Customer churn, or the loss of customers, is a challenge faced by almost all businesses, which can have a significant impact on a company’s bottom line and growth potential. Understanding the reasons why customers churn is crucial for any business looking to reduce customer turnover and increase customer retention.
A study by Marketing Metrics in Jill Griffin’s book ‘Customer Loyalty: How to earn it’ demonstrates the probability of successfully selling a product or service to a prospect is between 5-20%, whereas when selling to an existing customer this number jumps up to 60-70%. Revealing the importance of retaining customers to maintain healthy revenue generation.
Why do customers churn?
Before we look at the activities that can be pursued to enhance customer retention let’s take a look at the most popular causes of customer churn.
Poor Customer Service: Customers expect high-quality customer service, and if they receive poor service, they are likely to take their business elsewhere. Poor customer service can include slow response times, unhelpful representatives, and a lack of personalized attention.
Price: Customers are always looking for value for their money, and if they feel they are not getting their money’s worth, they may look for cheaper alternatives. Price is often a top reason for customer churn, especially in competitive markets.
Product/Service Quality: Customers expect high-quality products and services. If they receive a product or service that does not meet their expectations, they may be more likely to leave. Consistent quality is key to retaining customers.
Competition: In today’s market, customers have numerous options for products and services. If a competitor offers a better product, service, or price, customers may switch to that competitor.
Lack of Engagement: Customers want to feel valued and engaged with the brands they choose to do business with. If a customer feels ignored or neglected, they may be more likely to leave.
Changing Needs: Customers’ needs and preferences change over time. If a company fails to adapt to these changing needs, customers may look for alternative options.
By addressing the common reasons for churn, companies can take steps to retain their customers and build long-term relationships.
Methods to reduce customer churn
Collect first-hand customer data
Understanding who your customers are is the first step to reducing and preventing customer churn. Implementing a system such as guest WiFi that easily integrates with existing CRM solutions enables businesses to easily collect first-hand data, providing high-level and granular insights into who its customers are.
Examples of first-hand customer data:
- First and last name
- Date of birth
- Contact details
- Social interests
As the use of third-party cookies declines and eventually stops in 2023 businesses must change their data collection methods to stay competitive. By collecting, segmenting, and analyzing first-hand data, businesses can gain highly detailed customer profiles allowing them to adapt to changing needs, create tailored customer experiences, and provide personalized services.
Survey customers to collect feedback
Actively collecting feedback from customers is a great way to highlight issues and find out how to improve operations and services.
Asking customers for feedback in a timely and personalized manner provides businesses with the best opportunity to improve the customer experience and energetically prevent churn.
“Once you stop learning you start dying” – Albert Einstein
What kinds of questions can businesses ask when collecting feedback?
Every customer experience is unique which means when you’re asking for feedback it’s important to cover the key aspects and interactions to collect valuable and actionable insights.
Overall satisfaction: Asking customers to provide an overall satisfaction of their visit is especially informative as it allows them to provide feedback in their own words.
- Example question: On a scale of 1-10, how satisfied are you with our product/service?
Net Promoter Score (NPS): The importance of NPS lies in its ability to provide a clear and concise measure of customer satisfaction and loyalty.
- NPS question example: On a scale of 1-10, how likely are you to recommend our product/service to a friend or colleague?
Customer service feedback: When customers feel heard and valued, they are more likely to continue doing business with a company. Revealing trends and patterns in customer service, enabling businesses to anticipate customer needs and respond accordingly.
- Example question: How would you rate our customer service? Were your issues resolved in a timely manner?
Purchase experience: This type of feedback allows businesses to reveal pain points in the purchase process, such as confusing checkout procedures or long wait times. By addressing these issues, companies can make the purchase process more streamlined and efficient.
- Example question: How was your experience purchasing our product/service? Were there any issues with the buying process?
Make WiFi access quick and easy
By offering free WiFi in exchange for customers connecting via their social media accounts, businesses can gain an additional layer of valuable insights into customer demographics and behavior.
This data can be used to personalize the customer experience, tailor promotions, and offers, and improve customer engagement. Social WiFi allows end-users to quickly access internet access by authenticating on a captive portal with social media credentials. This can also help businesses increase their social media presence and grow their following by encouraging customers to share their experiences on social media.
But how does this reduce customer churn? Social WiFi provides customers with a convenient and fast internet connection while in the venue, enhancing their overall experience and encouraging them to spend more time and money at the business.
Understand venue behavior data
By collecting and analyzing venue-level data, such as foot traffic, dwell time, and customer flow, businesses can gain a deeper understanding of how customers interact with their physical spaces.
This data can be used to optimize store layouts, improve product placement, and identify areas where additional staff may be needed.
Venue-level behavior data can also be used to personalize the customer experience, by offering targeted promotions and recommendations in real time based on individual customer behavior. Overall, venue behavior data can help businesses increase customer satisfaction, cut costs by optimizing operational efficiency and drive additional sales.
Incentivize repeat visits and purchases with loyalty programs
The Harvard Business Review reports that acquiring a new customer can cost anywhere from 5 to 25 times more than retaining an existing one, depending on the industry. With this in mind, businesses must have an equal focus on retaining customers just as much as acquiring new customers.
We’ve all experienced the excitement of a deal that sounds great but are then disappointed when it’s only available to new customers. Showing that you value your existing customers is key to preventing churn and one of the best ways to achieve this is to create and promote a loyalty scheme.
How can loyalty schemes prevent customer churn?
- Offering rewards to customers who stay with a business for a certain period of time can encourage customers to continue using the business’s products or services
- Exclusive perks to customers, such as early access to new products, access to a customer service hotline, or free shipping. These perks make customers feel valued and appreciated, and they are less likely to switch to a competitor who doesn’t offer similar perks.
- Using a points system to reward customers for their loyalty is a great way to increase repeat visits and purchases, allowing customers to redeem points for rewards such as checkout discounts, free products, or special experiences.
- Loyalty schemes can personalize the customer experience by using customer data to offer personalized rewards and perks such as offers on frequently purchased items or a birthday discount. This personalization can make customers feel valued and more connected to the business
In conclusion, preventing churn and increasing customer loyalty is centered around personalization and the ability for businesses to engage customers at key points of their consumer life-cycle.