Does it cost more to land a new customer or retain an existing one? While statistics show that the cost of customer acquisition can actually be five times higher, 44 percent of companies say they have their greatest focus on landing new business, while only 18 percent indicate their greater focus is on keeping current customers.
To be certain, customer acquisition is vital for revenue growth. But if you’re also leaking customers, you’re spending considerable time and money to replace them—in many cases, so much so that your company is likely to never get ahead. It’s akin to taking one step forward and two steps back.
Understanding Churn
You can look at churn in two ways: customer churn and revenue churn. Customer churn is the number of customers lost in a given period, while revenue churn looks at total dollars lost in that same period due to customer attrition. Obviously, it can cost more to lose some customers than others.
What’s considered an acceptable or expected churn rate also varies greatly by industry. In the SaaS industry, for example, the average customer churn rate is believed to be about 5 percent, and a “good” churn rate is 3 percent or less.
The bottom line is that if your B2B company is experiencing undesirable churn, your customers are dissatisfied with some aspect of your product or company. Yet, two out of three companies have no strategy for churn prevention.
How to Reduce the “Churn Burn”
There are reasons for customer churn over which there is little control—for instance, a client goes out of business or has changed its market strategy and your product is no longer applicable. But outside of such scenarios, there are things companies can do to stanch customer leakage:
- Prioritize customer service and communication. While poor customer service is a top reason why customers depart, it’s surprising how many businesses downplay complaints or are slow to provide requested assistance. Also, be aware that good customer service isn’t just reactive—it should be proactive as well. If your business doesn’t yet have personnel focused on post-sales customer success, it might be time to change that. Top-performing companies are also 50 percent more likely to have well-designed user journeys that include clear, regular communication.
- Set the customer up for success from day one. Proper customer onboarding, training, and implementation puts a relationship immediately on the right path to faster ROI and ensures that customers won’t spend time being frustrated and regretful. As a side benefit, making sure that your customer is “good to go” before you take off the proverbial training wheels can also greatly reduce your own IT support and helpdesk costs.
- Look for signs of dissatisfaction. Technology companies have a wealth of data about their customers at their fingertips and should use it to monitor usage and satisfaction. For instance, if you see from your data that a customer is signing on to your platform less and less over time, don’t delay in reaching out to them.
- Find out the “why.” When you do experience unexpected customer attrition, try to find out why they left so that you can fix the problem before more customers follow. Exit interviews and surveys, or even an informal phone call to a departing customer, can reveal eye-opening information. If you don’t ask, you’ll never know the reasons, especially since only one in 26 customers will openly complain—the other 25 will simply cut and run.
Of course, having a great product or service in the first place is the most essential aspect of reducing customer churn. Without that, little else will matter. While we all work to deliver the best product we can, paying attention to other, softer factors—at the beginning of the relationship and throughout—will go a long way toward achieving customer loyalty and longevity.