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Ways for Small Businesses to Reduce Churn Rate

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Last editedOct 20213 min read

Do you know your churn rate? Customer churn shows the percentage of customers who leave your company during a specific period. It gives a quick overview of customer loyalty. Do your customers stick with your business, or do they frequently leave for competitors? If you’re experiencing too much turnover for comfort, here’s how to reduce churn rate.

Why should you reduce customer churn rate?

Small businesses are often focused on attracting new leads, so why does churn matter? Simply put, it costs far more to attract high quality sales leads and convert them into customers than it does to retain existing ones. A high churn rate indicates that something has gone wrong with your business model. Your products, customer service, or engagement might be lacking which is driving your customers away. This spells trouble for long-term business prospects.

There’s no one-size-fits-all solution for every business but surveying your customer base is a great start. If you’re losing more customers than you would like, here are a few of the best ways to reduce churn rate.

1. Understand the causes of churn.

Before you can figure out how to reduce churn rate, you’ll first need to understand its causes. Here are a few of the common root causes of churn:

  • Poor customer service: Does your business receive a lot of bad reviews? What does it do about them?

  • Poor products or services: Customers won’t continue paying for a low-quality product.

  • High levels of competition: Is the market already saturated with similar products? How do you stand out?

  • Insufficient communication: Is your service user-friendly? Do customers understand how to use your products?

These are all examples of voluntary churn, where customers actively choose to leave your business. However, sometimes churn is caused by outside factors such as failed payment attempts or banking issues. In these cases, you’ll need to examine alternative payment methods to retain your client base.

2. Perform a churn analysis.

Now that you understand the root issues that can lead to customer churn, the next step is to analyze your own situation. Look for early warning signs like an uptick in missed payments or downgraded subscription plans. Are there specific customer segments or geographical regions exhibiting higher churn rates?

Talk to your customers to find out what’s going on. Communication is a key component of any analysis. Ask for feedback on the phone, using email surveys, or via social media. Many customers leave because they don’t feel listened to, so sparking a conversation is one of the best ways to reduce churn rate.

3. Engage with existing customers.

With the doors of communication now open, the next step is to find innovative ways to engage with your customer base. Do they know how to use your products? Add how-to guides and tutorials into your content strategy. Keep an eye on your socials to find out what’s being said about your products. Search for brand mentions, relevant keywords, and customer comments. This will help you determine how to reduce customer churn rate with targeted engagement.

4. Improve customer communication.

Make sure that your communication strategy remains in place for the long-term. Focus on retaining existing customers rather than throwing all your effort into drumming up new business. This involves a combination of many of the techniques mentioned above:

  • Requesting feedback

  • Responding to feedback

  • Providing trainings and tutorials

  • Offering free webinars and product demos

  • Interacting with multimedia channels

Make sure your communication strategy is proactive, rather than reactive. Customers will only get in touch when they have a complaint; if you want to keep satisfied customers onboard, you must reach out to them instead. Encourage customers to sign up for helpful email newsletters, offer giveaways, and provide incentives for loyalty.

5. Improve your product and service.

Finally, what if it’s not your customer service or onboarding that’s the problem, but the product itself? Keep a close eye on what your competitors are offering to ensure that you meet or exceed expectations. Strive for constant innovation.

You can then complement excellent products with better customer service. An average buying experience won’t help you stand out from the crowd; instead, small businesses should aim for better than average. This is potentially the best way to distinguish your service from corporate competition, while reducing churn rates at the same time.

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