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is little control—for instance, a client goes out of business or has changed its market strategy and your product is no longer applicable.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:
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.
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