Sarah has been a loyal customer for years, managing and storing critical business files on your platform. But lately, things haven't been running smoothly - uploads are sluggish, syncing takes forever, documents are hard to find, and the user experience is no longer intuitive. 

The result? 

She decides to stop using your services and switches to your competitor.

This is the reality of customer churn.

This happens when long-time clients like Sarah, who once subscribed to your products or services, start taking their business elsewhere. You’ll also notice that despite a steady stream of new customers, the overall growth is still not changing because existing customers aren’t renewing their subscriptions. 

High churn rates can significantly impact a company's revenue. 

To help you understand customer churn and how you can easily reduce it and set up your business for growth, we’ll take a closer look at this and more:

  • The causes of customer churn
  • How to effectively reduce customer churn
  • The importance of technology in helping you retain customers  

Understanding Customer Churn

Customer churn, or customer attrition, is the rate at which you lose customers over a specific period. This can manifest in various ways, such as customers canceling subscriptions, closing accounts, or simply ceasing to make purchases. 

Churn is a critical metric for any business because it directly impacts growth potential.

That being said, every business undergoes some form of churn. A report on The State of B2B Account Experience showed that some industries can have a churn rate of as high as 56%.

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Additionally, a 2023 research by Recurly Research revealed that subscription businesses have an overall monthly churn rate of 4.1%.  

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Higher churn rates can indicate underlying issues within a business, such as poor customer service, inadequate product features, or competitive alternatives.

Here's why focusing on reducing customer churn is critical for business growth:

  • Cost-effectiveness: It can cost four to five times more to acquire new clients than to retain existing ones. Think of all the customer acquisition costs that come with marketing campaigns, sales efforts, and promotional incentives to attract new customers. By addressing churn, you have more resources to be reinvested in business growth activities.
  • Predictable revenue stream: A stable customer base = predictable revenue. When customers leave unpredictably, it becomes harder to forecast your potential income and plan for the future.
  • Improved customer satisfaction: Why are your customers leaving? Once you address the root cause of the churn, you can tailor your products and services to their needs, boosting the overall customer experience.
  • Positive brand reputation: Satisfied, long-term customers are more likely to become business advocates who refer new clients. On the other hand, high churn rates can damage your reputation, especially when unhappy customers share their negative experiences. 
  • Customer lifetime value (CLV): Loyal customers typically generate more revenue over time through repeat purchases and additional services. This increases the customer lifetime value and maximizes each customer's revenue potential. 

Measuring and Monitoring Churn Rates

The customer churn rate is calculated by dividing the number of customers the business lost during a given period by the total number of customers at the start of that time period. 

The churn rate formula is: (Number of customers lost ÷ Total customers at the start of the period) x 100

Let’s say you started June with 200 subscribers and ended the month with 180 subscribers - meaning you lost 20 accounts. 

Here’s how to calculate the churn rate:

  • 20 ÷ 200 =0.1
  • 0.1 x 100 = 10% 
  • Your churn rate for June is 10%.

Besides customer churn rate, you should also calculate your revenue churn rate. 

This metric calculates the percentage of lost revenue due to customer churn, providing more insight into the financial impact of churn.

Calculating churn once is not enough; you need to monitor churn over time to identify the trends. 

Is it a seasonal or a persisting issue? 

This allows you to identify potential problems before losing customers. 

To effectively monitor churn rates, you can use customer relationship management (CRM) software or platforms that calculate churn rates and provide insights. These tools allow you to focus your resources on the areas that need the most attention.

Causes of Customer Churn

Churn can be voluntary - when existing customers choose to stop subscribing to your service and products or involuntary - due to reasons beyond their control. Understanding the causes can help you analyze customer satisfaction metrics.

Here’s a look at the most common causes of customer churn:

  • Poor customer onboarding experience: Onboarding is a critical customer success metric. It influences how long the customer stays with the company. Customers who don’t achieve early success with a product are likely to churn.
  • Your product or service has issues: Customers are looking for solutions. If your product or service lacks the key features or is unreliable, you’re more likely to lose customers to your competitors. 
  • Poor customer experience: Is your interface easy to use? Is your customer support team readily available? All these factors can quickly lead to frustration and customer churn. Keep in mind that 64% of customers would easily switch to a competitor after a poor experience.
  • A pricing disconnect: Customers will walk away if they feel your product or service is overpriced compared to the value it delivers. This could be because of hidden costs, features that don't justify the cost, or a competitor offering a more attractive package. 

