Reduce customer churn by better understanding and addressing its root causes

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Think back to a recent company-wide meeting you attended.

When the financial results from the previous quarter were announced, which specific financial metrics got brought up? Operating profit? Gross margin?

Whichever they were, the customer churn rate was unlikely to make the list. And yet, the financial health of nearly every business depends on a low customer churn rate.

So why, exactly, should your organization strive to reduce customer churn? And how can you go about doing so?

We’ll answer both of these questions, but first, let’s align on what customer churn is.

Customer churn overview

Customer churn is the percentage of customers your organization loses over a given period of time.

It takes the number of customers your organization lost over a given period (monthly, semi-monthly, quarterly etc.) and divides that by the total number of customers you had at the beginning of that period.

Written as a formula, it looks as follows:

customer churn formula

To help you understand this formula, let’s review a quick example:

Say your organization had 100 customers at the beginning of a quarter. Your organization then lost 7 customers by the end of that same quarter. Using our formula, your customer churn rate is:

calculating customer churn

Reducing a 7% customer churn rate—or whatever yours is—holds significant business implications. For example, its been proven that if an organization manages to reduce customer churn by 5%, its level of profitability can then grow by more than 25%.

Customer churn is often preventable. Roughly two-thirds of customers cite a bad customer experience as the reason they cut ties with a business.

So how can your organization determine these “bad experiences” and then address them?

Want to track and improve the customer experience in a more effortless way? Learn how SurveyMonkey CX can help.

Identify what’s causing customer churn

To help your organization prevent and lower customer churn, look at customer activity and collect feedback from recently churned customers. Let’s talk about the former approach first.

  1. Review the activity of customers who churn. Using your customer relationship management tool (CRM)—or whatever tool your team uses to analyze customer engagement—build a report that displays customers who’ve churned over an extended period of time.

Then ask yourself the following questions to uncover the most relevant trends in the data:

  • Which types of customers tend to churn most?

“Types” is used broadly here. It can represent the type of product or service the customer was using, the length of time they were a customer, the industry they’re in etc.

  • What kinds of inactivity do these customers have in common?

“Inactivity” often includes an extended period of time where users didn’t log in; weren’t using a certain feature of your product enough, if at all; and didn’t use your product in a way that meets their goals in a meaningful way.

  • What do these customers tell you about your business?

Are these customers managed by the same set of customer success managers? Are they using the same product(s)? These insights can shed light on areas that deserve more attention, internally.

  1. Collect feedback through surveys. Discover additional insight from former customers who recently churned by sending them a survey.

Here are a few things to consider when designing your survey:

  • In the survey introduction, clarify the purpose of the survey—to improve the experience of current and future customers. This will help former clients understand why you’re asking them to take the survey and why their responses matter
  • Include open-ended questions that ask the respondent why they’ve decided to stop partnering with you and what you could have done differently to keep them on as clients
  • Use a survey incentive to motivate participation
  • Send the survey shortly after they churn. If too much time passes by, they can easily forget why they stopped working with you

Do you use Salesforce? Our integration with the CRM platform allows you to survey customers who churn, automatically. 

There’s nuance to data. By sending former customers a survey, you’re gathering additional insights that contextualize the data and inspire further improvements.

Take the right measures to reduce customer churn

Once you know what influences your customer churn rate, your team can prioritize making the right improvements.

Are certain customer success managers frequently ill-prepared to handle customer issues? Get them up to speed with additional training. Do customers often wish your product could do something that it currently can’t? Get your product team on it—and work with your customer success team to identify temporary workarounds with customers.

After addressing these important issues, your organization can survey customers to ensure your efforts are, in fact, improving the customer experience. In addition, send out surveys on a more consistent cadence to identify and proactively address new areas that can cause customer churn. Our customer satisfaction survey template can help you get started on building this relationship-focused survey.

Looking for more advice on writing and delivering customer surveys? Our “6 easy steps to kickstart a killer CXM program” has the tips and tricks you need to be successful.

Your organization’s ability to reduce customer churn is critical to its financial success. Reduce customer churn by looking at the customers who have already left and understand why they’ve done so. Once you begin to use these insights to improve the customer experience, you’ll be in a position to boost your organization’s profitability.

3 quick tips to improve survey response rates

Here are some ideas to ensure that respondents will answer your surveys.

1. Be quick

If your survey is short and sweet, there's a greater chance that more respondents will complete it.

2. Offer incentives

Little incentives like small discount or an entry into a drawing can help ensure respondents complete your survey.

3. Buy a targeted audience

With SurveyMonkey Audience, you can purchase access to an audience who meets specific demographic criteria for your survey. It's a great way to get targeted responses from a specific group.

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