15 Tips to Prevent Customer Attrition

1. What is customer churn and how can it be measured?
2. These are the most common reasons for customer churn
3. How can customer churn be predicted (Churn Prediction)?
4. How can customer churn be prevented? – 15 tips from practice
5. How does a CRM software support churn management?
6. Conclusion on customer churn

The boost in digitization and innovation leads to an infinite variety of product and service providers, which can be compared more easily than ever before on the internet. In this process, customer expectations keep increasing. But no longer is product quality alone convincing consumers, but the customer experience (Customer Experience) and the Customer Service play a decisive role today. However, digital alternatives often do not lead to the hoped-for customer experience and missing personal touch-points increasingly jeopardize customer relationships and lead to a decrease in customer loyalty.

This means for the company: declining sales and higher costs! Because acquiring new customers is many times more expensive than keeping existing customers (BCM). According to the SugarCRM study from 2022, medium-sized companies worldwide stated that the customer churn rate had never been as high as 32% and had cost them on average $5.5 million per year in 2021. The companies admit that they neither know the reasons for the churn nor can track, quantify or prevent it.

Therefore, it is becoming increasingly important for companies to better understand customers and their needs and to build customer loyalty in order to ensure continuous revenues. CRM systems, loyalty and churn management are key factors in maintaining valuable customer relationships and proactively preventing customer churn.

What is customer churn and how can it be measured?

Customer churn (Customer Churn) refers to existing customers of a company who no longer want to buy the company's products or services or no longer want to interact with the company.

Customer churn can be measured by the customer churn rate (Churn Rate):
 

A good churn rate, according to Adito lies between 5 - 30 % per year - ideally it would of course be 0 %, but that is not realistic. They emphasize that the churn rate depends on the industry, the products and the target group. The KPI should however not be viewed in isolation, but in relation to the profit and loss rate and the growth rate of the company. If the customer churn rate is higher than 30 %, urgent countermeasures should be implemented to increase customer satisfaction again and improve the relationship with customers in the long term.

These are the most common reasons for customer churn

There are many different causes why customers churn. The reasons can be external, but also internal. Often the reasons even condition each other and affect not only sales, but also the entire company:

• Competition-related reasons: Customers churn because the competition offers a better alternative, such as lower prices, a larger product range, better product quality or better service. But new (legal) regulations are also drivers of external churn reasons.

• Customer-related reasons: The consumers themselves change the demand in the market due to lack of purchasing power, lack of or shifted interest or changed life circumstances (e.g. Corona pandemic, relocation, job change, etc.).

• Company-related reasons: The companies contribute to churn by conveying a bad image to the outside world. Often poor service is decisive, which deters consumers with poor accessibility, inadequate complaint management and unfriendly employees. But an incomplete CRM system also increasingly frustrates employees, as they do not have access to the data and cannot foresee (churn prediction) and prevent churn.

To develop appropriate prevention measures for your company, you should know the reasons for your customers' churn. You can find these out either with regular customer surveys or competitive analyses. Categorizing the reasons for churn is useful in order to develop even more targeted countermeasures per customer group.

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How can customer churn be predicted (Churn Prediction)?

Due to the large number of clients and the shortage of staff, it is becoming increasingly difficult to personally care for all customers of a company. Due to the lack of attention, some potential customers turn away from the company. In order to fill this attention gap, a suitable churn prediction strategy is needed.

Predictive analyses can be used to predict customer churn at an early stage (BCM). For this, enough customer data must be collected, which can be derived from a CRM system, ERP or e-commerce system or from customer satisfaction surveys. The sooner you implement an early warning system in your company and thus recognize the churn, the sooner you can focus your internal capacities on the customers who are about to leave. It also enables you to prepare your countermeasures early and better plan your following months if you should lose sales due to customer churn.

How can customer churn be prevented? – 15 tips from practice

Recognizing tendencies to churn early, counteracting them and thus increasing customer loyalty in the long term, is vital for your company nowadays. You wonder how to do that and what incentives you can create to increase your customer satisfaction again? We show you a total of 15 prevention measures against customer churn:

1. Internal Communication: Define your minimum requirements for customer satisfaction, your strategy to reduce customer churn as well as your customer retention measures. Thomas Hamele, CEO of BCM. Best Customer Management GmbH advises each of his customers to also address KPI's that aim at measuring the customer experience (e.g., Return on Experience (ROX)). Communicate these throughout the company, so that all employees see, understand and consistently implement them and thus guarantee a consistent appearance to the outside. 

