Every business wants to increase its customer base while decreasing the number of customers who leave. It can be a daunting task.
This blog post will discuss the steps your organization can apply to identify, measure, and reduce customer churn.
Step 1 – Track The Leading Indicators of Churn
It’s tough to improve what you don’t measure. Attacking churn requires the analysis of metrics (i.e., customer behavior that indicates dissatisfaction). By establishing a robust measurement framework, your company can map customer behavior and surface early warning signs of potential churn. These “leading” indicators help identify areas of friction and milestones of satisfaction and loyalty.
Potential leading churn metrics might include:
– The number of open support tickets created and the average time it takes to close them. Higher support ticket volumes and response times may indicate that customers are experiencing issues or are not getting the support they need to resolve their problems promptly.
– A Net Promoter Score (NPS). NPS scores, mainly from surveys, indicate how likely your customers are to recommend your product to others.
Step 2 – Collect Direct Feedback from Customers
Quantitative data alone is not sufficient. Collecting qualitative data by directly asking customers why they are churning prevents the organization from making incorrect assumptions from quantitative data.
Surveys are one method to solicit customer feedback. However, ideally, you should work with a third party skilled at extracting customer insight via 1:1 interviews.
The depth and texture of 1:1 interviews provide invaluable insight into why customers think the way they do, not just what they think.
Step 3 – Align Teams Around Retention
In most organizations, each function (sales, marketing, operations, etc.) has goals, metrics, and KPIs. These metrics are essential for measuring team performance, but having siloed goals makes it difficult to align everyone in the pursuit of reducing churn.
Aligning teams to collectively improve retention enables them to re-evaluate their prioritization of retention initiatives that otherwise wouldn’t get the required attention.
Step 4 – Define Churn Improvement Goals and Experiments
Defining actionable goals for reducing churn will lead to measurable improvements in the bottom line. While the end goal will be to meet specific churn metrics within a certain period (e.g., reduce churn by 5% this fiscal year), it’s vital to set shorter-term milestones to get you there.
One example of a shorter-term milestone/experiment could be ensuring that quarterly business reviews (QBRs) are conducted six months before contracts expire. Properly structured QBRs that focus on understanding customer business objectives, their customers, and critical success factors can provide indicators of risk churn.
Experiments must be measurable, so you must have the right tools to monitor your experiments’ performance and impact. While not every initiative will be successful, building an iterative roadmap of experiments will drive you toward achieving negative churn.
Reducing churn can be a powerful growth catalyst for your organization. We hope our recommended steps have sparked ideas on how your organization can immediately begin taking steps toward reducing customer churn.