Churn happens for many reasons. Check out 8 top reasons for customer churn and solutions to reduce it.
As a VP of sales, head of sales, sales manager, or SMB business owner, you know customer churn can be a significant concern for your business.
Lost customers mean lost revenue, and that can have a significant impact on your bottom line. To maintain a healthy business, it's essential to understand why customers churn and how to reduce it.
In this article, we'll explore the most common reasons why customers churn and provide you with quick fixes to overcome each problem.
From pricing and ineffective marketing to external factors and inadequate customer support, we'll discuss a wide range of issues that could be contributing to customer churn.
By the end, you'll have a better understanding of how to reduce customer churn, increase customer loyalty, and achieve long-term success for your sales team and business.
What is customer churn?
Let's say you run a company that provides a software solution for managing online customer support. One day, you notice that one of your key clients hasn't been using your software as frequently as they used to. You discover they've switched to a competitor because of better features and more responsive customer support.
That's customer churn: When customers leave a company at a certain rate.
Churn can happen for many reasons, including poor product or service quality, high pricing, ineffective marketing, or better offers from competitors.
The adverse effects of customer churn in business
High customer churn can have several negative impacts on a business. Here are some of the consequences of losing customers…
- When customers leave, they take their business and revenue with them. The more customers churn, the greater the revenue loss.
- When customers leave due to poor experiences, they may share their negative experiences with others, and negative social proof is something best avoided at all costs. This can hurt your company's reputation and make it harder to attract new customers.
- To replace lost customers, companies need to invest in marketing and advertising. This is, according to Invesp, five times more costly than retaining existing customers.
- High levels of customer churn can be demoralising for employees, who may feel like their efforts aren't paying off. This can lead to a decline in productivity and employee satisfaction.
It's quite obvious that customer churn is negative and it would be best to minimise. What’s less obvious, are the specific reasons why customers might leave your business.
8 reasons why your customers churn
Here are the eight main reasons why customers churn, and tips on how they can be fixed.
Make sure you read the embedded articles. They’ll provide you with more information on how to solve the churn problems you experience.
You attract the wrong kind of customers
One potential reason for high customer churn is that your company attracts the wrong kind of customers.
This can happen when a business is unclear on its ICP or buyer persona, generating leads that aren't a good fit for products or services. These customers may not have a genuine need for what the company offers. They may also have unrealistic expectations, leading to dissatisfaction and churn.
A solution to this problem is to clarify your ICP and buyer persona and tailor your lead generation efforts accordingly.
Conducting market research, analysing your existing customer base, and creating buyer personas can help identify the characteristics and needs of your ideal customers.
If you're interested in learning more about how to identify and target your ideal customers, check out our blog post on defining your buyer persona to boost sales.
Customers don’t get what they hoped for from your product or service
Another reason why customers churn is that they are not getting what they hoped for from your product or service. This can be due to many reasons.
A steep learning curve and poor onboarding
Customers will leave if they can’t figure out how to use your product. They won’t sit around and wait for the “aha!” moment to happen. It’s essential to teach customers how to get value as soon as they commit to your business.
Customer onboarding, however, is more complicated than just showing clients the basics of using the product during a demo. You need to show customers how to do the thing that they bought your product to do. They also expect you to show the most efficient way to do it.
For example, if you sell CRM suites and your customer purchased your product mostly because of email automation — focus on email automation functionality and anything related to it during the onboarding process, and skim over the other parts of the product.
A lack of customer success/support
Customers want to feel supported. If they don't get the help they need, they feel ignored and can abandon your product. Proactive support prevents this.
There aren’t enough features
Often, when customers say “there aren’t enough features”, it means one of two things…
Firstly, the issue could stem from false expectations. Maybe a sales representative or promotional material promised a feature or capability that isn't actually available. Similarly, customers might also have simply misunderstood the product's offerings.
Secondly, there might be a genuine lack of features.
In such cases, companies must pay attention to customer requests and let them influence the product development process. Close feedback loops.
Even if implementing the desired feature isn't on the immediate agenda, companies must communicate this, provide an estimated timeline, or offer a functional workaround.
By addressing these potential causes of churn, businesses can better understand and cater to their customers' needs, ultimately reducing churn and fostering lasting relationships.
These problems can be solved by focusing on improving the customer experience at every stage of the customer journey. This might involve simplifying the onboarding process, providing more comprehensive training resources, or offering proactive customer support to address issues before they even have the chance to arise.
To address each of these challenges more comprehensively, we recommend checking out our articles on…
➡️ How to implement customer success
➡️ Onboarding strategies to gain your customer's trust
Your customer service practices need improvement
Customers expect personalised and prompt customer service.
As many as 96% of buyers agree that customer service is a primary factor when it comes to customer loyalty. Poor customer service is another significant cause of customer churn. Customers are more likely to switch to a competitor if they experience…
- Long wait times. According to Jeff Toister, 46% of customers expect a response to their email within 4 hours, with a further 12% of those customers expecting it within 15 minutes (during working hours).
- Generic support, like having your support request be answered with a link to the knowledge centre.
- Ineffective issue resolution, such as being given a solution that wouldn’t work in the case of the prospect's company.
Automating customer service processes in CRM is a quick fix for this problem.
This allows customer service teams to dedicate more time and energy towards each individual customer's experience.
Valerie Kakovkina
A CRM also allows you to access information on the customer at your fingertips. For example, NetHunt CRM’s client card features a timeline showing all the related documents and previous interactions with a customer.
