A practical guide to reducing customer churn

Customer churn is one of those terms that people look at and may not fully realise the importance of. Maintaining a solid consumer base is easier said than done, so it's important to keep loyal customers around.

Why does churn matter so much for businesses:

· 80% of your future profits will come from 20% of your existing customers?

· 80% of companies believe they are delivering a great customer experience but only 8% of customers believe they are receiving a great Customer Experience.

· A 2% increase in customer retention is the same to profits as cutting costs by 10%.

· Companies with a customer experience mindset drive revenue 4-8% higher than the rest of their industries.

· Two-thirds of companies compete on customer experience, up from just 36% in 2010.

· 73% of consumers say a good experience is key in influencing their brand loyalties.

· 68% of customers leave because they think a company doesn’t care about them.



Having an overview of your customer churn stats will help you to make more sense of what’s happening in your business.


There is not a single business in the world that has never lost customers. Every business deals with it differently: some immediately start looking for new customers to replace the loss; others throw all their forces at analysing what went wrong and how to put a lid on others trying to run away. Some don’t even notice the loss of valuable customers as they are so focused on the acquisition of new customers.

What is customer churn?

Customer churn is the number of customers who leave a company during a given time period. In a more down-to-earth sense, churn rate shows how your business is doing with keeping customers by your side.


What is customer retention?

Customer retention essentially is your company’s ability to keep its customers and maintain company-consumer relationships.


Why does churn matter?

It all comes down to the numbers, the more customers a business retains, the more revenue it makes.


· According to Forrester it costs 5 TIMES MORE to acquire new customers than it does to keep an existing one.

· It will cost you 16 times more to bring a new customer up to the same level as an existing customer.


· The Harvard Business School claims that on average, a 5% increase in customer retention rates results in 25% – 95% increase of profits.

· KPMG, found that customer retention is the main driver of a company’s revenue.

· Marketing Metrics data shows that the probability of selling to an existing customer is 60-70%, and only 5-20% to sell to a new prospect.

Impressive isn’t it.

So, it makes perfect sense that focusing on reducing churn is paramount since keeping your customers is profitable. Yet, not too many companies understand this and, as a result, still struggle in trying to implement a successful churn prevention strategy. So, how do you reduce customer churn?

How you can reduce customer churn

You need to understand why you are losing customers.

To put it simply, you have to find out why customers decided to leave. The easiest way to do this is to talk to the customer. Get on the phone and have a proper conversation with your disgruntled customers and recently exited customers. Ask them what went wrong, why did they leave and how could you improve and then LISTEN.

I know what your are thinking, but we sent out a customer exit surveys, isn’t that ok?

No. Call them up and ask why they left. This will give you the immediate, voice of the customer feedback on whether or not your product/service solves the customers’ problems or causes trouble.

An on going two way, open communication does wonders in being able to analyse your customer churn. You will need to be utilising all your channels; phone, e-mail, website, live chat, and social media. The valuable feedback on how well you serve your customers is just a chat away.

Deliver the customer experience your customers expect.

Do not underestimate the detrimental effect of a poor customer experience.

Studies show that 58% will never use a company again after 1 negative experience, and 48% who had negative experience will tell 10+ people about it.

Nearly half (48%) of consumers surveyed by Accenture said that they had ditched a company’s website and bought the item somewhere else because of a poor experience.

According to Zendesk, 79% of high-income earners shunned a company for more than 2 years after they had a bad experience.

And we are not talking here about really bad experiences. Sometimes an average customer experience or what can be called a “meh” experience is a trigger for churn. You simply showed nothing to develop a value exchange.

So, start by analysing your existing Customer Journey Maps to understand where you are delivering and where you have created pain points and frictions. Pay very close attention to your hand over moments.

The customer journey will give you a clear picture of all customer interactions across channels, devices and touchpoints throughout every stage of the customer lifecycle, and be present with the right content at the right place at the right time.

Listen and learn from your customer complaints

Complaints are like tips of the icebergs – they suggest that the bigger part of the problem is hidden from the view.

Did you know that 96% of unhappy customers don’t complain and 91% of those will simply leave and never come back?

32% of customers stop doing business with a brand they once loved due to only 1 negative experience to make

However, dis-satisfied customers whose complaints are attended to are more likely to remain loyal, and even become advocated, than the average customer.

Have a clear understanding of who are your most valuable customers

So often we are told we have to surprise and delight our customers, well, we can’t possibly deliver this on a scale that would be required, we would never get any other work done.

You need to segment your customers and separate the most valuable customer and these are the people you invest in surprise and delight moments. These are the customers you want to keep the most, so these valuable customers have to be taken extra care of as they bring in the biggest revenue.

For the most valuable customers, if you haven’t already, you need to prioritise creating ‘AS IS’ and ‘TO BE’ Customer Journey Maps. This will help you understand how deeply involved they are at each stage, whether they have any problems with the product, and whether these issues were dealt with.

Not sure how to find your most valuable customers, segment your customers into groups of profitability, readiness to leave and their likelihood to positively respond to your offer to stay. This will help you predict customer churn.

In summary:

All in all, keeping your customers is not magic. It all boils down to analysing the reasons behind churn and then acting on them. Communicate with customers and involve them with your products, improve your customer experience levels and make sure they see what they are gaining if they stay with you, rather than stray away from you.

To stay motivated, just keep in mind that 82% of companies claim that retention is cheaper than acquisition and even a small 2% increase in retention can lower costs by as much as 10%.

It’s also important to realise that the main reasons of churn have nothing to do with the product, but mostly comes down to poor customer experience.


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