The untold love story between churn and customer feedback loops
Customer churn can be a nightmare, but controlling it is key to the long-term survival of your business. Why? Because repeat customers lead to higher profits for your business as they are associated with higher sales.
As a matter of fact, according to the Harvard Business Review, only a 5% increase in your customer retention rates, enhances a 25% to 95% rise in your business profits.
Furthermore, a study by the CMO Council reveals that customer churn leads to a 59.9% revenue loss, a 39.6% profitability reduction. And raises your marketing and re-acquisition costs by 36.3%. Thus, this reveals the need to control your customer churn.
What is customer churn?
Customer churn refers to the number of customers who leave your business in a given period. Customers that lose interest in your products or services over time and move on.
Customer churn is calculated by subtracting the number of customers you have from the number of customers you started with in a particular time period.
Say you started the year with 1000 customers, but at the end of the year you only have 800. 200 customers have dropped off along the way for different reasons.
Churn happens for various reasons. Ideally, you want to close the loopholes that push customers to leave your business.
Let's take a look at the leading causes of customer churn you need to pay attention to. I'll also go over how closing customer feedback loops helps reduce and predict customer churn.
Three lead causes of customer churn
1. Delayed Feedback
Customers need quick responses every time they engage with your business. If you can’t respond fast, then your customers are more likely to move on. So you need to act quickly on their feedback and resolve their issues.
Think about this: a customer wants to purchase your product and needs it urgently. They enquire about the price but get no response. Another business with the same product gets back to them quickly, and you lose the sale.
In fact, a Forrester study reveals that 57% of customers abandon their purchases if they can’t receive quick answers to their enquiries. What does this mean? Your customers move on to your competitors who have a quick turn around.
Want to know the worst part? Delays cause frustrations for customers. They opt to shift to other businesses with faster response rates and may never return.
2. Poor customer service
Customers point out poor quality service as one of the major reasons they leave a business. Just one bad experience with your company may prevent them from ever returning.
Imagine a customer complaining about defects on a product they bought. And instead of apologizing, you just ask why they never checked the product before taking it.
That’s not good enough for your customer - it’s your responsibility to ensure that your products are fit to be sold.
And here’s the truth; Oracle’s Customer Experience Impact Report reveals that incompetent and rude staff, plus unbearably slow service are major reasons customers churn a business.
3. Low Levels of Customer Engagement
When you don’t keep in touch with your customers, you lose out. Why? Because they leak out of your sales funnel to other businesses: today's market is highly competitive.
But here’s the thing: track customer engagement and proactively reach out to customers who seem dormant. Find out why they are silent. Lead with new offers or by requesting feedback.
Most customers go silent, and it’s only a few customers who usually provide feedback. Keeping your customers engaged helps to prevent churn!
How Closing Customer Feedback Loops Reduces Customer Churn
1. Identifies Customers at Risk of Churn
With customer feedback, you can identify customers on the verge of leaving your business. Wondering how? You look out for customers who develop behaviors similar to those who previously churned. Or those who raised serious issues you need to handle urgently.
This helps you to act fast and solve customer issues on time before they leave.
In our own case study on Greyhound, Senior Customer Insights Analyst Matthew Schoolfield reveals how they were able to identify that customers in New York getting frustrated when waiting for a late bus.
They needed to focus more of their time and efforts toward solving this issue to prevent customer churn.
2. Keeps Customers Engaged
Responding to your customer’s feedback meaningfully keeps them engaged with your business all the time. And this gives you the golden opportunity of upselling to them more of your products or services.
Use your customers’ input to improve your product, and keep them updated on developments like new products or system upgrades. This keeps you first on customers’ minds every time they need to make a purchase.
Wondering why? Because it shows you value their input and satisfaction.
Best of all, highly engaged customers have higher chances of giving your company their long-term loyalty.
According to a study by Rosetta Consulting, highly engaged customers are 5 times more likely to purchase from the same brand in future than those less engaged.
3. Taps into the Customer Voice
Closing customer feedback loops helps you to listen to your customer’s voice and act accordingly. Wondering how? It enables you to identify your customer’s key pain points and handle them, achieving customer happiness.
Esteban Kolsky, founder and principal of Thinkjar, reveals that you can prevent 67% of your customer churn if you solve customer issues at the first engagement.
Furthermore, 11% of customer churn can also be prevented if your business reaches out to customers.
4. Optimizes Your Customer Support Performance
Your support team is your company's representative and must be able to serve your customers to their satisfaction.
So, with customer feedback loops, you win the golden opportunity of weighing your support team’s performance and knowing your customers’ experiences with them.
This helps you to highlight the great things your support team does for customers, and identify their weaknesses and solve them. You'll know exactly where to focus for better performance.
Winning long-term loyalty and predicting customer churn
The 2018 ROI of Customer Experience Research by Temkin Group shows that the correlation between customer experience and repurchasing is high. So, typical $1 billion companies across 20 industries on average can gain $775 million over three years.
This is after investing in customer experience.
And guess what? The secrets to improving customer experience are:
- Collecting customer feedback
- Identifying customer key pain points
- Taking action by solving customer issues
“Your most unhappy customers are your greatest source of learning.” Bill Gates