Six ways to reduce customer churn

How tech companies can understand and improve customer satisfaction

Customer churn isn't the happiest metric to examine in a tech business, but it's a necessary one. It's better to know how many customers you've lost, so that you can begin to understand why - a far more productive approach than the ostrich one.

The reality is that for any business, customer churn is inevitable. That doesn't mean that you shouldn't continually strive for 100% customer retention, and the way to work towards that goal is to figure out why some customers have stopped buying your products or using your services.

Measuring customer churn

OK, so you know you've lost some customers. The first thing you need to do is calculate the churn rate. It's important to know what the actual numbers are, and the formula, as outlined by HubSpot, is pretty simple:

  1. Determine a time period: monthly, annual, or quarterly
  2. Determine the number of customers you had at the beginning of the time period
  3. Determine the number of customers that churned by the end of the time period
  4. Divide the number of lost customers by the number of customers you had prior to the churn.
  5. Multiply that number by 100

Go ahead and perform that calculation. I'll wait.

What percentage did you arrive at? If it was somewhere between 5% and 10% you're probably thinking "well that's not so bad, is it?" Think of it this way - it costs more to attract new customers than it does to retain them. In fact, a 5% increase in customer retention can generate at least a 25% increase in profit. Why? Because your existing customers will probably spend up to 67% more, which means you can reduce the costs of attracting new customers. And that is why it's important to calculate customer churn as a necessary first step to reducing it.

The importance of the customer journey

Now it's time to take a good hard look at what your customers experience when they purchase from your company. What's the buying journey like for them? How much value do you and your team place on it? Ask yourself the following:

  • Have we had customer complaints? If yes, are they similar in nature?
  • Does everyone on my team understand what good customer service really entails?
  • Are we taking steps to continually improve the customer experience?
  • If a customer left us for a competitor, what are they doing that we're not?
  • Do we have technology in place that's focused on customer service?

By now you're getting the picture - the quality of the customer experience you offer is directly correlated to customer churn. Let's look at five ways you can reduce that churn by focusing on customer service.

1. Reward your best customers
Once you've identified customers that might be on the brink of ditching you, you may be thinking that you need to focus your efforts on keeping ALL of them. Sunil Gupta, the Edward W. Carter Professor of Business Administration at Harvard Business School disagrees. Instead, Gupta suggests that you need to focus your attention on the most profitable customers on the brink of churning.

"If I offer an incentive to customers most likely to churn, they may not leave the company, but will it be profitable for me? The traditional method is focused on reducing churn, but we contend the goal should be maximising profits, rather than only reducing churn," he explains. Identify your best customers and re-engage with them before they make the decision to go elsewhere.

2. Focus on improving communication
This is all about being proactive. Don't wait for customers to reach out to you - show them you care about their experience by keeping in touch and communicating what's happening with your company. Let them know about perks and discounts, product updates, R&D updates and accomplishments. And while you can keep your customers updated with company news, make the effort to also create tailored communication that relate directly to whatever they’ve purchased from you. Make sure these messages are personalised so that the customer knows you’re taking an interest in them as an individual.

3. Check in regularly
If you’re selling a product that receives updates, or a service that’s repeatable, make sure your customers know about them. Follow up with them to ensure they’ve applied the latest update, and ask if they need any help with it. Let them know if anything is about to expire. Once they’ve used your service, keep in touch and let them know that the next one is due.

4. Monitor and analyse customer churn
You need to keep on top of this metric. If you can identify how and when churn occurs during a customer's buying journey with your company, you'll start to spot patterns. This kind of data is essential for putting measures in place to eliminate a particular cause of customer churn. The better you understand the specifics around churn, the more successful you'll be at preventing it.

5. Get proactive about feedback
Word of mouth - whether it's a conversation, an online review, a social media post - is one of the most powerful tools customers have to express their opinion of a company. That's because people are going to trust what their friends and family tell them more than any advertising. One negative online review will outweigh ten good ones. Often, customers will vent their frustration in this way rather than communicate it to you directly, especially if they don't feel connected to your company in the first place.

So get in there first and ask for feedback. Give your customers an outlet to tell you what they think of your company, whether it's a survey, an online form, an email or a phone call. This lets them know you're continually striving to improve and that their opinion not only matters, but you're taking it on board as part of your commitment to providing the best customer experience possible.

Improving customer churn is an evergreen task - you should be continually measuring it, analysing it, and putting in place measures to combat it.

The sixth way - harness technology designed to reduce churn rate

Reducing customer churn sounds like a big undertaking, doesn't it? And it is, especially if you're facing the challenge of doing it all manually. It's time-consuming, frustrating, prone to error and takes you away from your core business. Your tech business. For your company more than those in any other industry, you need to leverage technology to reduce customer churn in the same way you'd use it for anything else. You understand the importance of tech solutions - and here's one - a customer service management tool that will help you reduce customer churn while allowing you to focus on what you do best.

Service Hub - the gold medalist in customer service management
This solution from HubSpot connects all your customer service data and channels on one CRM platform, to allow for better customer service management. It's an easy-to-use tool that helps you deepen customer relationships, connect to the front office, and drive team efficiency. It ensures that you deliver authentic service and truly put the customer first. Its features include:

  • Conversational tools (e.g. live chat and chat bots)
  • A shared inbox to consolidate customer enquiries from multiple channels
  • Help Desk ticketing and automation
  • Knowledgebase functionality and FAQs
  • Customer feedback and customised surveys
  • A customer portal
  • Customer success playbooks
  • The ability to receive inbound calls directly through HubSpot with VoIP software

And it's all powered by a CRM to give your business one unified view of each customer interaction.

Service Hub means you can easily support, retain, and grow your customer base while continually reducing customer churn. Because you're delighting your customers at every stage of the journey, they're going to stick with you.

Keen to learn more about how Service Hub can reduce your customer churn? Make sure you join our upcoming Service Hub HUG on Wednesday, May 25th or contact us to schedule a demo.

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