Even though a company may have strong client loyalty and a lot of repeat business, they can still lose 20-30% of their revenue every year from customers leaving. Some attrition is desirable. Some is unavoidable. But much of it can be prevented.
Revenue replacement is a difficult and challenging process that requires a lot of work. Why does this happen, and what can you do in order to stop it? Attrition has many complex causes.
The following text lists the reasons customers may stop using a product or service, as well as ways to reduce the chances of this happening.
1. A Reorganization or Executive Turnover
Have you ever pour your time and effort into developing a relationship with a client, only to have them retire, move, or leave? Executive turnover is higher than ever. Here’s how to make the best of these situations:
- Build many-to-many relationships with all your key clients, so that the account does not hang on one single connection.
- Make sure you are connected to a senior executive above your day-to-day client. That relationship will be worth its weight in gold when turmoil hits.
- Work hard to get the departing executive to vouch for you and introduce you to their replacement
- Redouble your client development and relationship-building activities when there is organizational change.
2. A One-off Need for Your Services
Some clients only need your services on a periodic basis. A college may only hire a fundraising consultant once every five to ten years during a capital campaign.
A corporation might only need to use the services of a construction company when they build a new headquarters building. The first and most important priority is to create additional products and services that fit customers’ Repeat needs.
Ask yourself, “What adjacent, ongoing needs can we help the client with?” For example:
- A fund raising consultant can help a university run their annual campaign more effectively
- A construction company can help clients manage their facilities and do sustainability audits
- An executive search firm can do talent planning, executive assessments, and leadership coaching in-between periodic searches.
Second, you need to add value in-between major engagements.
The client should see you as a reliable advisor during both prosperous and difficult times. Do you contact all your past clients every year and provide them with valuable information that addresses their most difficult problems?
It’s important to get referrals and testimonials from your clients, even if they only rarely use your services. This will help you build a strong reputation and attract more business. You need to have a marketing strategy that will cast a wide net and the references will be a big help.
3. A Financial Crisis or Profit Squeeze
Many companies reduce or eliminate discretionary services during financial hardships. Even if a company claims they have a “no budget” policy, this doesn’t mean they don’t have any money set aside for expenses. What it means is that the company has decided that using you is not a priority given their limited financial resources.
You need to demonstrate that your offerings are worth investing in even when budgets are tight. You do this by:
- Showing exactly how you are part of the client’s growth, profits, and innovation—not simply a cost, a necessary evil. You must compellingly draw a direct line between what you do and the client’s highest-level goals
- Relentlessly communicating the value and impact of your work. Show how your solutions can help the client deal with their financial crisis.
- Spending sufficient face-time with executives so that you have a good understanding of what is most important to them.
4. The Impact of Your Work is Not Compelling
The two reasons mentioned above often lead to feeling unneeded or that there is a lack of budget.
If you are providing high-quality work, why would your client feel that what you are doing is not interesting or persuasive? Here are some possibilities:
- You have not sufficiently communicated the value you’re adding
- You are working at too low a level in the organization and your product or service is basically hidden from view
- You have not shown the client how you are helping them achieve their most important goals or priorities
- Your work is acceptable but not perceived as “a cut above.” You’re not wowing the client in any way.
- The client perceives your products or services as solving a relatively insignificant problem.
Can you give more specific details about the benefits of your work? Can you ask some of your managers who know and like you to talk to senior management on your behalf?
Can you propose more ways to be useful to the client, either by updating your service offering or improving your client service levels? Can you show how your work impacts something larger and more important than just a small part of the client’s business?
I have a client who is in the executive relocation business, for example. They became more relevant and well-known to clients by changing their value proposition to “enabling the mobile workforce” instead of just “relocation.”
I moved my company’s focus to “building clients for life” instead of things like “relationship training” or “sales training” early on in its development.
5. Quality or Delivery Issues
“Quality” is a function of three things: First, actual quality. Are you providing a high-quality service or product by objective standards?
Second, expected quality. Even if you do a great job, you’ll disappoint your client if your solution doesn’t meet their expectations – no matter how unreasonable you think those expectations might be.
Third, perceived quality. Why do people buy expensive dishes made with the relatively unappetizing Patagonian Toothfish? People buy expensive dishes made with the relatively unappetizing Patagonian Toothfish because the fish is a rare delicacy. Because restaurants serve Chilean Sea Bass with fancy cooking methods, sauces, and side dishes.
-Come up with ways to measure the quality of your work -Find ways to improve the quality of your work -Make sure clients are aware of the quality control mechanisms you have in place Get formal client feedback several times a year.
Be sure to set clear expectations at the start of any project or engagement. Focus on agreeing outcomes and objectives, not deliverables. A deliverable is a meeting that happens every quarter, and an outcome is when customers’ response times improve.
Make your clients think that your work is high-quality and effective. A good way to make your client see your hard work is to be transparent about your process.
A second way to build trust with your client is to be transparent about the difficulties you have faced in order to complete their project, and to make sure they are aware of the special circumstances surrounding the engagement.
One way to ensure your client is happy with your work is to get positive feedback from their employees.
