Three Ways to Help Stop Customer Churn

You probably know how important it is to convert a one-time buyer into a repeat customer because it costs you more to obtain new customers than to retain existing ones. According to the Harvard Business Review, depending upon your industry, it is up to 25 times more expensive to gain a new customer than to keep an existing customer happy to do business with you. Not only does customer retention cost less, but it also gives a tremendous boost to your bottom line.

According to international management consulting firm Bain & Company, increasing customer retention by 5% can lead to a 25% or more increase in profits. That is why reducing customer churn is so important to your company’s long-term financial health. Here are three suggestions to help you accomplish that goal.

Thinking about churn and taking preventative action

One of the most difficult challenges in stopping customer churn is determining how best to measure it and when to reach out to customers you think you may be losing. If your business is subscription based, you know when customers leave because they have cancelled their subscription. With a traditional retail business the answer is not always clear-cut.

You cannot have a fixed rule that assumes a customer who hasn’t made a purchase in 60 days has churned. Some customers will make a purchase every week, while some regular customers will only make a purchase every six months. You need to analyze your customers’ purchasing behavior when you make decisions about reaching out to them to prevent them from leaving. Bombarding customers who purchase from you regularly but infrequently with promotional emails can drive them away rather than entice them to purchase more.

Segment your customers by the potential risk of churning

Once you have analyzed your customers’’ purchasing behavior, segment them according to the risk that they may leave. Identify those customers that are beginning to show signs of leaving, those who are likely to leave, and those you have already left. Then you can tailor your promotional emails based on the categories they are in. For example, you could send an email to customers you think may be in the process of leaving thanking them for their business. At the same time you could offer a small discount for making a purchase and a larger discount for customers you think have already left to try to win them back. You could further segment each category by varying the message to customers who purchase big-ticket items or other customer attributes.

Test one message at a time

There are many variables involved in customer behavior and expecting to design a perfect email message for each customer churn segment is unrealistic. Test emails for each risk segment. Slowly amend them and note which versions are most effective at getting customers to respond and make a purchase. Once you know what emails work best you can set up a process to automatically send out an email as customers enter each risk category.

An effective churn prevention program takes time to develop, however, the benefits make the effort extremely worthwhile.