15 Effective Strategies to Reduce Customer Attrition Rate and Drive Business Growth
What will you give to reduce customer attrition rate and drive business growth? While acquiring new customers is important, it’s more expensive than customer retention.
In this article, we explore what customer attrition is, why it matters, and 15 effective strategies for strengthening customer relationships, boosting loyalty, and driving long-term growth.
Overview of how to reduce customer attrition rate
- Customer attrition or customer churn is the loss of a customer(s) by a business.
- Understanding and limiting customer churn improves customer loyalty and the customer’s lifetime value.
- Because it improves your business’ profitability, understanding and reducing churn also gives you a better customer acquisition cost to customer lifetime value (CAC: CLV) ratio.
- Various factors could cause customer churn, including bad product-customer fit, poor user onboarding experience, poor customer service, and weak customer relationships.
- To calculate the churn rate, divide the number of customers lost by the total number of customers at the beginning of that period.
Some effective strategies for reducing customer churn include:
- Personalize the onboarding for new customers to shorten the time to value.
- Use checklists to guide users toward key actions within your app.
- Replace generic product tours with interactive walkthroughs.
- Reduce churn with proactive customer service.
- Offer contextual help with tooltips to improve customer experience.
- Help existing customers master advanced features with webinars.
- Implement gamification to boost customer engagement.
- Retain existing customers with secondary onboarding.
- Prevent involuntary churn with pre-dunning banners.
- Track the behavior of loyal customers and replicate their paths.
- Identify drop-off points with funnel analysis and fix them.
- Collect customer feedback to improve your customer retention strategy.
- Monitor product engagement to identify at-risk customers.
- Optimize your offboarding flow to reduce customer churn.
- Use email marketing to win back churned customers.
- Userpilot helps you analyze product usage and create contextual in-app experiences to reduce the attrition rate. Book a demo now to learn more!
What is customer attrition?
Customer attrition is the loss of customers by a business. Also known as customer churn, it is the end of the customer’s relationship with a business and is a key indicator of business health.
Why does customer attrition matter?
Put simply, the loss of a customer is expensive. Outside of the lost revenue that comes from losing customers (and that is a lot!), new customer acquisition is also more expensive than customer retention.
Therefore, understanding customer attrition and taking steps to reduce customer churn has plenty of advantages, including:
- Improved customer loyalty: Reducing churn fosters positive customer experiences, which promotes customer loyalty. These loyal customers are more likely to recommend your business to others and drive word-of-mouth referrals.
- Increased customer lifetime value (CLV): When customers churn, you miss out on the potential revenue they would have generated. On the other hand, retaining customers helps you maximize their CLTV.
- Better CAC: CLV ratio: The ratio of the customer acquisition cost (CAC) to the customer lifetime value is a primary indicator of a business’s profitability, growth potential, and financial health. By reducing customer churn, you can improve this ratio.
What causes customer attrition?
There are several reasons why customers churn, some of which are highly personal and unique to each customer or business. However, most customer churn falls under one of four categories:
Bad product-customer fit
Several factors could lead to a poor product-customer fit. For example, the customer may not understand the product’s value proposition or how it fulfills their needs.
Likewise, your product’s features and functionalities may not meet or align with customer expectations. And if customers feel like they’re not getting their money’s worth, they’ll be more likely to churn.
Ineffective onboarding experience
The onboarding process is the perfect opportunity to help customers understand how your product works. When done correctly, it helps uncover a product’s value and drives product adoption.
Unfortunately, several businesses inadvertently misuse this chance. For example, if your onboarding process is too complex and confusing, it can leave customers feeling discouraged and cause them to look for other solutions.
Poor customer service
Once you’ve got the customer firmly in the door, though, how you handle the problems they face becomes a powerful predictor of customer churn.
Do customers have to wait long hours for their problems to be addressed? Are your customer support agents rude and dismissive? Are your agents unknowledgeable and unhelpful?
Put simply, poor customer service interactions increase the likelihood of churn. Customers who wait a long time for help or who reach unhelpful agents may feel unvalued and discontinue their business.
Weak customer relationships
Finally, a failure to connect with customers can be a major cause of churn. Poor communication on your part may cause customers to feel uninformed or even unheard.
Similarly, if customers cannot leave feedback or their complaints go unaddressed, they may feel unheard and undervalued and leave as a result.
How to calculate the churn rate
The customer churn rate is the rate at which customers leave your business.
To calculate this number, you’ll need to divide the number of customers lost over a period by the total number of customers at the start of the period, and multiply the value by 100.
For example, let’s imagine you had 1000 customers at the start of the year and had lost 50 customers by the end of the year. Your churn rate for the year will be (50/1000) x 100 = 5%.
