Whether you’re part of a small-scale startup or an established market leader, your customers are pivotal to your daily activities.
Consumers of your product or service not only dictate whether your product is a rip-roaring success or a total flop, they also shape the future of your business, and you need to do your utmost to keep them on board
If your churn rate increases, this can have a catastrophic impact on your short and long-term goals. Therefore, you need to consistently measure appropriate metrics to mitigate the risk of customer churn and solidify your customer retention rates.
While there’s no such thing as a business with an unblemished retention rate, there are strategies you can put in place to reduce churn and protect your business’s prospects.
Every product marketer will have their preferred strategy for reducing customer churn.
For example, Anuj Adhiya, Author, Growth Hacking for Dummies said:
"I think this depends on the kind of retention issue you have; you need different strategied for each, whether this is short/medium/long term.
"If I had to pick, it's solving for conversation rates in the onboarding flow that has the biggest downstream impact. One way to do this is using to-do checklists that you develop once you understand the action(s) that make the lightbulb go off as to what value the product provides."
Conversely, Gaurav Harode, Founder at Enablix hones his attention on the benefits of sharing realized benefits with customers at regular intervals.
"Most B2B tools are measuring usage and adoption. They can take this data and share it with customers in a meaningful way.
"For instance, every quarter our customers get a report on the health of their sales enablement program. We share important KPIs, what is working, what isn’t. Not just numbers, but a story that surrounds those numbers.
"Our customers love this kind of visibility and end up sharing this report with other sales enablement stakeholders."
In this article, we’ll focus on:
- What is customer churn?
- How to calculate customer churn
- Why is low customer churn important?
- How to reduce customer churn
- How to reactivate churned customers
What is customer churn?
Customer churn is a metric used to show how many customers you have lost. Churn represents the customers who have decided to no longer use your product and/or service. The metric not only illustrates whether your customers are staying or going, but will also influence your overall strategy.
For example, if your customer churn is low and your customer retention is healthy, then you have no pressing reason to alter your existing setup.
However, if your customer churn is high, this suggests there are more pressing issues that need to be urgently addressed; perhaps your product messaging isn’t resonated with user personas, your value proposition may not be clear, or perhaps you haven’t conducted competitive intelligence thoroughly enough to highlight where your product falls short in comparison to your rivals.
How to calculate customer churn
To calculate customer churn, divide the number of customers lost during a particular period by the number of customers you had at the beginning of that given period.
For example, if you had 100 customers at the beginning of Q1 and this decreased to 50 at the start of the second quarter, the churn rate is 50%.
This is because you have 50% fewer customers at the start of the second quarter, in comparison to the first quarter.
Why is low customer churn important?
Some customers will inevitably take their custom elsewhere at some point. However, if your churn rate is astronomical, this’ll have a significant impact on the future of your business.
Many product marketers will tell you that attracting new customers is much trickier than keeping hold of existing clientele. So, once you’ve done the hard work and converted your target personas, then it’s all about pouring your efforts into keeping them on board.
In some cases, you may need to reactivate churned customers, and while this isn’t an impossible task, it’s a notoriously difficult process.
How to reduce customer churn
No matter what the margin of increase may be in your customer churn, every time a customer is lost, this is disappointing.
Fear not though, for, there’s a whole plethora of ways you can proactively try to reengage lost customers and get them back on side.
Price your product appropriately
Nailing your pricing strategy isn’t only important for a successful product launch, it can also influence customer retention and churn.
Mastering the psychology of pricing is tricky because not everyone has the same budget. However, you can get the golden nuggets of information you need by conducting customer and market research, understanding their respective budgets, and creating a product that A) will solve their problem, and B) won’t exceed their budget.
If customers believe your product is overpriced, they’ll seek a lower-priced alternative, and you’ll be left kicking your heels, while your competitor benefits from your poor planning.
That said, it isn’t only overpriced products you need to think about. If you release an offering and it’s too cheap, this can lead people to believe the manufacturing of the product isn’t up to scratch, and they may be tempted to pay marginally higher prices with a rival company.
For example, value-based pricing is a method whereby you set your price based on how much different customer segments believe your product’s worth. Consequently, the price you charge can vary from customer to customer or segment to segment.
Value-based pricing accurately gets to the bottom of what your customers are willing to pay. While it could be argued competitor-based pricing does this because customers are willing to pay for their product, value-based pricing puts your potential customers at the heart of that journey as well as differentiating you from your competitors.
Improve your customer service
You can have the best product on the market, but if your customer support network is poor, this’ll have a profound impact on user experience, and before you know it, your customer’s head will be turned..
Ask yourself: if a customer experienced a problem and needed technical support, could they get the help they need quickly, efficiently, and practically?
If you’re unable to answer each of these questions with a resounding YES, go back to the drawing board, and start from scratch because poor customer service will more often than not have one outcome: sky-high churn rates.
