Why does customer churn happen (and what can I do about it)?

As a freelancer or small business owner, it can be very challenging to manage all the aspects of your business. And some of those aspects can be easy to miss too. We looked at customer churn in a previous post, and in this post I thought I would take the time to work out why churn happens. If you are concerned about churn (and I don’t believe that there are many people like us who aren’t), then take a look at the following areas where it can start to grow, and then become a problem. Then, work on ways to avoid the areas.

Money as the cause of churn

Yes, it’s often about the money. People may use your products and services for some time, and then realise that the company on the other side of town can give them the same thing, but cheaper.

There is really only one approach you can take with this. If you are able to provide value for your customer, they will find it harder to jump into churn. Even if the guy down the street is selling website copy for half the price you are, if you’re better, more responsive and careful in your work, churn can be avoided.

Money is a major factor in churn. And with the competitive marketplaces today, that’s understandable. But there is a reason why people still shop with a brand that is more costly than the rest. All you need to do is work out why you are worth what you say you are. The rest should fall into place. And you may reduce churn.

Bad product fit causing churn

You may have a very good sales process (as a freelancer) or team (as a small business), and that may result in lots of sales. But if the product or service is not a good fit for the customer, they won’t come back.

Good sales people qualify clients. Only when they know that their product or service will genuinely help that client do they start to sell. I once had an experience where I hired a ‘specialist’ sales team to find me leads. I ended up having a coffee with a ‘lead’ who explained to me that the sales team hadn’t let him speak during their conversation. He had felt intimidated. On top of that his business was going under and he had no need for content for his website.

The sales team had pummeled him with great selling (or at least very ‘firm’ selling). If they had closed on that phonecall, he would have spent some time as my client (perhaps), but would have gone into churn as soon as the first poorly-qualified service had been experienced.

Qualify who you are selling to. If they genuinely need your product, and they’re a good fit for it, sell it. If not, walk away, because they’ll churn away quicker than you can say Glengarry Glenn Ross.

The product isn’t working

Okay, selling your product is one thing, but it’s equally as important to ensure that what you sell is working in the way your clients want it to.

As a freelance graphic designer, for example, you may have to spend ten hours trying to get the exact right shade of yellow. But you’re putting in that time for a reason. Your client wants that shade, otherwise the product ‘doesn’t work’.

A freelance writer may have to produce ten high quality blog posts that help to market the services of a client. But unless that writer explains exactly what the client can expect, there could well be some disappointment. It’s not always easy to explain why blog posts don’t immediately make clients money, but it does need explaining.

If you design software or apps, carry out on boarding, so your clients get to know how to work with the product to meet their goals. Make instructions clear. Set up a communication channel so that they can contact you if they need to with any problems that occur after purchase. Include a chat feature on your website.

Basically, if your client discovers that what they have bought doesn’t work, they won’t come back/continue subscribing.

Churn due to poor customer support

Things do go wrong and problems occur. This is especially true if you’re offering a subscription service for example. As problems occur, customers expect full and efficient customer service.

The customer support you offer needs to be everything customers expect it to be. There should be humans (preferably trained) at the heart of it all, able to take questions and manage them in minutes.

Customers will leave if support is not there.

Churn due to your competitors

Your customers may look at your competitors and believe (rightly or wrongly) that they can give them better results, or a better product or service overall. While this may not be true, if they feel it is, this is as good enough a reason to enter churn as any other.

I dealt with the money thing earlier in the post, but one way to help your clients understand that your product or service is worth sticking with is to consistently focus on your USP (unique selling proposition).

What can you offer that those pesky competitors cannot? What one thing do you bring to the customer experience that no one else does? Putting money aside, what do you do that really helps your customers and clients?

Do you care about your customers, and show this through your marketing messages? Are you funnier than your competitors? Do you have the very best customer service known to man? There must be something that you can articulate, which shows that you are better than the next provider of your particular product or service.