2. Improve the coordination between your marketing and sales team: So that both teams can work hand in hand and productivity can be increased, each team member should have access to the respective customer data and be allowed to use it. It is important that both teams pursue common goals, use the same metrics and define a seamless handover process. 

3. Improve your onboarding processes: So that new customers can understand and use your products or your service optimally, Gartner recommends providing an easily understandable onboarding process, such as clear instructions and visual aids (e.g. infographics or instruction videos). Also offer personalized product tours and training to improve the customer experience and offer personal support from the beginning.
   (https://www.gartner.com/en/digital-markets/insights/churn-prevention)
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4. Regular competition and market analysis: Watch what your competition is implementing to retain and/or poach customers and which trends are establishing themselves on the market. Adjust your customer retention strategy accordingly.
5. Use of Artificial Intelligence (AI): In the course of digitalization, artificial intelligence is becoming increasingly important for companies and offers great competitive advantages. These opportunities arise according to a study by Luenendonk from 2018:

   
   
   
   
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   (https://www.luenendonk.de/aktuelles/presseinformationen/kuenstliche-intelligenz-ist-top-thema-bei-unternehmen-2/)
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   ⁠With the help of AI, you can automate and improve your existing processes, collect and analyze customer data and personalize your marketing activities. This not only saves you money and time, but AI also helps you to target your customers in real time, thus making your customer experience even more targeted.

6. Customer Surveys: Regularly start surveys on customer satisfaction at all touch-points along your Customer Journey (Touchpoint Analysis) to capture current customer sentiments and flexibly adjust your customer retention measures according to the results. SugarCRM recommends embedding the customer surveys in customer care and especially asking customers about their reasons for leaving after their departure, in order to derive future countermeasures from this. The surveys not only provide you with potential for improvement for your company from your customers' perspective, but your customers also feel that their criticism is being heard and respected.

7. Make individual and exclusive offers: Keep your existing customers up to date about new products and services - either via a newsletter or via target group appropriate channels such as Social Media. Regularly make them attractive offers and lure them with appropriate discount promotions that are unique and valuable and in some cases only apply to certain customer groups (for categorizing your customers, an ABC customer analysis or the fan principle can help).

8. Implement a suitable CRM system in your business that is user-friendly and flexibly adjustable and supports sales in its work with the help of automated processes. Also pay attention to the individual needs of your employees and offer individual customization possibilities (e.g., mobile customizations and easy creation of reports and dashboards). If necessary, carry out a change management process to attune all your employees to the use of technology. 

9. Customer centricity and personalization: The trend is increasingly towards personalization. Make Customer Centricity your focus and base your entire communication strategy on it to offer your customers the best customer experience (Gartner). This increases your chances of long-term customer retention, improves competitiveness and ultimately leads to more sales and profitability. Therefore, address your customers throughout the customer journey with individually tailored and personalized content. Here a CRM system can support you to see in which phase of the customer journey your customers are and which offer fits best now.

10. A strong customer service is everything: Be attentive and respond personally to inquiries and complaints. According to Oracle 50 % of consumers only give a brand a week to respond to a question before they quit doing business with them. Therefore invest in a strong and reliable customer support structure and constantly control how fast your reaction time is. The better the service performance, the more satisfied your customers are with your product or service. Not only sell your product, but also provide added value! Good customer service not only binds your buyers to your company in the long term, but they also gladly recommend your company, which means long-term growth and great competitive advantages for you. Use helpful customer service software here that can support you. 

11. Engage in personal exchange: Make it easy for your customers to connect with you or other users. Use the channels where they are (e.g. current social media platforms, forums, review portals, etc.). Also respond objectively to negative comments here and offer quick, personal solution approaches. Feel free to provide a direct exchange platform on your website in the form of a chat window or a hotline for quick answering of questions. For this you can use helpful technologies and software. However, pay attention to your authenticity and the speed and accuracy of answering questions. Questions answered too generically reduce customer satisfaction and consumers use the communication channel less and less.

