Reducing Customer Churn- Understanding & Improving Your Churn Rate

For businesses that rely on a recurring or subscription service model, customer churn is a serious issue. Churn, or customer attrition, occurs when customers or subscribers cancel your service or let their subscriptions lapse – no small problem when one considers that the cost of generating new customers is five times that of retaining an old one.

All things considered, reducing churn rate (the percentage of total customers who drop off in a given time period) should be a major priority for anyone with a subscription service model.

What are Some Common Reasons for Customer Churn?

In a nutshell, the only real reason customers cancel a service is because they don’t feel they’re getting their money’s worth. But the reasons for this can be many. Some common reasons customers might feel this way include the following:

  • The service lacks features that they need, or thought it included when they signed up
  • The service’s features don’t perform up to the customer’s expectations
  • Poor customer service or support
  • Cost issues (service is too expensive, customer’s budget has changed, etc.)

While the examples above describe reasons for voluntary churn, you may also experience involuntary customer churn, when a customer can’t continue your service (death, retirement, relocation) or lets it lapse accidentally (didn’t update credit card info). There’s not a lot you can do about customers who can’t continue your service, for handling the latter try checking out our blog post on dunning management.

Ways to Reduce Customer Churn

Reducing churn rate is about specifically addressing the reasons for each customer’s departure, and that means actively communicating with them. Call customers who cancel (yes, on the phone), and ask them why they’ve cancelled. Take what they’ve said and if possible try to rectify the situation. There’s often a window of time between when a customer cancels and the actual point where their service expires – that’s the best time to reach out.

Let’s take a closer look at some of the reasons we looked at above and talk about how to address them.

Problem #1: Service Lacks Key Features

If a customer claims that your service lacks a feature they’re looking to it for, there are two possibilities: your service actually lacks that feature, or it doesn’t and the customer just doesn’t know it. In the latter case, you can simply inform them that your service includes that feature and sign them back up. If your service genuinely can’t offer them what they’re looking for, consider adding that feature in the future (especially if multiple people offer the same grievance).

Problem #2: Features Don’t Perform up to Snuff

If a customer is generally underwhelmed by your service’s performance, get some details and ask how they’re using it. The case may simply be that they’re using it poorly or are missing out on key features. Again, if you begin to notice a pattern of drop-off customers citing poor performance, it might be time to punch up your service itself.

Problem #3: Poor Customer Service

Customer care is absolutely essential for any business, but especially those that offer a service rather than a physical product. Ask the customer if they’re referring to a single instance or a recurring pattern of poor service or interaction. Take what they tell you to heart, and promise to specifically address their issues – not just for them, but across the board.

Problem #4: Cost

If a customer simply thinks they’re paying too much, or have new restrictions on their budget that affects their ability to pay, consider offering them a special discount, either temporary or ongoing. This might not sound ideal, and you definitely don’t want to make a habit of haggling with every customer who walks out the door, but considering the long-term value of retaining customers, it can be worth it.

Extra Tip: Be Proactive

It should go without saying, but don’t wait until customers cancel to take this advice to heart. You should always be adding new features and upgrading the quality of your service, and letting your customers know about it. You should always provide great customer service. You should always be sending out calls and emails asking customers what their experience with your service is like, and how it can be improved. You should always be conscious of price point and service tiers.

Now That You Know How to Reduce Churn, Do You Have the Tools to Follow Through?

This all sounds like a lot, we’re sure, and that’s because it is. That’s why you need to have the right tools to make the job of delivering your customers the best service you can as seamless as possible. That’s were Subscription DNA can help.

Subscription DNA is a cloud-based subscription billing and membership management platform that can help you to reduce churn by offering easy, versatile payment options, powerful communications tools to help you keep in touch with customers (and vice versa) via emails and secure portals, and more. If the system you’re using doesn’t live up to Subscription DNA, consider making the switch and get in touch using the form below.