Three favourite ways to stop customer churn and start retaining more of your customers

Read time: 3.5 minutes

In this week’s issue, we want to share our three favourite ways to stop customer churn and start retaining more of your customers at significantly less cost.

Let’s dive in.

Usually there are two groups of people within organisations:

  1. A large group responsible for making promises to attract new customers.
  2. A second, much smaller group is tasked with keeping customer.

The imbalance in the size of both groups is why customer churn is challenging for most organisations.

Making promises is far more attractive. You can do it with a quick email, a sales meeting, a social media post, or even some advertising. While making promises is essential because attracting new customers is the lifeblood of any business, it is equally important to invest in basics.

Though more tedious, it’s the lower profile but much higher ROI projects that are the ones that drive repeatable, sustainable superior financial outcomes.

Queue the convincing statistical dump:

Carousel Customers

The problem is that for some organisations, customers appear to leave just as fast as they are joined. So the business redoubles its efforts and finds more new customers to fill the void. But, if little to nothing has been done to improve the number of promises being kept, these new customers will also leave.

The carousel of customer acquisition never stops. It becomes frustrating, costly, and enormously wasteful.

But how do you keep your customers?

Achieving Net Customer Growth

People are attracted to the business because your promises will make their life easier or better. However, they stay with you because you identify how to achieve that for them quickly and seamlessly.

To reduce customer churn, you need to shift your mindset from new customer growth to net customer growth.

Let’s stop the churn!

Step #1 Understand the "why" behind the churn

You cannot effectively reduce customer churn if you don't start by asking yourself why. This means that you need to:

  1. Define the points where you can identify the maximum friction or frustration of your customers
  2. Understand what you could be doing to remove their frustration or make dealing with your brand easier
  3. Prioritise the solutions you can implement that customers want and that the business can achieve both operationally and makes commercial sense

A few years ago, we worked with a mobile telecommunications client who used to charge customers for excess data. This feature frustrated customers immensely. Complaints contained strong swear words; people were furious at paying an additional $400 to $500 on top of their monthly bills.

Some parts of the leadership were reluctant to stop charging customers for this data because they were generating good revenue from it ($12 million/year). But this was dirty revenue. Customers hated paying for it, ultimately hurting our client's business.

Step #2 Prioritise initiatives to maximise value

Now that you understand the main reasons customers are leaving, you can start to work on sizing how to maximise the financial outcomes with minimum investment. This will involve growing initiatives into three distinct groups:

  1. Basic (threshold) features – You need these to be competitive. Customers expect these features (such as a car’s turn signal) and take them for granted.
  2. Performance features – These are features that give you a proportionate increase in customer satisfaction as you invest in them. One example would be increasing photo storage capacity in an online photo app.
  3. Excitement features – If you don’t have these features, customers might not even miss them; but if you include them and continue to invest in them, you will create dramatic customer delight.

Recall our telco organisation that we are trying to help. After pointing out why their customers were leaving, we suggested removing the excess data charge - the main pain point of their customers. It was an excellent example of a threshold feature that was not being met and was causing enormous churn. They agreed to try it on the promise of increased NPS and customer loyalty. As a result:

Step #3 Measure and track your progress

The final step is to use Cohort Analysis to measure the improvements you are undertaking with your customers at the most significant churn risk.

For example:

A final interesting part of our story is that it was the CFO at the telco company who was the first person to call the $12m “dirty revenue”. His view was that the revenue was neither sustainable nor desirable.

And the improvements and outcomes we achieved proved him to be 100% right.


Capsule Customers > Carousel Customers

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