How can you prevent churn?

Not every newly acquired customer remains loyal to your company forever, but even from a loss of customers we can learn a lot. Churn Management gives you the means to not only understand why customers leave you but also how to prevent future churns.

What is a Churn Rate: a definition

The “churn rate“ describes the amount of customers leaving within a given period of time. Imagine you’re having a party and at 9 pm there are 32 guests. At 10.30 pm there’s only 13 left. The question you as a host should ask yourself is:  why did that many guests leave early and what could be done to prevent such high bounce rates next time. Maybe by playing different music, offering more choices in food and drinks or giving individual attention to all the guests.

So while the churn rate is something that should be kept as low as possible, the context of the customer churn offers a valuable opportunity to optimize the customer experience and evaluate the success of the moments that matter.

1. When do customers leave?

The longer a customer is loyal to your company, the lower the chance of a pull-out. Most customers leave rather earlier than later, which also means that you should build a long-term relationship with your new customers by means of personalized mailings, discount campaigns and other incentives. But be careful: too much of a good thing can make the new customer run for fear of spam.
The end of a contract (for example with an internet provider) can also lead to a higher churn rate, because prospects look around for new discount offers that are usually offered to new customers rather than existing ones. In our article about retention we provide valuable tips on how to turn your customer into a loyal one.

To do: Set a timeline and mark the points along the customer journey where the churn rate is especially high. Develop and test measures to make positive use of these critical moments (discount offers, additional services, etc).

2. Where do customers leave?

Obviously, brand new customers are most likely to churn at the first opportunity to do so. But not only the point in time can tell us why. The contact point or the moment they slip away can also provide helpful information. In a customer journey all possible touchpoints between customer and company are defined. If there are touchpoints where a disproportionately high number of customers pull out, this might be a sign the customers feel something is going wrong.

The earlier a company knows at which touchpoints the highest churn rate occurs, the earlier these very points can be optimized.

To do: Look at all your channels and touchpoints and especially concentrate on those with a high churn rate. Is it long waiting times, a lack of information or false expectations? Then change it.

3. Which customers leave?

Lead Management starts with customer segmentation, that is dividing them into different customer types or personas. But customers can also be differentiated by their type of interaction, which can range from loyal and interactive to unimpressed and rather passive behavior. Depending on the customer type, the measures for churn minimization must be formulated differently. Now back to your party: if, for example, young parents have to leave earlier because the babysitter isn’t available any longer, you surely have to approach them differently than the party couple that is off to the next, more exciting event.

To do: Develop buying personas and segments for your customers. This way, you can draw conclusions as to which persona in which segment (active, inactive, loyal, unimpressed) has the highest churn rate. Evaluate subsequently, if meeting your customer requirements will result in higher revenues. Retaining passive customers, who buy a lot, is by far more logical than retaining unimpressed customers who don’t spend one cent.

Find out how you can implement and use Customer Journey Management in your company.

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