Contributors from members of the Copper team
Customer churn—a.k.a. customer attrition, a.k.a. customer turnover, a.k.a. customer defection—is one of the most critical metrics to growing a successful business.
Churn represents the percentage of customers who stop using your product or service over a specified period. It’s quite simple to calculate—just take the total number of customers at the end of the period and divide it by the number of customers at the beginning of the period. That’s your churn rate for your churn analysis.
Customer churn is particularly important to companies that bill monthly (like telephone, cable, and fitness companies), and even more important to SaaS companies whose customers can cancel at anytime, resulting in ROI never being achieved.
However, churn should be a priority for everyone—SaaS or not—because it’s tied directly to your bottom line. In fact, some sources suggest it costs five times more to acquire a new customer versus retain an existing one. And a 5% increase in retention can result in anywhere from 25 to 95% increase in profits (which, let’s be honest, even a 25% increase in profits would be a huge win).
In order to reduce churn and maintain customer retention, we need to understand some of the main drivers of churn. Let’s dig into four common causes of churn, and how to counteract them and achieve customer success:
1. Misalignment between what was promised and what was delivered
Have you ever purchased something online—product or service—only to be thoroughly disappointed with what you actually received?
A few years back I bought a graphic tee modelled by a sun-soaked woman on the beach. The tee I received looked the same, but it was made of synthetic fibres. When I wore it in warm weather, I instantly started dripping with sweat. Something didn’t quite add up... Needless to say I donated the shirt, and became wary of purchasing clothing from ads I saw on Facebook.
The ol’ expectation versus reality experience is so common with a customer experience, it’s now a meme. Because this happens so often, it’s no wonderful this is on the list for why do customers churn.
This Fyre Fest meme never gets old.
Fortunately, it’s pretty easy to avoid becoming a meme and giving your customers a reason to churn.
Learn strategies to reduce churn and keep customers longer with this handbook.
Be honest with existing customers.
Exaggerating about your offer—even a little bit—might land you a few extra customers, but you can bet they’ll churn or never purchase from you again. Not only that, they’ll also probably tell their friends (or worse, Twitter) about their experience.
Search for #customerservicefail on Twitter to discover all the ways businesses are letting their customers down.
And remember, honesty isn’t just about what you say in your copy, it’s also how you visually present your offer. For example, don’t include an image of a snorkler wearing your watch 40 feet below the ocean’s surface when really the amount of water it can resist is a heavy rainfall.
Maybe your project management tool is the best... for teams over 200 who have the technical resources to implement it. However, if you don’t set these expectations at the beginning (and by beginning I mean the beginning of the buyer’s journey), you’re going to have one unhappy small business owner who’s struggling to adopt your product and will inevitably churn.
It’s better to attract the right customer—not only will they be easier to retain, they’ll also use up less of your internal resources like customer support.
Sometimes misalignment happens when Sales and other teams further down the funnel aren’t in close communication.
For example, let’s say a member of your sales team tells prospects that your support team will troubleshoot custom code. They’re not lying; they simply misunderstood a previous incident. When this same customer reaches out to support for help with their custom code and is turned away, this will inevitably cause a lack of customer loyalty and friction.
A CRM built for collaboration can help, providing all members of your team with access to prospect and customer details and sales notes. You should also have the ability to tag team members to ask questions and make sure what you’re promising can actually be delivered.
Copper CRM tracks every customer interaction plus notes and important documents. Mention team members, and receive notifications when someone mentions you.
2. Poor adoption of your product
Surprise! Your job isn’t done when your customer purchases your product or service. In the post-purchase stages of the buyer’s journey, your new customer needs to actually experience the value of your offer.
Salespeople can spend weeks and even months building a relationship with a prospect. However, once that prospect becomes a customer, often another team will handle adoption. If that transition isn’t handled with care, it can threaten customer satisfaction, and the trust that Sales so diligently built.
There are two key ways to foster adoption and reduce the risk of churn during the adoption stage:
- Milestone-driven onboarding
- Cross-channel support
Onboarding—usually emails supplemented with documentation and how-tos—should walk your customer through common milestones while also addressing common barriers.