15 Effective strategies to reduce customer churn and increase customer lifetime value
Thankfully, although churn is an inevitable part of business, you can keep it (and its impact) to a minimum.
Let’s now consider 15 effective strategies to help you prevent customer churn and reduce customer attrition rate.
1. Personalize the onboarding for new customers to shorten the time to value
For most businesses, preventing customer churn really comes down to making the product or service usage attractive enough to new customers to drive adoption early in the customer journey.
For that to happen, new users must experience value quickly, and the onboarding process is your chance to make that happen.
Personalizing the onboarding experience enables you to demonstrate how the product helps the customer solve a direct need. It removes unnecessary steps from the process and shortens the user’s time to value.
The key to effective personalization is data. Use a welcome survey to understand the user’s goals and their jobs to be done (JTBD). Then, segment users according to their needs and create personalized onboarding flows for each.
2. Use checklists to guide users toward key actions within your app
Onboarding checklists are an excellent tool for guiding new customers to the right actions users should complete to reach activation.
The best checklists are brief and to the point. You want to include only a few key tasks to avoid over-complicating your product and scaring users away.
The tasks on the checklist should also be customized according to the goals the user hopes to achieve with your product.
3. Replace generic product tours with interactive walkthroughs
Interactive walkthroughs are step-by-step product guides that handhold users and help them use a feature.
This contrasts with product tours which are long and boring videos or demo environments without any form of customer engagement.
By replacing your product tour with an interactive guide, you ensure that new customers are actively involved in the process. They take action, follow the steps, and ultimately derive value from the feature immediately.
4. Reduce churn with proactive customer service
Despite your best onboarding efforts, users are bound to have some difficulties while working with your product.
Enter proactive customer service, one of the best customer retention strategies for aiding already existing customers. It involves anticipating and preventing problems before a user reaches out for help.
For example, you may include an in-app knowledge base with in-depth articles, how-to guides, and even video tutorials to help users answer any questions they may have about your product.
5. Offer contextual help with tooltips to improve customer experience
One way to offer proactive help is by triggering contextual in-app messages to provide targeted assistance and improve the customer experience.
We see this in many different forms while using a product or service. Perhaps one of the most common examples is the use of inline text prompts to guide users in filling out a form.
But you can also provide contextual help in your product using tooltips. For instance, you can use a single tooltip or a sequence of them to show users how a feature works and guide them to use it successfully.
6. Help existing customers master advanced features with webinars
Yet another way to reduce the customer churn rate is through ongoing customer education, and webinars are very well-suited to this purpose.
Webinars are virtual seminars that pack the power of video tutorials while providing a forum for users to ask questions and provide real-time feedback.
You can use webinars to address industry-specific or product-specific customer pain points. Their interactive nature makes them ideal for complex subjects that require comprehensive answers or guidance.
7. Implement gamification to boost customer engagement
Gamification is a process of making the customer experience more fun and engaging. It involves introducing game-like mechanics, such as badges, avatars, leaderboards, etc., to boost user motivation.
When done correctly, it helps establish an emotional connection with your product and drives repeated engagement.
For example, Calendly congratulates users who complete a crucial first task with a celebratory message and confetti. This gives the user a sense of pride and encourages them to complete even more tasks.
8. Retain existing customers with secondary onboarding
Over time, you’re bound to update and upgrade your product or service. This will involve adding new features and functionalities that your customers know nothing about.
To ensure the new feature is successful, you first need to announce it to your customers. This involves informing them of the feature and how it benefits them.
Next, you’ll need to implement secondary onboarding to guide them to use the feature. This involves using tooltips or walkthroughs to provide clear usage instructions and eliminate friction.
9. Prevent involuntary churn with pre-dunning banners
Pre-dunning banners are in-app notifications alerting customers of upcoming payment issues.
These banners serve as an early warning system, giving customers a chance to update their payment information or choose a different payment method before their service is interrupted.
When used correctly, pre-dunning banners are an excellent way of eliminating involuntary churn. However, beware: Overly aggressive pre-dunning tactics can damage customer trust and loyalty.
10. Track the behavior of loyal customers and replicate their paths
For most businesses, the key to reducing customer churn involves identifying your most valuable customers and replicating their path for other customers.
There are different ways of identifying loyal customers. For some, these are their product’s power users. For others, these are high-value, long-term customers. And, if unsure, you can always use NPS surveys and CSAT scores to identify users who adore your product.
Once you’ve determined who they are, you need to track their product usage habits. Which features do they use? What content do they engage with? How do they overcome challenges?
As you identify patterns and common behaviors within this group, look for the key milestones that drive product adoption among them. Then, use these insights to optimize the user experience of other similar users.