Churn is manageable

Hopefully, you have learnt that, while churn is inevitable, it can be reduced and limited. Putting into place any of the ideas above should allow you to limit the number of clients that want to leave your care.

And that word, ‘care’, is important. Find ways to care about your clients more, even just 10% more, and you should find that churn is less of a beast than it is right now.

What is customer churn?

As your business grows and becomes bigger and better at what it does, there is one inevitability that is always lurking just around the corner.

You are going to lose customers.

No matter how hard you work or how amazing your product is, at some point people just won’t come back. They will go and buy from someone else.

While this is sad, and in some cases quite worrying, it is absolutely inevitable. No company, no matter how amazing, can avoid losing customers.

It’s what we refer to as ‘customer churn’. Customer churn happens when you lose customers as part of the natural process of running a business over time.

The difference between successful and unsuccessful companies is whether you allow the churn to get out of control.

A definition

Customer churn is best defined as the percentage of customers who stopped using your product or service during a particular time frame.

This means the number of customers you lost during the last financial quarter, as a percentage. Or the lost customers in 2018. Essentially, it’s a percentage figure that gives you an idea of the size of the chunk of customers you lost during a certain time period.

To work out your customer churn, simply divide the number of customers you lost in the time period (say a month) by the number of customers you had at the start of that time period.

Kind of like this, really (with thanks to Adrian Swinscoe)

I am hopeless at Maths, so I found this really handy churn rate calculator, which not only works out the churn, but also how much it costs your business.

So why do this?

It’s easy to dismiss losing a small percentage of income every now and then, but if you continually use a churn rate calculator, as a freelancer or small business, you will soon see how important it is to reduce churn.

I have talked about how important it is to hold onto customers (and that is, basically, what this blog is all about), and customer churn is a great and useful way to highlight the impact of not doing that. Reducing your churn rate is a really big part of your success.

If you have a high churn rate, attached to a significant loss in revenue every month, for example, you’re failing. It means that your work is not good enough to make people keep giving you money for it.

Seriously, that’s what it means.

If you’re a freelance writer and you land a great client that has plenty of work available, and you lose them within a few weeks, what does that tell you?

In addition to that, a high churn rate should be a strong and urgent warning sign for you. It means you have to improve what you do, possibly on a huge scale. People are simply becoming unhappy with your work.

Of course, you could be a freelancer or small business owner who just wants to ‘bag and run’ clients. One shot work, in other words. But is that really what you want? Is that healthy? What happens when your selling isn’t working out too well one month? It’s a good job your customer churn is low, right?

You get the picture.

Why customer satisfaction surveys are important

If a business is to stand out in today’s hyper-competitive marketplace, it has to excel at customer happiness. This builds the foundations of customer retention, and as we all know, this makes running a business a whole lot easier.

A customer satisfaction survey is an effective way to create future customer happiness. The simple truth is that if you know what customers want, and what they don’t want, you have the ability to make more people happier when they buy from you.

A customer satisfaction survey is a doddle to arrange. Even the most basic customer relationship tools (like Mailchimp) have customer relationship survey options. And then you have your dedicated survey platforms (such as SurveyMonkey) that allow you to ask questions on a large scale.

And if you don’t have access to any of that, you can just create a spreadsheet and send out surveys individually.

But creating a customer satisfaction survey is vital for a number of reasons.

Customers are becoming less loyal

Maybe it’s something to do with the fact that there is much more choice these days, but customers are not necessarily going to stay with one provider or manufacturer time and time again. They can always go online and find a similar product or service that is cheaper or is delivered quicker.

If you have a survey, and you are sending it out to customers, you will get responses that give you clues (or clear instructions) as to how you can make your offering more attractive to them.

You can’t keep hold of them all, but some customers will let you know what it takes to keep them. And they will do it through a response to a customer satisfaction survey.

It feels nice

Again, in the huge and often impersonal online world, having contact with a company on a more human level makes a big difference.