Here’s a snippet from a great onboarding email I received from accounting tool Wave. The subject line is clear and concise—just “4 steps to get you started” and they’ve broken down the top four milestones that encourage adoption: creating an invoice, connecting your bank account, categorizing your transactions, and forwarding your receipts.
Consider what your key milestones are, and then craft automated content around them to guide your customer to adoption.
But remember, even if you create a kickass onboarding track, people are still going to need support—and you need to be available for customer loyalty.
According to research from Accenture, “52 percent of consumers have switched providers in the past year due to poor customer service.” And they estimate the costs associated with customers switching due to poor service is $1.6 trillion in the US alone.
Offering cross-channel support (phone, email, live chat, help center) will show your customers that you truly care about their success. Wave gets extra points for embedding live chat directly in the app alongside a button that links to both their community and help center.
Pro-tip: Integrate your CRM with your team’s support tool using a webhook or tool like Zapier to see all sales and customer interactions at a glance.
3. Your competitors are wooing your customers
To put it simply, the best way to keep your customers from straying is to be indispensable. Of course, this is easier said than done—but it is possible.
Zapier is a prime example.
Firstly, they offer a 14-day trial for all their paid plans, which includes all the premium features and support they’d receive if they were a paying customer. Not only that, you can also start your trial without providing credit card info. Anyone who’s ever signed up for something and then forgot to cancel before the trial period knows this is huge.
No sweeter words have been written than: “No credit card required.” And they can help with maintaining loyal customers
Secondly, setup of your first Zap is pretty easy, and new users can see its value right away: the moment a Task is completed. Thirdly, (and perhaps most importantly) the more Zaps you use, the harder it’ll be to switch to another provider, since you’ll have to reconfigure all your integrations.
And finally, there are over 1,000 Zaps, so the chances are high that if you need to link two apps, there’s a Zap for that.
You can mirror Zapier’s strategy in your own business by providing features, tools, and resources up front on a trial basis, helping your customers see value quickly, and (this is a controversial one and we’re personally not a big fan of it, so use it wisely) making it too inconvenient for them to leave you.
4. Lack of engagement
The last selection for the why do customers churn list, is one that is relatable for a lot of people. In a world of handheld devices vying for our attention and hustle-culture, it’s not uncommon for folks to straight up forget why they purchased your product or service in the first place.
It’s your job to remind them, encourage customer feedback, and keep customer retention.
Send snappy, compelling emails letting customers know when you’ve launched new products or features they might be interested in. If the feature is gated to a higher plan then they’re on, consider giving them a 30-day trial of the premium feature. Invite customers to an upcoming live event, workshop, or webinar.
Communication tool Zoom offers multiple monthly webinars featuring compelling CTAs via email. “Get on the Guest List”—yes, please!
A lack of engagement and customer feedback can be an indicator that a customer might churn, so consider setting up alerts for at-risk customers. Should a customer trigger an alert, you have the opportunity to reach out to them from your CRM.
Automated Actions empower your team to be on top of at-risk customers without all the manual headache.
Work on figuring out churn rate with your churn analysis, and dig into churned customer data to discover trends, and set up your alerts accordingly. Your criteria for an at-risk customer will be unique to your business and offer, but it may include the following data:
- Last login
- Last in-app action (i.e., setting up a Zap, publishing a page, downloading an album)
- Last time opening an email
Burn customer churn
If you’re struggling with customer churn and retention, rest assured you’re not alone. Even top companies like Netflix and Spotify struggle with maintaining all existing customers and churn (their rates are 9% and 5.1%, respectively). But if you’re not proactively focusing on churn, then you’re doing your company a huge disservice.
The reasons found in this post are common causes of churn and a lack of loyal customers, but it’s by no means complete. By digging into the exact reasons why your customers churn, and then further separating them into things you can’t control and things you can, you’ll discover a ton of opportunities for improvement to help with the customer experience.
Don’t keep your head in the sand any longer. The sooner you learn about your customer churn, the sooner you can burn it.