11. Identify drop-off points with funnel analysis and fix them
Next, you can zoom out of your loyal customers to analyze funnel progress for all users. Your goal here is to identify the stages where users most commonly abandon the process and churn.
Thankfully, this process involves a few simple steps:
- Break down the customer journey into a series of funnels with key touchpoints.
- Identify the desired outcome for each stage of a funnel (such as signing up for a free trial).
- Analyze funnel completion patterns using tools like Userpilot to determine areas with significant drop-off rates (high friction areas).
- Dig deeper using heatmaps to determine why users abandon the funnel at that stage.
- Finally, address the causes of the friction and continue monitoring the funnel for progress.
12. Collect customer feedback to improve your customer retention strategy
Although a few customers will reach out for support when they have issues, 96% of unhappy customers simply don’t complain. Furthermore, 91% of these will just leave and never return.
It’s important, therefore, that you actively reach out to customers and provide them with a platform to complain. You can do this in a variety of ways, such as in-app or email surveys, live chat, phone calls, etc.
You can also implement Net Promoter Score (NPS) surveys to gauge customer satisfaction. In addition to the traditional rating scale or multiple-choice questions, use open-ended questions to allow customers to elaborate on their experience and provide specific details.
As the responses pour in, analyze them to identify recurring patterns and themes. Then, develop action plans to address these concerns and communicate the steps you’re taking to improve to close the feedback loop.
13. Monitor product engagement to identify at-risk customers
Customers on the verge of churn often have lower engagement levels than regular customers.
By constantly monitoring how customers engage with key features for their use cases, you can identify at-risk customers and proactively retain them.
For instance, once you’ve determined a customer to be at risk, you can check to see if they’re having any issues with your service or if they’ve lodged a complaint in the past.
You can then boost customer retention by engaging with them to address these concerns and help them get the most out of your product’s key features.
14. Optimize your offboarding flow to reduce customer churn
Despite your best efforts, you will always have churned customers. This doesn’t have to be a loss, though. The key is to work with these customers to reduce the customer attrition rate.
For example, you can launch an exit survey asking customers who are leaving why they’re doing so.
This can provide invaluable insight into the reasons for churn and help you take action to reduce future churn.
You can also make one final attempt to save these customers using the information they provide.
For example, for customers who indicate the product’s pricing as the reason for their churn, you can offer alternative pricing options that better fit their needs.
15. Use email marketing to win back churned customers
As your customer success team works to reduce customer churn, they can also craft win-back emails to engage with already churned customers.
The key is to identify their reasons for churn and segment them accordingly. Then, craft a compelling, personalized message that addresses their specific need and shows you care.
For example, you can identify those who complained about performance issues and inform them of your efforts to improve your product’s performance.
How to reduce customer churn rate with Userpilot
Once you’ve decided on a strategy for reducing the churn rate, you’ll need the right tool to help you execute it. Userpilot is just that tool.
A no-code product adoption and growth tool, Userpilot’s many features are tailor-made to improve the customer retention rate and reduce churn. It helps you in three key ways:
Monitor product engagement and user behavior
Whether you’re looking to identify power users or at-risk customers, Userpilot provides a variety of features for tracking and analyzing customers’ engagement with your product. These include:
- Feature tagging and heatmaps: Feature tagging helps you track which features customers use most and least frequently. Heatmaps, on the other hand, reveal areas of high/low engagement (clicks, taps, etc.). Together, they help you understand how customers use your product.
- Analytics dashboard: View key metrics at a glance with Userpilot’s analytics dashboards. Track performance metrics such as active users, sessions per user, stickiness rate, etc., and act on real-time data as it emerges.
- Analyze user paths: Conduct in-depth path analysis with Userpilot. Choose a starting point and see what actions users take from there. This is your chance to determine the path that most often leads to success (the happy path) and replicate it for all users.
Trigger microsurveys to collect customer feedback
Collect contextual customer feedback by triggering in-app surveys based on different user actions. For example, you can launch an exit survey when a user clicks to cancel their subscription.
Userpilot provides a variety of pre-made survey templates for your selection. You can also create one from scratch, choose where and when it appears, and who sees it.
Create customized experiences to improve customer satisfaction
Finally, Userpilot enables you to act on the qualitative and quantitative data you collect to create better user experiences.
Using different UI patterns such as modals, tooltips, hotspots, slideouts, and more, you can create and trigger relevant product experiences to guide and retain users.
Conclusion
Customer churn can take a heavy toll on your business if you let it. Thankfully, there are more than a handful of strategies to help you retain customers. Examine each of them and determine the best for your business.
To get started with any of these strategies, book a Userpilot demo to learn how it integrates with your product to help you fight churn and boost adoption.
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