A survey is one extra piece of customer-focused marketing. In fact, throw that slightly cynical last sentence to one side for a moment. A survey is one extra piece of human interaction online. And that one extra piece could mean a customer feeling more connected to your company.

And that means that they will be more likely to stay with you.

About that loyalty thing again

The Harvard Business Review undertook some research back in 2014 that showed that a subscription-based business (as in a membership site or club, or a magazine site) can see massive loyalty as long as customer satisfaction is there.


With thanks to HBR

A customer satisfaction survey measures that customer experience you see on the bottom of the table. If you can use a survey to monitor satisfaction, and then implement actions that are informed by your findings, you’re looking at loyalty.

It’s clear that customer happiness and great customer service bring about loyalty from customers. It’s also clear that acting upon what you discover through a customer satisfaction survey can help to build that happiness.

Even if you’re a freelancer, working for yourself, it takes no time at all to create a good customer satisfaction survey, and the benefits can last for years.

What are some Customer Retention Strategies I can use?

You’re in business, and you know just how incredibly important it is to retain customers. If you’re a CEO or Managing Director, or a senior leader, it’s a topic that will routinely cause you some irritation and stress. If you’re a freelancer or self-employed, it’s probably something that wakes you up in the middle of the night 2-3 times a week (results may vary, but no one is immune).

It’s a major challenge, and if you’re not on top of customer retention, you could quite easily see a significant impact on the bottom line. There’s no way to sugar coat that, it will happen. You may hear ‘experts’ talking about how it’s all about sales and finding new customers. That’s a big part of your success, but it’s a hell of a lot easier to keep customers, loyal customers. Not only do they bring you continuing cash flow, they also become part of your life. Ask anyone who has loyal customers and clients, and they will tell you how great it feels to have people supporting your business.

So yes, customer retention is seriously important. I’ve put together what I like to think is a ‘definitive’ list of strategies you can use to keep hold of customers, and grow with their support and loyalty. It will have gaps, but that’s the nature of customer retention. So expect updates and more strategies in future posts.

So, let’s dig in.

The value of a happy customer

I will go on and on about this for evermore, but a happy customer will help keep your business alive.

With thanks to brandongaille.com

So much important stuff here. But look at the fact about reduction of lost customers. Reducing lost customers by just 5% can result in an increase of profits by up to 75%. And look at how 78% of happy customers simply buy more.

Any business that has customers should be holding on to them with both hands. It should be their absolute mission to keep customers happy and content. And here’s how they should doing it.

A communication calendar

Whether you’re a large business or a small one, having a communication calendar is absolutely paramount. Simply by staying in touch with your current customers, you stay in their mind, and they think of you when they need to buy more, or take buying advice.

It’s dead simple to do. Grab a new spreadsheet on Excel (or any other platform) and simply fill out customer names in fields, and dates on when you’re going to call them next. If you’re going to email them, slot those times in too.

This simple little method should allow you to develop a communications calendar. If you have a CRM, you can use that to automate it and add that level of sophistication. If you don’t have a CRM, just fill out your spreadsheet, and commit to contacting each customer at least once a month. Imagine how cool it would be to get a discount code on your birthday, for example. Or a message to give some exciting news about a service they have been using for months.

Some small businesses and freelancers don’t do this. They are too busy chasing clients.

And then they go out of business.

Stay in touch with clients and customers using a calendar. Remember that 78% of customers who will buy more if they are happy and content. Staying in touch with them will make them happy and content.

Underpomise and overdeliver

Freelancers and smaller business owners can take this idea and make it one of the most effective ways to improve what they do.

If I’m creating content for a client, I always give them a clear and honest date for completion.

And then I make sure I try and get the job done before that date.

It’s not hard to see why this works. If you’re trying to make customers happy, giving them what they’re paying for early is a fantastic surprise. It means you care about them and what they do. And it helps them get their stuff done quicker.

And that means they’ll buy from you again. Wouldn’t you?

