5 Reasons You’re Losing Customers (Churn) —And How to Win Them Back

Best Practices | Business & tech | Sales

by   Jen Ribble

Let’s talk about churn: the enemy of growth. 

Every company needs customers to survive—whether you sell software to Fortune 500 companies, accounting services to local dental offices, or meal plan subscriptions to health-conscious consumers. 

That’s why customer retention is such a priority for today’s business leaders. But earning your customers’ long-term loyalty is no small task, especially when almost every market is crowded with competitors.  

That said, conventional wisdom tells us that the cost of acquiring new customers is four to five times higher than retaining existing customers. So customer churn is a problem you literally can’t afford to ignore. 

What is customer churn and why does it matter?

Simply put, “churn” is the metric that measures customer attrition—whether they cancel their subscription, leave your company for a competitor, or simply stop using your product. Customer churn rate is a valuable metric for assessing company growth, and it’s relatively easy to calculate. 

# of customers at the start of the time frame — # of customers at the end of the time frame

——————————

# of customers at the start of the time frame

For example, if you start the year with 1,000 customers and you close the year with 850, your churn rate is 15%. You can measure churn rate annually, quarterly, or even monthly, depending on your reporting needs.

Of course, some attrition is inevitable in any business. But when customers are leaving your company at a high rate, there may be significant negative consequences, including:

  • Short- and long-term revenue loss
  • Damage to company reputation
  • High cost of acquisition efforts to replace lost business (marketing, advertising, sales, etc.)
  • Decline in employee morale and productivity

Fortunately, there are plenty of steps you can take to improve customer satisfaction, increase retention rates, and ultimately reduce churn rate. But first, you need to understand why customers leave. 

Following are five of the most common causes of customer churn—along with our recommendations for making sure customers want to stay with you for the long term. 

Top 5 reasons why customers churn

1. You’re attracting the wrong customers in the first place

It’s surprising how often customers buy a product or service without fully understanding it. After the purchase, they may quickly realize that it doesn’t actually meet their needs—and that’s when “buyer’s remorse” sets in. When a customer regrets making a purchase, it probably wasn’t a great fit for their needs—and they’ll likely correct that mistake as quickly as possible, either by returning the product, canceling their subscription, or leaving you for a competitor. 

How to avoid attracting the wrong customers:

  • Ask the right questions. Preventing fit-related churn requires a deep understanding of your customers’ needs. Make sure you’re collecting enough customer preference information in the early stages of the sales cycle. Sometimes that’s as simple as asking, “What is your biggest pain point?” or “What problems are you trying to solve?”
  • Be clear about your value proposition. Your promotional materials need to be enticing, but they should also clearly explain what your product or service actually does. Setting realistic expectations will help to ensure buyers are satisfied with their purchase.
  • Make sure your product/offer aligns with their needs. It’s easy to lose sight of what the customer wants when you’re trying to make a sale. But closing the deal won’t help your bottom line (at least, not for long) if you end up with an unhappy customer. 

2. Your product or service doesn’t meet their expectations

Customers choose your company because they believe you can help them achieve a desired outcome or solve a specific problem. If your product doesn’t provide measurable progress toward success (and quickly!) they’re likely to become frustrated and start looking elsewhere. But in many cases, the product isn’t really the source of their problem—it’s your onboarding process. 

How to ensure better customer outcomes:

  • Uplevel your onboarding. Customer activation is just as important as customer acquisition. A well-crafted welcome email (or email series) can help new customers feel appreciated, provide important information to get them up to speed quickly, and ensure they know where to go for assistance.
  • Set them up for success. New customers often need help learning how to use your product and its key features. Self-serve resources like blog posts, demos, and tutorials can help customers understand your product better and increase stickiness. 
  • Make help available. There will inevitably be questions your onboarding doesn’t address, so customer support is a must. Make sure your contact information is prominently displayed in all new customer communications. 

3. You’re delivering a poor (or inconsistent) customer experience 

In many markets, the top products or services are quite similar, so customer experience can be a key differentiator. But if your customers have trouble getting the help they need—or worse yet, if they’re treated poorly when they reach out—they won’t hesitate to start looking for another provider. 

How to improve your customer experience:

  • Focus on live support. When problems arise, customers don’t want to wade through a library of articles or navigate a confusing menu of automated options. They want to talk to someone who can help. A dedicated customer service team can set your brand apart and improve retention. 
  • Make customer service a priority. People remember how they’re treated. That’s why customers will often stick with a brand that provides outstanding service, even if they can find a better price elsewhere. 
  • Deliver an exceptional experience, every time. Your customer service can’t be great one day and subpar the next. Inconsistency erodes confidence, so make sure you’re providing a consistent and predictable experience. This may require additional training for your support staff, as well as access to a single, shared customer data set.

4. They believe a competitor’s offering is better (or cheaper)

It’s only natural that customers want the best product or service for their needs, at the best price. If they feel one of your competitors can provide a better option, they will be tempted to switch. To avoid losing business to the competition, you need to know what you’re up against, highlight your strengths, and find the right pricing strategy.

How to head off competitive threats:

  • Keep an eye on the competition. Know your top competitors and be proactive about monitoring them. Pay attention to changes in their product features, pricing, and marketing strategies so you can make adjustments as needed. And be sure your team knows how to position your company against key competitors.
  • Offer timely up-sells and cross-sells. Highlighting new products and premium features is a great way to demonstrate value—and it shows you’re thinking about what your customer wants. Consider adding “related product” recommendations to various touch points, including the checkout screen, order confirmation, shipping notice, and follow-up emails.
  • Optimize your pricing. Price-sensitive customers are part of today’s reality, but that doesn’t mean you have to slash your prices—or lose business to a cheaper competitor. A smart pricing strategy can help to minimize price-related churn by taking into account both the value you’re providing to customers and their willingness to pay. 

5. They don’t feel valued

Loyalty is a tricky subject, but customers are more likely to leave a company if they feel their business is not valued. To avoid this, you need to recognize your long-term customers and show you appreciate their loyalty, using tangible or intangible benefits that enhance their satisfaction.

How to make customers feel appreciated:

  • Invest in loyalty or incentive programs. Offering a loyalty discount or bonus program for repeat buyers can help to strengthen a long-term relationship. Even a simple “thank you” or an anniversary email can go a long way. Depending on how they’re structured, loyalty programs can also be a valuable source of behavioral and purchase data.
  • Learn from your best customers. Ask for feedback from long-term customers. Find out about their experience; ask how they use your products; learn why they choose to stay with your company. Then apply your learnings to improve the customer experience for others or shape future product enhancements. 

Boost customer satisfaction—and loyalty—with a customer-centric solution

In a marketplace crowded with competing solutions, customer expectations are higher than ever before. And if customers feel your company isn’t meeting their needs, they won’t hesitate to move on. At the end of the day, it’s simply not possible to understand what each customer wants—and deliver it—unless you have complete, accurate customer data. From basic contact information and purchase data to deeper insights like customer behaviors, attitudes, and preferences, the right CRM solution puts that data at your fingertips so you can delight every customer, every time.

Insightly CRM was designed to help teams build lasting customer relationships through a simple, scalable platform. Insightly’s unified solution aligns cross-functional teams like sales, marketing, and customer service on a single, shared data platform with a single customer view. The result? Unprecedented transparency, better decision-making, and a seamless end-to-end customer experience.

Get started with a free trial of Insightly CRM today, watch a demo on demand, or request a personalized demo to see how it can help your company achieve its business goals. 

 

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