6. Bad Chemistry
There are times when the relationship between the manager and a certain client’s executives isn’t good. So what do you do?
There is a difference between an irreconcilable conflict and tension caused by two different personality types. If the reason you’re not getting clients is because of your own style, then you can try adjusting your style to match your client’s temperament and approach. For example:
- Are you being a good listener? Do you listen carefully, affirm, and ask thoughtful follow-up questions?
- Have you shown your immediate, work-with client that you can be trusted to support them and their goals—as opposed to serving your own agenda and/or even going behind their back to their boss?
- Have you taken the time to understand how your client would like to structure and manage the relationship and how they like to communicate?
If you work with a firm and the chemistry between you and your manager is bad, you have the option of asking for a new manager.
Tips to Reduce Customer Churn
1. Lean Into Your Best Customers
If a business wants to reduce the number of customers who cancel their service, they need to identify which customers are most likely to do this and put more effort into keeping them satisfied.
However, Sunil Gupta, the Edward W. While this strategy may appear to be effective, Professor Bob Carter of Harvard Business School suggests that it is lacking.
Instead of spending time and resources retaining customers who are about to leave, Gupta suggests businesses focus on the most profitable customers who are about to leave.
” If I give a bonus to customers who are likely to leave, they may not actually leave the company. But would it be profitable for me to do so? Gupta argues that the traditional method of reducing churn should be replaced with a focus on maximizing profits.
According to Gupta, you should consider how likely it is that a customer will respond positively to your attempts to re-engage them, rather than just focusing on your most profitable customers. This could involve a phone call, email, or larger promotional package.
2. Be Proactive With Communication
If you contact your customers before they need your help, it shows that you care about them and want them to get the most out of your product or service. But not any old outreach will do. The message or resource you send to them should be directly related to their product or service usage.
If someone uses your product or service and doesn’t take advantage of all it has to offer, you might send them a reminder.
After signing up for SEMrush, I received the following email, encouraging me to check out a whole bunch of features I hadn’t explored yet:
Showing these features to me early kept me from losing interest and uninstalling the SEMrush tool.
3. Define a Roadmap for Your New Customers
When you’re starting out with a new product or service, it can be tough to know where to start. If a customer cannot figure out how to use your product or service, they will likely lose interest.
A helpful way to ease the transition for new customers is to set up a customer onboarding process or roadmap. This will guide them through your product or service’s features, functionality, and process.
This approach manages customer expectations better while giving you more control over the pace of releasing information.
It’s important to keep an eye on your onboarding process and make changes to it as needed so that your customers feel empowered to succeed with your help. This will keep them from leaving.
4. Offer Incentives
Offering customers a loyalty program or discount can keep them coming back. By showing your existing customers how much you value their business, you’re more likely to keep them as loyal customers.
There are a few things you should consider when deciding when to offer these incentives.
It’s important to think about the customer’s timeline when trying to convince them to renew their contract. If they’re approaching the end of their contract, offering a discounted renewal rate could be enough to convince them to stay.
Another thing to consider is the customer’s needs.
If you think a customer is going to cancel because they realized your product or service isn’t what they were looking for, give them a incentive to stay while you work on adding a feature or strategy that will help them reach their goals.
After the company Baremetrics received feedback from customers who were ready to cancel due to a lack of features, they employed a strategy of creating new features.
“We give our customers a discount on their next month of service to help them out while we’re finishing up what they’re looking for,” says Baremetrics’ Founder Josh Pigford.
The impact? Adding this one extra step to their process helped them keep 15% of customers who were planning to cancel their accounts.
5. Ask for Feedback Often
Customer churn happens when customers get frustrated and confused about a product or service, and there isn’t effective support to help them solve the issue.
But those concepts are vague. You need to collect feedback early and often to figure out what specific issues are plaguing your business.
Depending on your business needs, you can create a customer feedback loop by setting up a survey or feedback form and sending an email. Let’s check out a few examples of how this has been done by brands in the past:
Asking customers for feedback shows that you are committed to always improving.
One way to get feedback and insights from your customers about their experience with your product or service is to ask them directly. Live chat.
If you have a live chat feature on your website, you can use it to track customer conversations and learn about any potential issues that could be preventing them from getting the most out of your product or service.
6. Analyze Churn When it Happens
If a customer leaves your business, you’ve already missed your chance to do something about it. Use data to build strategies to prevent customers from churning instead of using it after they have already churned.
Churn is a part of any business and will happen no matter how much effort you put into the steps above.
The key to retaining customers is to identify key signs of customer satisfaction and dissatisfaction so you can address any issues before they lead to churn.
First, start with analysis. When are customers most frequently churning? When do your customers see value in your product or service? Is it 30, 60, or 90 days after they first start using it? Is churn a result of customers not using the product or service for a certain number of days? It is important to understand how and when customers typically churn in order to prevent it from happening.
Then, get feedback as outlined in Step Five above. Are customers leaving for specific reasons? What objections led them to cancel or stop purchasing? Figure out why churn usually occurs.
So that you can better predict churn, or customers leaving, analyze current trends and reach out to customers that may be at risk with special offers.