formula

The rest is simple: Divide lost customers by acquired customers and multiply by 100. So:

(Customers lost / Customers gained) x 100 = Average Churn Rate

For the above example, the monthly churn rate would be:

(50 / 300) × 100 = 16.5%. 

That means the company lost about 16.5% of its customers that month.

Top 6 Reasons For Customer Churn

Price is the decisive factor for many (Image source: Pexel). 

Price

For some customers, price is the deciding factor. Does your product fall into a highly price-sensitive category? Then, we have some bad news.

Even a small difference from competitors can lead to a high customer attrition rate, especially when they feel they're not getting enough value for what they're paying! Plus, if there has been a recent price change, your existing customers (who were happy with the original pricing) might find the increase unacceptable. 

Products

Customers might find a product outdated when it fails to keep pace with evolving user needs or competitor advancements. 

Needless to say, they will set off to find more innovative solutions! Bugs, glitches, crashes, clunky user experience, etc., often frustrate customers and push them closer toward other, more reliable alternatives. 

A lack of features is bad, but too many are not necessarily better. Sometimes, overloading a product with excessive add-ons complicates things and overwhelms users. Your customers end up confused and, ultimately, leave your brand for good. 

Competition

Even if your product is decent, a competitor might offer a more robust feature set or functionalities that immediately address customer pain points. As a result, your services seem much less attractive in comparison, leading to a high churn rate.

Still, how about brands with extremely high-quality goods yet facing alarming customer loss? In that case, their competitors have likely invested in targeted marketing campaigns or attractive customer acquisition offers (e.g., free trials, discounts), which lure your customers away. 

Worse, a company with a better-established reputation can easily overshadow yours without trying. Your customers are swayed by their brand image, leading to massive churn. 

Bad Customer Service

Poor customer service is another reason. Nobody enjoys being put on hold for hours or shuffled around between agents without getting their issue fixed. 

The same frustration occurs when customers encounter rude, dismissive employees; they are left feeling both helpless and unimportant! Thus, most people in these situations choose to seek out other companies that can handle their issues with better expertise and professionalism.

Inconvenient Communication Channels

In today's digital era, customers (understandably) expect diverse channels to connect with your brand, be it email, live chat, social media, or even self-service options like FAQs or knowledge bases. The lack of their preferred channels might discourage them and cause them to abandon their query altogether. 

Plus, remember that the availability of those channels is just as important. If customers cannot seek your help after business hours or must wait days for a short reply, you cannot blame them for seeking another more responsive company.

Wrong Customers

Marketing/sales efforts targeting the wrong audience aren't uncommon. 

Your brand might end up attracting customers with needs or expectations your product simply can't meet. It's likely to lead to disappointment and churn as they realise your offering doesn't solve their problems at all.

In the worst-case scenarios, it doesn't just stop at customer loss. Unhappy customers might even leave bad reviews and drag down the brand's customer satisfaction metrics! Not only have you failed to retain current customers, but attracting new ones is also twice as challenging.

How To Predict Customer Churn Early

Remember to track NPS, CSAT, and other customer satisfaction metrics (Image source: Freerangestock). 

1. Track NPS and CSAT Index

Research suggests consumers will likely switch to another company after 2-4 bad experiences. Hence, monitoring these metrics ensures you know how satisfied customers are with your current service and identifies potential issues before they escalate.

• Look for patterns in the scores. Dissatisfied customers who give you low ratings (6 or less) have a higher risk of churn than those rating you 7 or higher.
• Reach out to customers who give low scores to resolve their current issues. Are they struggling to understand your products? Do they have to wait for hours to contact customer support? 
• Don't forget about happy customers, however. Keep building on areas they appreciate, such as fast response, fast resolution times, or an excellent self-service menu. This will help maintain customer loyalty and further reduce the likelihood of churn! 

2. Gather Open-Ended Feedback

Aside from metrics like NPS and CSAT, consider collecting open-ended reviews from your customers as well. Customers express ideas using their own vocabulary, allowing you to understand their feelings better and pinpoint those who might be leaving soon.

You can gather open-ended feedback from various sources, such as G2, Apple App Store, Google Play Store, or popular social media channels. These platforms often show you organic customer reviews (which can be brutally honest at times). 

Also, do not forget to seek indirect reviews by paying more attention to clients' language and tone via live chats or emails.

3. Monitor Their Payment Patterns

Payment delays signal that the customer is becoming disengaged - which, unfortunately, is often their first step towards leaving your brand. And indeed, they will eventually take their business elsewhere if you fail to make them re-engage. 

Talk to your analysis/finance team to understand what causes the late payments. If it's due to billing issues or complex payment methods, then great news: your team can easily address them. 

However, you must step in immediately when customers consistently pay late despite the easy payment process. 

If necessary (or if the customer isn't responsive to written communication), consider scheduling regular meetings to discuss the issues. This could improve communication and also strengthen your long-term relationship with them! 

How To Prevent Customer Churn? 3 Retention Strategies

StringeeX will help address your existing issues (Image source: StringeeX). 

1. Invest In An Omnichannel Solution

Has your brand failed to connect with customers through their preferred communication channels? Or did you overlook early signs of churn? Both are detrimental to the business. Fortunately, virtual centres like StringeeX address both of these challenges.

StringeeX consolidates customer data across various communication channels into one platform. Now that you no longer have to switch between platforms, there will be much less risk of missing out on important information.

Better yet, you can now communicate with customers through multiple channels (such as Facebook, phone calls, and Instagram), all from just one interface, to ensure customers receive immediate responses. The smart routing system assigns customer queries to the most qualified agents, improving customer experience!

2. Segment Your Customers or Target Audience

Not all customers are the same, so you should tailor your communication and marketing efforts to each customer segment so they can resonate and provide actual value. Some common criteria to group them:

• Demographics (age, income)
• Firmographics (company size, industry)
• Usage patterns (active users, infrequent users)
• Needs (basic users, advanced users).

3. Keep Improving

Gather customer feedback every few months, then actively work on your products based on customer suggestions. Anyone would be happy to stay if they see your effort in providing value and addressing their issues! 

Also, to counter price sensitivity, we suggest offering tiered pricing plans or flexible subscription options that cater to different customer budgets and needs. 

Conclusion

Customer churn might undo all your hard work if left unchecked. So do not wait until the last minute to take action; always keep an eye out for early warning signs and strive for consistent product improvements! 

Don't hesitate to reach out to us if you need more advice!