12. Invest in rewards / loyalty programs: Offer your loyal customers incentives and rewards for their loyalty. To extend your customer retention and strengthen loyalty, invest in a customer retention software, to play out loyalty programs such as loyalty points, membercards, birthday/anniversary discount promotions, gift vouchers, etc. Loyal customers not only buy regularly, but also recommend you further.
    ⁠(Source: Success factor customer satisfaction – B. Brugger, p. 55-57)
13. Turn your customers into fans: Focus on the valuable customers by analyzing and optimizing your customer relationships. This not only increases the customer value and your economic success, but also optimizes your use of resources. The fan portfolio of the 2HMforum segments the target groups according to their emotional bond and satisfaction and creates a fan quota from this, which consists of five segments in total (see illustration). It shows that it is not primarily important to turn unsatisfied customers into satisfied ones, but to turn already highly satisfied ones into loyal ones. Because fans have the highest customer value: they shop more often, are less price sensitive and voluntarily recommend you further.
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    (https://fanomics.de/fanomics/)
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14. Monitor your customers using the NPS (Net Promoter Scores): The Net Promoter Score not only helps you identify your loyal (promoters), but also your unsatisfied customers (detractors). By regularly checking your NPS, you can quickly respond to customers at risk of defecting and satisfy their respective needs with the right measures. This way, you can sustainably reduce your churn rate (BCM).
15. Offer a unique customer experience: Nowadays it is often not enough to distinguish yourself from the competition by your prices or your product range, but consumers demand a personal and appealing customer experience. The Customer Experience refers to the relationship between a company and its customers and describes what feelings the customers have towards the sum of the interactions with a company (Zendesk). The design of your customer experience has a big impact on your future customer retention and customer loyalty.
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    (https://www.invoca.com/blog/manage-analyze-reduce-customer-churn-rate)
    

According to the Zendesk 2020 report 50% of customers switch to the competition after a single bad experience. With several bad experiences, even 80% leave. In the Oracle Report 86% of consumers say they would even be willing to pay more money for a better customer experience. Therefore, focus greatly on expanding your customer experience in order to increase customer loyalty, increase the Customer Lifetime Value and give your business a unique competitive advantage.

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How does a CRM software support churn management?

To get a current, holistic overview of your customers, you need a lot of customer data. With the help of the customer data, sales, marketing and service teams can individually adapt each customer interaction and thus create unique customer experiences. A Customer Relationship Management software improves your customer service and customer loyalty and plays an important role in churn management. The selection of a suitable CRM software is therefore extremely important!
The following things can be improved with a suitable CRM system in your company:

• Detailed customer information allows a better view of the customers at any time
• Automated data entry saves time and costs
• By collecting customer data, marketing and sales can communicate better and more personalized and targeted to customers
• Monitoring of customer interactions and prevention of customer churn
• Collection of feedback at all touch-points along the entire customer journey possible
• Improvement of the customer experience through customer data collection

The segmentation of customers allows the creation of suitable customer retention measures and thus a higher customer retention rate

In short, CRM includes many functions that can be crucial for churn management. However, it is up to the company to recognize the potentials of the tools and to integrate it into their short term and long term plans to improve customer retention. 
(Source: SugarCRM CRM Impact Report 2022)

Conclusion on customer churn

No company can afford to lose customers today. The competitive pressure is increasing due to digitization and globalization and companies must sooner or later implement an effective and efficient customer retention management (B. Brugger, p. 66 – Book: Success factor customer satisfaction). Companies that succeed in putting consumers at the center and impressing them with unique customer experiences will have a competitive advantage in the future and bind their customers to their company in the long term while saving valuable resources. To strengthen customer loyalty and increase loyalty to the brand (Customer Engagement), you should analyze your customer base exactly.

Remember that reducing customer churn is an ongoing process that requires continuous effort and attention. Since customer retention measures generate costs, the aspect of "Return on Invest" should also be considered when defining churn targets. The goal should not be to keep every customer at any cost, but rather to focus on the valuable customers (fans) with a "retention return". The fan principle helps you to classify your customers and execute your measures in a resource-saving way (B. Braunmüller; T. Hamele, p. 264 – Book: Customer Churn).