Accept customer complaints for what they are

Some companies ignore customer complaints. This is not a good idea. If someone has bought from you and they then complain about the product or the service, this is one of the very best ways to give service. It’s an opportunity.

A customer who complains is a customer that is willing to stay as a customer. If you deal with the issue promptly and to the best of your ability, there is a very strong chance that they will buy from you again.

When a customer complains, they are telling you what they feel strongly about, and what they need as customers. If you ignore it, they will leave and never buy from you again. And then they will tell their friends all about it.

Deal with the complaint, and serve that customer well, and they will tell all their friends about it, and probably buy from you again.

Use your information to improve retention

If you’ve been gathering data from existing, happy customers, you are officially armed with a weapon that will allow you to foster customer retention.

Surveys, feedback emails and and anything else that allows you to see why your happy customers are happy will give you the chance to understand what to do moving forward. If a customer, for example, says that they would like to have faster delivery times, work on that as an improvement area.

This is what your customers want to make their experience better, so you know that if you supply this for them, they will enjoy their customer experience more.

On social

Customer service belongs on social media, and the same goes for customer retention. On your social media accounts, look out for mentions of your company and say thank you when you’re praised or your customer service is praised. This is dead easy to do (a tweet takes seconds) but it builds up that interaction that boosts retention.

Respond quickly

This is linked to the social media thing because so much customer service is happening on social. Basically, this idea involves you responding as quickly as possible to contact and mentions from customers.The quicker you respond, the better the chance they will come back to you time and time again.

Give long-term customers the biggest discount

You don;t have to go overboard here, but you can certainly consider giving larger discounts and gifts to the customers who have been with you the most.

A certain insurance company recently told me that a premium wasn’t going up because I had been with that company for five years. That’s a lovely thing to hear, and it makes you want to stay with a company.

When working with customers, give them what they want, and do the whole thing in a way that shows you care. The happier and more ‘cared for’ that a customer is, the more it is likely they will come back for more.

Customer service on social media

person using black iPad

Customer service is actually very easy to do badly. Try ignoring your customers for a week and see how that one plays out. However, we have seen some excellent examples of high-quality customer service in recent times. These examples generally make life easier for customers.

Morton’s

This brand does a great steak, and they’re well known in the United States for doing just that in the very best way possible. However, they showed an almost supernatural level of delivery when a hungry fan of the steaks tweeted that he would love to have one when his plane touched down in Newark. The whole thing was actually meant as a joke. No company would actually bring a free steak to a fan when their plane landed, right?

Wrong, because Morton’s did. And the fact that it was also presented so well is only part of the amazing customer service story here. Morton’s also managed to give him some shrimp and bread, as well as everything else that makes a great steak so wonderful. The whole thing was done in less than three hours and delivered by a guy in a tuxedo. 

This is obviously a one-off (we don’t recommend you try it again, they probably will just laugh), but the fact that the community manager of Morton’s Twitter team saw the tweet and thought it would be a great idea to fulfill the fan’s wishes is something pretty awesome. And of course, on top of all of that, it also brought a ton of kudos on Twitter.

A Masterpiece Of Social Listening

Social listening is a big part of customer service and you should never forget that. Delta hotels saw a tweet from a guest who loved his room but hated the view. Unlike the previous entry on our list, the guy wasn’t asking for anything. He just wanted to explain how he felt about the view. He didn’t even tag the hotel.

Within one hour the hotel responded with a room that had a better view. On top of that, a handwritten card greeted the guest in his new room. All of this happened via Twitter. And it all happened because Delta had a team that knew the benefits of social listening.

Big And Clever

Xbox is huge. It has become a major part of the lives of many people, and one of the reasons why it makes so many people happy is that it is huge. So it could be excused for messing up on customer service now and then. 

However, it continues to show that it knows just how to do it right. A recent episode involved them managing an issue that a Twitter user had and then following up nine days later. This showed amazing levels of customer service, especially when you realise that Xbox handles hundreds of interactions a day. It has a team of nearly 30 Twitter workers though, so that kind of interaction kind of makes sense.

