January 25, 2017
Losing great customers is painful. It's even more painful when they've entrusted your business with their money first and then suddenly decided to leave. High churn rates negatively affect your business. But have you considered the exact numbers?
A study conducted by CMO council suggests the following numbers of how customer churn impacts the business performance: 59.9 percent reported palpable revenue loss, 39.6 percent noticed reduced profitability, and 36.3 percent indicated higher marketing and re-acquisition costs. Those are numbers to keep track of for future success.
Punchlime Presentation proposes some exact numbers to illustrate the point:
Additionally, customers who have been loyal to a brand for 3+ years tend to spend 67 percent more on average compared to those being engaged with a business for just 6 months. While hardly any SaaS can manage to operate with zero churn rates, keeping them at under 10 percent isn’t impossible either. Here are a couple of customer retention strategies to consider:
Review Your Unique Value Proposition
According to the same survey from CMO council, 67 percent of business owners admitted that they don’t have a system for reactivating lost customers in place. Ouch, that’s a lot of potential business lost.
According to Groove, your chances of selling to a new prospect are equal to 5-20 percent on average. While the probability of selling something to an existing customer is 60-70 percent on average.
If a customer didn’t follow up after their trial or decided to cancel their subscription later down the road, high chances are that they didn’t manage to experience the entire value of your product. Your sales growth is directly correlated with your UPV. Hence, work on refining it and re-communicating the potential value to the lost customer.
Take a deeper look at your onboarding process once again. Are there any obvious bottlenecks? Do you require too much data? Do you offer proactive help and guides on getting started? Also, make sure to follow-up with educational materials. A lot of customers choose to cancel their subscriptions when they find a product too complicated, and hence not that useful. Offer the bouncing customer a more detailed outline of all the functionality and advanced features your product has.
Remember, it's important to continuously communicate your unique product benefits. Again, that could be done in a multitude of ways through email marketing, resources libraries, case studies and customer success stories. Keep them educated, hence more interested in continuously doing business with you.
Segment “At Risk” Groups
You should be deploying different retention and engagement strategies for different groups of customers. Active users may not need as many follow-ups or getting started guides as those, who haven't logged in to your app for a month.
Your first step is to weed out those “at risk prospects”. Here are the common telltale signs of those:
Expiring Credit Card
On average, credit cards expire every three years. It means that on average, 3% of all credit card subscriptions will expire each month or 36% of expired card subscriptions will occur per year. Make sure you follow-up these users in a timely manner and remind them of the expiry date.
Downloading/Backing Up Data
This potentially means that a user is about to bounce off and move on to another solution. You should be reaching out to these prospects proactively.
Visiting Cancel Page
This obviously means that a user considers his way out. If a user has frequented that page but didn't take action just yet, you should follow-up and try to regain their confidence in you.
Deploy Trigger-Based Emails
While it’s important to manually reach out to bouncing customers, sustaining high engagement rates among your entire user base is merely impossible without a certain amount of automation.
Sending out the right types of emails at the right time periods can be essential to reducing the churn rates. Encourage people to take action whenever they didn't log in to your service for too long or finally returned to using the tool after a long break.
Reward Active and Long-Term Users
Make your customer journey more interactive and reward users, who have been with your company for a while. Show your appreciations and offer them small incentives like month-free upgrades; the ability to use new functionality the first and so on.
Consider establishing a customer loyalty program. It shouldn’t be expensive or based around discounts-only. Small, personalized gestures particularly count towards building better customer experience. And as long as the customer is happy, he won’t consider canceling their service.
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