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Home » Articles » Customer churn: Its definition and prevention

Customer churn: Its definition and prevention

Customer churn Its definition and prevention

Customer churn prevention is no easy feat, especially in a saturated market where consumers are offered products and services anywhere they go.

Amidst this abundance of offerings, if people really like your brand, they will subscribe to it. Once you’ve gained them as customers, all you have to do is retain them.

If not sustained, customers will naturally leave your business and choose a different one. This scenario will contribute to your loss of customers, which is also known as customer churn. 

Read more to discover what customer churn is and how you can prevent it. 

Customer churn defined

For a certain period, a company would lose a particular number of its customers. This is called customer churn. 

Since customer churn is tantamount to loss of profit, needless to say, this is one of the most important metrics any business should monitor.

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To calculate the churn rate, divide the number of customers you lost after a certain period by the number of customers you had at the start of that period. It could be a period of a month, a quarter, or a year. 

Your company should aim for a 0% churn rate. But realistically, even if you lose customers, you should at least be able to keep the percentage to the minimum.

In order to do this, your company should identify the reasons churn occurs and the measures to develop their products and services.

Customer churn defined

Why does customer churn happen?

There are a lot of factors for customers churning. But one of the most predominant reasons is related to product and service downgrades. When a customer can no longer relate to, use, or afford your products, they find no reason to stay. 

Customer churn also happens when a consumer has maximized their typical subscription length. Some people would only want to say with a certain brand until their subscription ran out. 

Customer service is also a heavy factor affecting customer churn. It’s also a life-saving aspect of any business. Excellent customer service will retain customers in the long haul.

Why does customer churn happen?

Key strategies in customer churn prevention

You may say that churn rate is a natural event. You’re going to lose customers one way or another. But the thing is, if you keep losing customers, it will eat a big portion of your capital and your profit. 

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The goal is to prevent or reduce customer churn as you operate in the long run. That’s why it’s important to have these key strategies in place for customer churn prevention: 

Talk to your customers

This is a basic step for any business. It may seem simple, but it goes a long way.

Instead of waiting for customers to approach you, you should initiate a connection with them. Be more proactive and ask them what they need. You can have a dedicated team for this, utilizing different channels such as phone, email, online survey, or social media.

Communicating with customers will give you a clear perspective on how to work with them, how to serve them better, and how to produce content more relevant to their situation.

Showing that you care about their feedback will also enable you to personalize the content and services you give them.

Use data analytics 

All business owners should implement data analytics upon creating internal and external processes. Data analytics can determine changes in capital, revenue, and customer loss. When a business wants a model change, data analytics can also identify pricing changes for products.

When it comes to customer churn, data analytics can provide in-depth insights as to where your service went wrong and identify your weak points. 

Offer incentives

This is one of the best actions if you want to reduce customer churn. All customers want a bit of appreciation. Don’t hesitate to give them incentives, especially if they have been a loyal customer of your brand.

There are other ways to offer incentives such as promotional discounts, special offers, seasonal free delivery, and the like. But carefully consider your offerings too and make sure it will incorporate something that would make them stay longer as your client.

Key strategies in customer churn prevention

Know when to let go of your customers

This sounds sadder than it is, but it’s the truth. Sometimes, a better way to reduce churn rate is to learn how to actually let go of your customers. 

Even if they’ve had a great customer experience with your brand, when the customer has been honest about their reason for leaving, trust them and let go.

It’s even more important to let go of customers who have been difficult, continuously dissatisfied, or disrespectful. They may leave negative reviews and false accusations about your business, which may influence other customers and eventually affect your churn rate.

If you’ve done everything to tailor your service to their need and it’s still not working, it’s better to give them the option of leaving.

Securing customer retention

There’s a reason why people become your customers in the first place. They love your products and services! The more they return as customers, the more they spend a bigger amount for your business. The question is, until when?

The best customer retention strategy is built by establishing more personal relationships with your customers. It is built not through abstract measures but with concrete data and insights. 

As you reduce customer churn, try to perform these tips we’ve given you to secure customer loyalty and retention.

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