Nike

unpaired red Nike sneaker

Not the world’s smallest brand, we’re sure you’ll agree, but still pretty capable of delivering awesome customer service. 

A recent episode involved Nike taking a complaint from a customer who had made a genuine error but thought Nike was responsible for the issue. It was the customer’s fault basically, and the guys at Nike knew this. 

They still treated the customer with complete courtesy and respect. Even after they found out that their problem was actually nothing to do with them, they still tweeted out their best wishes to the customer.

That’s simply an example of treating the customer like royalty even if the problem is not one your brand created.

Jetblue

An airline of some years, Jetblue is not jaded. In fact, it has a strong reputation for great customer service on Twitter.

This was perhaps best exemplified when a customer had a dud TV on his flight so he couldn’t watch anything. Within half an hour, the ever-watchful team at Jetblue had secured credit for him against the cost of renting the service. It was incredibly responsive, and effective. On top of that, the thankful customer’s tweet was respectful and grateful. Just what customer service teams need.

Oh, and one more thing

All of this happened on Twitter. That’s because Twitter is becoming the best place to ask for and receive customer service. It’s quicker than pretty much anything else (save instant messaging) and it allows a strong customer service team to get in touch with people quickly. 

So if there are any lessons to learn here they involve listening (always) and being as helpful and proactive as possible. The examples here show that customer service can be done well on social, as long as your team is trained, alert and focused on what the customer wants above everything else.

What is the difference between customer service and customer care?

gray computer monitor

Any good business wants to take good care of it’s customers. And that’s great. But if you’re starting out in business, it’s easy to become confused about the two main areas of customer contact, customer service and customer care.

Why is it important to know the difference?

There are a couple of reasons really. But the main issue is the difference itself. Once you know the distinction between customer service and customer care, you can improve your delivery in both areas, strengthening your connection to customers, and helping your company grow.

So what is customer service?

This is perhaps best explained as being the advice and assistance you give to a customer. It most often comes into play after a sale. For example, when someone buys a laptop, and there are issues with the laptop, they contact customer service for technical support and overall product support.

Thanks to B2C

The infographic above perfectly illustrates the value of good customer service. Picking out just a few key points from it shows just how fundamental it is to good business.

For example, the finding that 91% of unhappy customers will not do business with your company again is both shocking and educational. It helps us understand the value of what happens after a sale, when customer service kicks in. While it is true that customer service is happening before a sale, it is most often post-sale, when questions are answered and problems are dealt with.

The infographic also discusses the top three drivers for good customer service, the three most compelling reasons for getting that service right. They are:

  • Improve customer retention. If you serve them in a positive and effective way, they are more likely to stick with you
  • Improve customer satisfaction. Ever had great service and told a friend about it? Exactly
  • Increase cross-selling and up-selling. Post the sale, if a customer is happy with the support and service she receives, she is more likely to buy more

And customer care?

Customer care is what happens while interaction and engagement with the brand is taking place.

If a sales rep or consultant is truly attentive, listening carefully and fully focused on the conversation he is having with a prospect, this will be ‘felt’ by that prospective customer. It’s the opposite of the old concept of a pushy salesman. People, now more than ever, want to feel like they can trust a person who is in a position to sell to them.

And in the best examples of true customer care, an emotional connection is established. This may be a simple feeling that the needs of the customer are being met in a genuine way. It literally means that a customer feels they are being cared for and cared about.

“Instead of focusing on the competition, focus on the customer.”

Scott Cook

By thinking about what the customer wants, rather than what we want or the pressures we face for a sale, we are showing we care. This simply strengthens the relationship.

Two different concepts, then

They are two distinct concepts, but knowing the difference means that you can have two distinct approaches to what happens before and after a sale. Make both approaches strong, and you have a pleasant and rewarding customer journey for both you and the client, putting the customer first, always.