October 3, 2018 Last updated October 3rd, 2018 2,779 Reads share

10 Unknown Reasons for Customer Churn and How to Avoid Them

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There is nothing more frustrating for organizations than losing clients. Customer attrition slows down business growth and entails huge extra charges on acquiring new buyers. So reducing churn should be a top-priority task for any business, from startups to industry leaders.

Dealing with companies worldwide, we often hear about the attrition issue from our partners and clients. Being in business for five years already, we’ve also lost long-term customers ourselves.

Every such loss prompts us to revise business processes and invest more in strengthening relationships with clients. For example, we’ve introduced communication skills training for our engineers to ensure smooth interactions with customers. It’s worth spending time and money on, as our customer retention rate has noticeably increased.

Client Loyalty Benefits

How much does client loyalty enhance business success? Let figure out the answer to this question:

Customer retention is five to 25 times cheaper than customer acquisition.
40% of profit in e-commerce is generated by return customers, who account for 8% of all visitors.
5% increase in customer retention raises profits by 25% to 95%, depending on the type and size of the business.
After their first purchase, there is a 27% chance of a customer returning; after their second purchase, this rises to 57%.
Clearly, the benefits from existing customers are significant. So what deprives you of this “bread and butter”?  Unsatisfying quality and non-competitive prices are among the most significant reasons for brand-switching. However, you should look beyond the obvious.

Based on our experience and the findings of global surveys, we’ve pinned down 10 lesser known sources of clients’ disappointment that you should eliminate as soon as possible.

#1. Poor Onboarding

You’ve got people to buy your product, to download your app or to sign up for your service? Great. Now you face the next challenge: how to prevent initial churn. It happens somewhere between two important milestones:

1) When a customer acquires your product.
2) When a customer starts receiving the first benefit from their purchase.

The time span between the two events is called onboarding, while by benefit we mean a wide array of things, from pure joy of possession to financial gains.  If customers fail to recognize the value of your product, they will consider it useless, ineffective, confusing or just plain boring. So the second event will never occur.

Your task is to educate a purchaser on how the product will make their life better or help them solve problems. For instance, you can share a video explaining all the key features of your app in detail, or showcase success stories of real clients wearing your apparel. Smooth and informative onboarding will add value to your company, turning impulse customers into loyal ones.

#2. Broken Promises

You put yourself at risk of churn when setting customer expectations too high. For promotional purposes, companies offer artificially low prices, fantastically fast service, and other lucrative terms (which are, in fact, too good to be true). No wonder that after a while businesses seem to forget their words, insulting trustful clients and driving them straight into the arms of business rivals!

Objectively, your product can be wonderful and even much better than the one proposed by competitors, but consumers won’t appreciate the advantages if they feel cheated. So, it’s much better not to make promises you can’t keep. Adjust customer expectations to your real capabilities and make sure that you stick to your initial statements.

#3. Slow Loading App/website

“Silent killers for business” — that’s what researchers called slow websites. A global online survey revealed that 73% of Americans and Brits would rather switch to a competing brand than tolerate a poor page loading speed. Only 2% of the 3,200 adult respondents from the UK and US said that website speed was of no importance at all to them.

Users set even higher standards for mobile sites. 53% of visitors abandon a page if the load time is longer than 3 seconds.

#4. Product Bugginess

In his book “IT Strategy for Non-IT Managers”, professor Amrit Tiwana says that developers make 10 to 15 mistakes for every 100 lines of code. As a project grows larger, the number of bugs and the price of failure increase. Bugginess manifests itself in stalled business processes, malfunctioning equipment, canceled meetings, and lost sales and deals. According to Tiwana, “The solution is not better humans (who create software) but better processes that bake in quality”.

Here we come to the importance of investing money in quality assurance. Buggy software costs you more than money – it costs you customers and reputation. In contrast, when you place greater focus on testing, you send a clear message to clients that their satisfaction matters more to you than pure profit.

#5. Feedback Delay

Speed is essential when it comes to feedback. On average, people have to wait 12 hours and 10 minutes for email replies from businesses. Meanwhile, 89% of clients would like to get answers within one hour. Customer expectations for world-class service are even higher. In this case, a response should be given in 15 minutes or less.

Delays lead to frustration and eventually cause people to opt for more active vendors. To put it briefly – you snooze, you lose.

#6. Avoiding Apologies

Customers want their problems to be resolved, but, above all, they want to be heard and respected. 40% of consumers worldwide feel annoyed when an employee switches the conversation from their actual complaint to another topic. If they are dissatisfied, people most of all expect companies to apologize, while fixing the problem takes fifth place in the list of expectations.

The art of saying sorry looks priceless in view of research by The Nottingham School of Economics. It found that 45% of customers are likely to withdraw their bad comments after receiving an apology. Meanwhile, compensation has the same effect on only 23% of clients.

#7. No Care After Selling

Only one out of 26 unhappy clients will share bad experience directly with a company’s representative. They are much more likely to comment on your product on social media sites, forums, and elsewhere online. A lot of dissatisfied customers don’t complain at all — they just leave.

To make sure that everything is all right, you should follow up with buyers within two to four weeks after their purchase. Ask them for feedback on the product. Then, contact customers via email, push notifications or any other channel from time to time, informing them about new products and changes you’ve implemented.

#8. Lack of Exclusive Offers

Good waiters greet repeat customers by name and recommend something to their taste. This level of personalization causes people to come back and order more.

Effectiveness of this proven old-school strategy is evident. Yet, sometimes brands lose sight of it and, as a result, fall short of consumer expectations.

Recent online research by Epsilon reveals that 29% to 45% of websites/mobile apps rarely, if ever, motivate consumers with customized offers. At the same time, 80% of respondents admit that they would rather buy from companies who create a personalized experience. This includes special discounts, customized tips and recommendations, tailored updates, and more.

#9. Ignoring the Power of Small Lagniappes

Merriam-Webster defines “lagniappe” as a small gift given to a customer by a merchant at the time of purchase. The term comes from the southern U.S. and refers to a little something extra you present your client with. It can be inexpensive keepsakes, a month of free service, free shipping, branded cookies or gift cards.

Not all customers appreciate this approach, but those who do will come to you again and recommend your company to other people.

Similarly, your competitors can use the “small extra” concept to steal your clients away. Be careful not to give them this chance.

#10. Too Much Advertising

There is a fine line between caring and intrusiveness. Nobody likes being bothered by nonstop emails or ad campaigns every day.

Again, it’s your job to track whether some of your clients are interested in your offers at all. Do they open emails and click on links? If the answer is no, you should stop sending them similar messages. Otherwise, you’ll create a negative impression of your company.

Try to learn more about your buyers – monitor their purchase behavior, examine what and when they buy. Contact them less often, but with more tailored proposals.

If a client leaves you in spite of all your efforts, ask them why they are no longer happy with your product/service and how you can change for the better. It won’t bring your customer back, but such exit interviews give you valuable information about people’s needs.

So, What’s Next?

Of course, this list is far from complete. Reasons for churn can arise at every step of the customer journey. Sometimes there’s nothing you can do about it. People may just quit the market you are in – for example, parents will cease buying toys when their kids are grown up. However, clients’ satisfaction (and hence, their loyalty to your brand) is mostly within your control. Never take your repeat purchasers for granted, and never stop learning what else you can do to make them happier. Keep exploring their expectations, problems, and tastes. Reach them to talk about what about your products and services they would like you to improve. Thus, you’ll be able to address potential triggers of churn at early stages and give customers more reasons to stay with you.

Maxim Vasiliev

Maxim Vasiliev

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