How to Identify and Predict Customer Churn

While customer churn can occur at any moment, there are preventive measures you can take to help you retain an existing customer. Here are some strategies to help recognize potential churn risks and take proactive measures:

Monitor Customer Activity

Customer behavior communicates a lot. The first step is to analyze user behavior for signs of potential churn. 

So, how can you identify these signs? Look out for: 

  • Reduced login frequency
  • Declining product or service usage
  • Changes in purchasing patterns, such as smaller transaction sizes or shift to a lower pricing plan

This way, your customer support teams can intervene before the customer completely abandons the product or service.

Track Customer Satisfaction Metrics

Monitoring customer satisfaction metrics allows you to understand how customers feel about services and products. You can then use this information to improve your offerings and enhance customer satisfaction. 

The best way to do this is to gather feedback through surveys and check the net promoter score (NPS) and customer effort score. These metrics gauge customer loyalty. For instance, low NPS scores or negative feedback can indicate a heightened risk of churn.

Consult Your Customer Support Teams

As the first point of contact, your customer success team has first-hand information about what customers need. They resolve issues and listen to potential complaints, which puts them in a better position to identify potential churn.

The team can identify these customers by:

  • Analyzing support tickets and existing customer service calls to identify at-risk customers.
  • Scheduling regular follow-ups with customers to gather information

This approach helps identify customers who may require additional attention.

Use Churn Analysis Tools

Sometimes, you need the right software and tools to identify patterns and predict churn. Advanced analytics tools like CRM systems use data analytics, machine learning, and customer behavior tracking to provide actionable insights.

Once you have the information, you can proactively contact customers with personalized offers or support.

Key Strategies to Decrease Customer Churn

Every business faces customer churn. However, with the right approach, you can address the potential causes and overall customer experience. Here are the key strategies to help you decrease customer churn:

Improve The Onboarding Process

Think of all the activities you implement once you sign up a new client. This process is important because 74% of potential customers will opt for alternative solutions if the company’s onboarding process is too complex.  

A streamlined onboarding experience ensures that new customers quickly realize the value of the service or product. This should include:

  • Personalized onboarding: Personalized emails, tutorials, and check-ins during the onboarding process make new users feel valued and understood.
  • Clear instructions: Provide step-by-step guides, video tutorials, and interactive walkthroughs to help customers get started easily.
  • Early success: Focus on helping customers achieve their first success quickly.

Enhance Customer Support

For starters, you can build a customer self-service knowledge base with how-to guides and tutorials on your products or services. This way, customers can get the information they need much faster.

Additionally, empower your team to resolve issues efficiently and go the extra mile to keep customers satisfied. A well-designed knowledge base can provide all the information they need to address customer issues promptly. 

A responsive customer support team is a lifeline for frustrated customers. It’s the perfect solution to boost customer retention. 

Implement a Customer Feedback Loop

Feedback provides insights that allow you to continuously improve your products and services. A typical customer feedback loop looks like this:

  • Conduct regular surveys: Use NPS and customer satisfaction (CSAT) surveys to gauge customer satisfaction and identify areas for improvement.
  • Take actionable steps: Analyze the feedback received to identify the common pain points and take steps to address them. Customers need to see tangible improvements from their suggestions.
  • Close the loop: Follow up with customers who provide feedback, especially those who report issues, to inform them of the steps taken to resolve their concerns.​ 

A proper customer communication strategy creates an effective feedback loop and is part of good customer service.

Personalize Customer Experiences

Gone are the days when customers were targeted using the same strategies. These generalization strategies barely resonate with customers anymore. 

In fact, a Statista survey revealed that 95% of marketers who implemented personalization tactics were very or somewhat successful. 

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Personalize communication, recommendations, and offers based on customer data and patterns. This approach can make customers feel valued and boost brand loyalty.

Offer Loyalty Programs

Imagine you just signed a few new subscribers this month. 

How can you make them feel valued in the first weeks?

Consider offering loyalty programs to incentivize customers to keep paying for your products and services. Additionally, consider exclusive benefits that can boost customer retention, such as early access to new features for loyal customers.  

If you have customers approaching the end of the subscription period, you can also offer a special discount rate to encourage them to renew. This encourages continued use of your products or services and strengthens brand loyalty. 