Hold internal training sessions to improve knowledge among your team. If they don’t know how your product works, why it’s different from the competition, and how to support the customer, customer service will suffer.
Engage with your customers
You must establish an emotional bond between your brand and your customers.
When you engage with your customers, this makes them feel special, prompting a greater propensity to buy and promotes a company’s products and services on a broader scale.
Customer engagement is an essential part of a successful product marketing strategy.
If you don’t engage with your customer base, you’ll sever the emotional ties between you and your audience. Taking steps to engage with your audience won’t go unnoticed; they’ll see you attribute value to their custom and will be inclined to continue purchasing your products instead of your competitors.
The small things really do go a long way. You could consider setting up an automated birthday email with a discount code, for example.
Not only will you put a smile on the face of your customer,you’ll also benefit from added sales, albeit at a discounted price.
Conduct competitive intelligence
Competitive intelligence enables you to learn from your competitor’s mistakes and improve in areas where they may be better than you.
Conducted properly competitive analysis will help you:
- Develop new products and features,
- Identify gaps in the market,
- Uncover trends, and
- Market and sell your product more effectively.
Competitive analysis helps you develop a deeper understanding of market dynamics so you can find fulfill customer needs. The more you know about competitors, the more equipped you’ll be to not only match but surpass their efforts, earmarking yourself as the leading product on the market.
To make the most of competitive intelligence, you need to communicate your findings so that your teams can use the information to develop and evolve your offering. Results are useless if you keep them to yourself - you need to share the knowledge.
Our Competitive Intelligence Trends Report 2020 revealed 86% of product marketers share their findings with Sales teams, closely followed by Product (83%).
Previously, it’s been suggested there’s room for improvement in relations between product marketers and leadership teams. However, it was encouraging to see a significant proportion of people taking part (77%) saying they discuss their findings with executives and leaders.
When we dug a little deeper and explored the preferred methods for sharing competitor intel findings, we found knowledge was shared in-person on a team-by-team basis, and by segmented emails to each relevant team.
Both of these areas accounted for 34% of responses, while a further quarter indicated they send blanket emails to relevant teams within the organization.
Of the 25% of people who fell into the ‘Other’ category, the likes of battle cards, Slack channels, and tools such as Klue were identified as the chosen method of communication.
With so many different ways of sharing information, we spoke with Matt Powell, Product Marketing Manager at Docebo, to get an insight into how competitor intel findings are shared at his company:
“I don’t think there is a silver bullet for effectively sharing competitive intel - it’s completely dependent on the realities of your business. I do, however, think that it’s all about creating a culture internally in which everyone is as actively involved in gathering and sharing competitive intel as possible.
“That’s a big behavioral change when it becomes less about having one or a few people gathering and sharing intel, and instead of extending it as a responsibility of everyone in the revenue organization. That’s when good things start to happen - the activity becomes more collaborative and is focused on problem-solving rather than just information sharing.
“We share our intel on a team-to-team basis leveraging our competitive intelligence platform to develop regularly cadenced newsletters. They’re good and they’re actionable, but we find the juicy stuff is the intel that happens in real-time. But, I’ve found the most effective way to share intel and have great conversations in the flow of work around competitive intel is through Slack.
“Our company is a big-time Slack shop - everything happens there. However, there was a lot of good intel being lost in the scroll of conversations. To combat that, we turned it into an opportunity by installing a two-way integration that allows us to send competitive intel to our CI platform directly from Slack.
“This has been a bit of a game-changer in making sure that as much information as possible isn’t lost. The great thing about these kinds of Slack channels is that the intel is only the tipping point, the conversations that happen in the threads afterward generally end up being the context you need to make the intel actionable.”
Segment offers for VIP customers
Resist the urge to adopt a ‘one rule for one, one rule for all’ approach and keep your customers close, and your VIP customers even closer. They’re the ones who are buying the most products, singing your praises the most, and providing the most lucrative loyalty.
When you’re discounting products, you can increase your conversion rate by introducing segmented offers based on your customers’ preferences.
Create customer profiles detailing their buying habits based on previous purchases and use this information to offer discounts that are relevant to each customer.
Reward them with exclusive content, vouchers, invitations to special events - whatever you need to do to show them you appreciate their custom. Do that, and they’ll continue coming back time and time again.
Conduct CABs sessions
A Customer Advisory Board is a group of existing customers brought together regularly to advise your company on forward-facing feedback on your product and strategic direction.
CABs allow customers to share best practices and foster community-building and networking among peers, whilst also deepening relationships with your company executives and product leaders.
They can take the form of in-person events, onsite or offsite, online, and/or a combination of them all.
Nobody can offer better feedback on customer experience than actual customers, and CABs sessions can be critical in helping you reduce customer churn. They offer a perspective into the mind of your target market, presenting opportunities in areas you can develop to further enhance your product and hone your services.
