Churn management is the process of avoiding or minimizing customer turnover. Companies that outperform their competitors can better predict, diagnose, understand, and retain customers at risk for churning.
Retaining important customers can reduce business expenses, ensure recurring revenue streams, and provide additional opportunities for cross-selling other products or services. The goal of churn management strategies is to prevent unwanted customer attrition and undesired turnover.
Why is Churn Management so Important?
High amounts of business churn can cause many problems, such as:
- Loss of good customers that generate referral business
- Reduction of cash flow due to the loss of monthly revenue and lack of future payments
- Decrease in profitability since fewer customers mean fewer sales and less revenue
- High turnover of staff due to instability of the business
Thus, retaining customers is essential because they not only represent a portion of your company’s income and growth but also provide opportunities for cross-selling other products and services.
Customer Churn: A Type of ‘Cost’
Customer churn is a type of ‘cost’ business owners need to be aware of. Customer acquisition cost is the money a firm has to spend to get a new customer.
A customer may decide whether to buy or not from you again for various reasons, unrelated to your products or services. This represents a potential loss of revenue and missed opportunities for cross-selling other products or services.
A customer that churns once represents a loss of revenue but not an ongoing cost to your business. However, if they continue to churn regularly, the costs due to lost revenue start to add up.
How to Retain Customers?
Improving customer retention is not so complicated. You can use many methods to improve the odds of retaining customers. Here are some examples of how you can retain customers:
- Provide a phone number or email for your clients
- Request feedback from them regularly
- Ask what they need. Set up a loyalty program, so they receive rewards for frequent purchases
- Monitor their product use and needs
- Automatically deliver the next shipment of a product before they run out
All of these methods can help to maintain or even grow your clientele.
In addition, you should also have a policy for those customers who are not satisfied with your products or services. The policy should outline how the customer can constructively voice their complaints that allow you to work for a solution.
Customer service is essential because it allows you to retain unhappy customers by giving them another chance with your product or service. If they are still unsatisfied after following your procedures, then you can politely part ways with them.
Adding incentives to the mix can go a long way in retaining customers.
However, keep in mind that every incentive will not work for your business. For example, offering reduced rates for referrals may reduce your profits since you are taking money out of your pocket to pay for the transaction. It’s, therefore, best to provide incentives that don’t cost you.
There are many churn management strategies to improve your company’s customer retention, and business owners need to find the method that works best for their particular product or service.