Proactive Customer Engagement

The role of your customer success team involves ensuring that your clients are always engaged. 

Instead of waiting for the customers to come to you, proactively engage with them through personalized communication and educational content.

One of the ways to be proactive is by automating your customer service efforts. This involves:

  • Implementing a comprehensive knowledge base that manages all user documentation, FAQs, and tutorials.  
  • Setting up advanced AI chatbots that learn from your customer interactions.
  • Utilizing a customer self-service software that empowers customers to get answers independently.  

Furthermore, it’s good customer service to constantly communicate about the new features and product offerings or tips to help them get the most out of your product. Once inactive customers start showing decreased activity, re-engage them to find out if they have any issues.  

This approach keeps your brand top-of-mind and demonstrates your commitment to their success, reducing churn.

How To Leverage Technology to Reduce Churn

Technology has a huge impact on business operations today. A report by the U.S. Chamber of Commerce reveals that 95% of small businesses have adopted at least one technology system.   

These same tools are essential when trying to reduce customer churn. Let’s take a look at how technology boosts these efforts: 

Customer Relationship Management (CRM) Systems

Imagine having a system that remembers your customers' past purchases, preferences, and interactions - that's the power of a CRM system. They centralize customer data and provide insights into customer behavior, which enables the business to:

  • Personalize communication based on the customer's history
  • Track customer activity and identify disengagement early, allowing for timely intervention.
  • Automate follow-ups to reduce the risk of churn 

Knowledge Base Software for Self-Service Support

One of the most important requirements for customer support today is fast response times.

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Your knowledge base software is the ideal self-service platform when your customers just want a quick answer. It offers a readily accessible library of articles, troubleshooting guides, FAQs, and tutorials. Think of it as a 24/7 support agent, empowering customers to find solutions independently.

Customers who resolve issues independently are more likely to be confident using your product, leading to higher retention rates. 

AI-Powered Predictive Analytics

Beyond traditional technology systems, businesses are shifting to AI tools to proactively improve efficiency. 

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AI-powered analytics can predict customer churn before it happens. This happens because machine learning algorithms provide insights into behavior patterns and engagement metrics.

Once you have this information, you can make data-driven decisions, such as reaching out to at-risk customers through personalized efforts. In addition, the AI systems create an environment of continuous learning to help you improve engagement and reduce churn.  

Common Pitfalls to Avoid When Tackling Churn

Addressing customer churn can be a challenge for most businesses. Here’s a breakdown of the most common pitfalls to avoid if you want to retain your customers. 

  • Using a reactive approach: Many businesses only react to churn after it happens - missing out on valuable insights. Proactive churn management involves analyzing customer behavior and identifying early warning signs. 
  • Ignoring the "Why": Besides your churn rate, do you understand why customers are leaving? Conduct exit surveys and analyze customer support interactions to identify and address pain points directly and prevent churn in the future.
  • Failing to monitor and act on churn metrics: Regularly tracking key metrics such as customer churn rate, revenue churn rate, and CLV helps you understand trends and implement corrective measures.  
  • Neglecting user feedback: Customers who feel unheard or undervalued are more likely to switch to competitors. Once you collect feedback, ensure that you implement the changes. 

How Helpjuice Can Help Prevent Customer Churn

The right tools will boost your customer retention efforts. Helpjuice is a resourceful knowledge base software that organizes and centralizes all company information.  

The self-service options make it easy for customers to find answers, eliminating the need to contact customer support teams. With the help of an intuitive AI-powered search, customers can consistently access relevant results. 

Helpjuice understands that proper documentation is important. Users leverage these features to keep customers onboard. 

Here’s a good example:

Thanks to Helpjuice, Hack The Box reduced customer churn by 20%.  

The journey to finding a knowledge base to document and store all internal processes and procedures led the company to HelpJuice.

“During the customer interaction phase, we've reduced customer churn with HJ by 20% by having a well-documented platform. We've reduced our incoming support tickets by 15% and avoided repetitive, simple questions about the platform's functionality.” - Customer Operations Manager"

All the technical and operational documentation became more accessible, reducing the number of unnecessary interactions. 

Helpjuice provides extensive customization tools that allow you to create customer-facing knowledge bases to make information accessible to customers. 

Want to enjoy similar benefits? 

Sign up for a free demo of Helpjuice