For a business to be successful, you must be willing to make continuous updates and improvements where necessary. More importantly, you should always be focused on your customers and how you can improve their experience with your brand and products or services. This starts with tracking your churn rate versus customer retention and running churn analysis to discover what's causing customers to go to the competition — and change it.
As Bill Gates once said, "Your most unhappy customers are your greatest source of learning."
Here's how you can take the insight you gain from a churn analysis and turn unhappy customers into happy ones.
Customer churn is the percentage of customers who leave during a given period of time. No matter what industry you're in, you will inevitably experience some percentage of churn. This can impact the value of your company immensely if the problems that are causing customers to leave aren't properly addressed and improved upon as soon as possible.
The most important reason to track and monitor churn is that it is more expensive to acquire new customers than to retain old ones.
In fact, Harvard Business Review reports that attaining a new customer can be as much as 25 times more costly than retaining the customers you have. Moreover, their research also found that when a business increases its customer retention rates by even 5%, it can experience profit growth as high as 25%-95%.
Churn analysis, on the other hand, simply tells you what percentage of your customers don't return compared with the percentage who conduct repeat business. It's a common measurement that will allow you to better understand your business-consumer relationships and what is potentially keeping them coming back or pushing them away.
By digging into this percentage more, you can gain valuable insight into:
Churn Analysis can also depict trends in customer behavior at every touchpoint. Personalized engagement preferred by your customers allows you to make your customers feel valued and appreciated.
Explore the complete, step-by-step guide to lowering your customer churn here.
Tracking and measuring churn is your first step in the analysis. This will not only allow you to evaluate churn right now but look back in the years to come for additional evaluations that may uncover patterns to inform better decision-making.
Many companies evaluate consumer risk of churning monthly or quarterly. Monthly results can help you identify problems sooner if you notice a substantial dip in customers following a promotion, announcement, new product release, etc. However, quarterly can be more beneficial for glimpsing a broader outlook, especially if there weren't any significant changes that could directly affect an influx in customers.
What key performance indicators (KPIs) you need depends on your business and goals. So, you'll need first to develop SMART (specific, measurable, attainable, relevant, and timely) goals that align with where you want the business to be. Your KPIs should then match up with the objectives you plan to achieve.
For insurance, you can establish KPIs like:
Different customers - different needs - different behaviors.
No one customer is like any other. For this reason, they should not be treated the same. Tracking customer behavior will allow you to track how certain groups interact with your service and will help you start anticipating customer behaviors. For example, customer behavior can tell you:
You can determine the reason for churn by implementing a voice of customer (VOC) software or surveys after a customer leaves. VOC is a method for gathering feedback from customers that is much like an interview. VOC software allows you to utilize client-specific questioning, gather data, interpret it, and record interviews over time.
Getting this insight from customers right as they leave your company is essential to pinpoint where you need to improve. While answers will vary from customer to customer, common reasons for churn are often due to:
By utilizing KAM software, you can not only keep track of churn in one place but also utilize other metrics to start helping reduce churn. Having access to all the data and tools you need to improve customer relationships will allow you to reduce churn and increase retention. This, in turn, will also reduce the extra costs of acquiring new customers and effectively increase your revenue.
Some key features you will want to look out for in your software include:
Customer churn and retention are among the most important components of the business to measure continuously. This is especially true since research has recently revealed that companies lose on average 23% to 30% of their customers annually to a lack of customer loyalty. The report adds that an additional 9% is lost to the competition when a business doesn't prioritize customer retention.
The satisfaction of the customers you have can tell you a lot about the great qualities of your company — just as the dissatisfaction of your customers can tell you where you still need to improve.
The key to effectively putting customer churn analysis into action is having reliable software equipped with all the tools your team will need to build long-lasting customer relationships. Contact us for insight into how we can help you measure what matters and grow your bottom line.