In the 21st-century volatile business world, running a flourishing business isn’t just about how much profits you have reaped but about how many customers you have earned and retained.
Customers are the backbone of a business. In fact, they are the biggest disruptors of all and play a crucial role in shaping the destiny of a business. This makes it crucial for a company to put a finger on the pulse of changing customer trends and expectations. Because it’s the customers who propagate the brand image of a company through word of mouth after feeling satisfied with their products and services.
And that is why many companies of late have resorted to customer churn as an important benchmark for measuring the growth of their business.
So, what is customer churn? Well, it’s a measurement of the percentage of customers who no longer purchase your products or subscribe to your services
Also, known as customer attrition, customer churn is calculated by dividing the number of customers a business has lost during a particular period (say a quarter) by the number of customers it had at the beginning of the period.
A higher churn rate can have a detrimental effect on the growth prospects of a company. A churn rate close to 0% must be the aim of every company, though achieving that is a tough call in the face of cut-throat competition and innovation in consumer products and services.
But why is it so necessary to retain existing customers when you can acquire new customers through effective marketing strategies. The answer lies in the cost. If you lose 5% of your customers, filling up that vacuum can drain up to 40 % of your money. On the flip side, retaining that same 5% of the existing customers will bring you 25% increase in profit as existing customers will spend more on your products and services.
Even if a 3-5% increase in churn rate doesn’t seem enough on paper, it is a significant dent on the cashflow. So, how will you hold on to your high-spending customers and protect them from getting poached by your competitors? Here is a lowdown.
- Focus on your best customers: Remember your best customers are the flag-bearers of your brand. They can bring in a larger chunk of revenues to your coffers in a couple of months than new customers can bring in a year. So, losing them in the sea of competition can be catastrophic and can take away the sheen from the brand. Refocusing your efforts towards such profitable customers, offering them incentives and promotional offers and sending personalized mails can go a long way in making them feel valued.
- Be proactive with communication: Being telepathic with your customers can help you reap good benefits by getting the most of your products and services. Knowing what the customer needs and reaching out to them before they reach you will send them a message that the company is invested in them. Go through their search history and send them messages and contents regarding products that they will take a keen interest in. If any customer signs up for a new service, send him a gratitude.
- Guide your new customers: Getting on with a new service can be overwhelming for a new sign up. Every customer is an opportunity and making them feel valued is a hallmark of a good company. So, it’s the duty of the company to onboard the customer via a short walkthrough of its products, services and other offerings. Customers taking a demo of your services will feel empowered to use them and think twice before shifting to your competitor.
- Analyse the churn: Tracking the activities of a customer will give you a wealth of information about how whether they have lost interest in your services or not. In a world of choices, it is wise to accept that your customers will leave you one day or the other. You can only try your best to stop that, by looking at the key signs of happiness and satisfaction that is experienced by the customer and strategize your marketing efforts on those lines.
- Stay updated and competitive: In a world of flux, it is all but natural that customer demands and choices will change. Businesses have to on their toes and be ready to swing with the trends, technology and product disruptions. Today’s customers stay updated with trends and so it is expected of brands to fall in line with them to cater to those new expectations of consumers.
Customer churn is a stumbling block in the growth of a business. It can change the trajectory of a business and bring unwanted struggle to a business in acquiring or retaining customers. Reducing customer churn can improve the brand image of the company and make customers brand evangelists.