How do you reduce customer churn?

Customer churn is the bane of many business lives. Churn rate is a measure of customer attrition, and is defined as the number of customers who discontinue a service during a specified time period divided by the average total number of customers over that same time period.

 

In the UK, the average churn rate is almost 20% (Royal Mail Data Services, February 2016). That means 1 in 5 customers will leave your business for a competitor this year. It’s one of the highest average rates in the EU.

 

45% of marketers in that Royal Mail survey said that replacing lost customers was their biggest challenge. As a result, businesses end up spending a fortune on marketing to attract new customers to replace the churn.

 

Instead of spending so much on finding new customers, what can we do to stop the churn? That’s the problem I would want to solve if I was churning customers. But how do we do that?

 

8 Steps to Reducing Customer Churn

 

  1. Create a Team to investigate the churn. Include people from throughout the organisation. Every department and rank should be involved in this, not just ‘the management’.
  2. Speak to customers and find out what’s making them leave. As well as existing customers, speak to some who’ve already left. Don’t be defensive, listen to what they tell you. Empathise with them, see it from their perspective.
  3. Once you’ve spoken to enough customers, get everyone together and start to discuss and analyse the results. What are people saying? Is there a consistent theme? Maybe there’s more than one? Continue to empathise with the customer and don’t make any assumptions.
  4. Define what the core problem is. There may be more than one, that’s okay. Write a ‘problem statement’, so that you are clear about what you’re going to solve. You may need to gather more data to be able to do this. Again, that’s fine, go back and do this. It’s important not to rush this stage if you’re going to solve the problem(s).
  5. Next, start generating ideas for how you could solve the problem. This could be done via a brainstorming session. We use post-it notes for this, and keep the session to an hour, 90 minutes maximum. It’s about generating as many ideas as possible – the crazier the better! See if you can generate 100 ideas in that hour.
  6. Sort the ideas into possible solutions and start developing out a handful of ideas that could work. You’re then going to prototype and test those ideas with your customers. The great thing about involving customers in this process is that it stops you making assumptions. They’ll tell you what they think. Honestly. You’ll also get valuable feedback that you can use to iterate and develop the ideas. They feel hugely valued, so you generate a lot of goodwill by doing this.
  7. You’re now at the point where you have some solutions to the problem that you’ve tested and refined with customers. It’s time to implement them! Get them out there, embed them in your systems and processes. Start making a difference.
  8. Hey Presto! Your churn rate will start to go down. Losing customers will be a thing of the past!

 

This approach does even more than just reduce churn.

 

Not only are you solving customer problems and stopping the churn, you’re also doing this as a team.

 

That’s hugely powerful and has a knock-on benefit to the business. Your staff now feel more valued, they’ve helped to design solutions to customer problems. Their voice has been heard. They’ve made a difference.

 

It’s a win-win situation! You reduce customer churn, increase staff engagement, both of which contribute positively to the bottom line. Now you can embed this approach within your business and start solving all sorts of problems.

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