Furthermore, by analysing previous customer interactions, you can identify gaps in customer service to fill. You can also identify team members that need additional coaching.
To dive deeper into this topic, we recommend checking out our how-to article on using CRM to automate customer service processes.
Your communication channels are inconvenient for customers
Many workers still prefer emails to be their primary communication channel for all work-related matters. However, there are still clients that would prefer a more modern communication channel for support needs.
Increasingly more customers appreciate communication with companies through social media.
As a matter of fact, the Zendesk CX trends report states that in 2020, the number of customers who prefer communication with companies through messengers skyrocketed by a whopping 110%.
Many social media apps nowadays even have the infrastructure needed to create business accounts for customers to reach out to. A few CRM systems, such as NetHunt CRM, have also released integrations for social media messengers such as…
Customer support employees can respond to messages directly from a client’s card, instantly create customer records from chats, and much more.
Customers believe your competitors offer better products or services
The two reasons why customers switch to a competitor include…
- The competitor offers better pricing
- The competitor offers features that your company doesn't
Unless you drastically changed your pricing, the issue is value. Customers who see your product as valuable will be ready to pay for it.
One way of winning back your customers is by identifying and building the value of your product. Value-based involves figuring out what your customers need, highlighting how your product or service can meet those needs, and explaining it in a way that's easy to understand.
Stay up to date on your competitors' advancements. By knowing about their recent improvements, you can ensure your offer matches or exceeds theirs.
To keep your customers engaged, it's necessary to inform them about what sets your product or service apart from the rest. Presenting comparisons, reviews, and other helpful materials will emphasise your unique selling points and illustrate why choosing your company is the better option.
Check out our super helpful article on value-based selling. It features tips and tricks you need to reduce customer churn when it comes to competitors.
Customers lack rapport with your business
When customers don’t believe you’re genuinely interested in their success, they leave.
This happens if you're not proactive in customer support, if you fail to personalise your outreach, or don't engage customers regularly.
To improve customer rapport and reduce churn, consider investing in customer success and account management. This includes proactive support, regularly checking in with customers to understand their needs, and personalising your communications to show that you care about their success.
You should also celebrate milestones and host regular events like Q&A and AMA sessions for your customers. This will give you a chance to bond and really show that you’re willing to put an effort into seeing your customers succeed.
For more information on improving customer relationships, check out our article on customer success and account management.
Customers don't have enough trust in your business
Imagine you run a software company and recently released a major update, causing user concerns about new features and data privacy.
To rebuild trust, you can…
- Publish a blog post explaining the update's changes and benefits
- Create tutorial videos to demonstrate new features
- Host a live Q&A session for customers to ask questions and voice concern.
- Revise and communicate your privacy policy clearly
- Offer prompt and empathetic customer support
Be clear about product changes and how they'll affect your customers. Communicate honestly and promptly when things go wrong.
With A CRM system like NetHunt CRM, you can send out bulk personalised emails to your customers. Reaching everyone you need to is a simple task. Additionally, take measures to protect customer data and be transparent about how you're doing so.
Our article on CRM and data protection can provide more information on how to achieve this.
Payment issues/billing issues/failed payment
Payment issues can be a major driver of customer churn. If customers have trouble renewing their subscriptions, or if their payment method fails, they might look for alternatives through frustration.
To reduce payment issues and prevent customer churn, consider implementing automated renewal reminders through your CRM. Provide multiple payment options to your customers too.
CRM suites can ensure that customers are aware of upcoming payments and have a way to resolve any payment issues quickly.
In a CRM like NetHunt CRM, you could create a workflow for automatic renewal reminders from the same tab as your Gmail. Neat, huh?
Finding it hard to come up with a good email to remind your customers about payment? We have an article on our blog on how to write payment reminder emails that you should check out.
External factors
By now, seven reasons later, you probably realised that the odds are heavily stacked against you when it comes to customer churn.
Hiccups can cost you customers so utmost care is required.
But sometimes it’s not your fault when your customers leave.
Things such as economic recessions, pandemics, and wars happen all the time. When the economy changes — customer habits change.
To prepare for external factors that could affect your business, it's crucial to stay informed and adaptable. Keep an eye on trends in your industry and the broader market, and be prepared to adjust your strategy as needed.
Remember, the more prepared you are, the better equipped you'll be to weather any storms that come your way.
If you want to learn more about how to best stay prepared for external factors, check out our articles on the economic recession and its impact on the B2B landscape and reducing crisis-driven product churn.
In conclusion, customer churn is a significant concern for any business.
It can result in lost revenue, damage to your reputation, and decreased employee morale. Customers might churn for many reasons, and addressing these issues can help reduce churn and increase customer loyalty.
Key takeaways…
- Enhance product quality to meet customer expectations and boost satisfaction.
- Implement competitive pricing strategies to maintain customer interest.
- Develop effective marketing campaigns to engage and retain customers.
- Provide exceptional customer support to resolve issues and build trust.
- Strengthen customer relationships through personalised interactions.
- Stay informed and adaptable to external factors affecting your business.
- Remember that reducing churn is an ongoing effort, not a one-time fix.
- Prioritise providing the best possible customer experience.
- Utilise the right tools, such as a CRM system, to help reduce customer churn.
Explore our blog article on how a CRM can help reduce churn for more actionable strategies.
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