4 Ways to Improve Customer Retention and Reduce Churn


Customer retention is at the core of any successful subscription business. An interesting aspect to customer retention is that even small changes to the process can have dramatic results. Bain & Co. estimates that increasing your customer retention rate by 5% results in a 30% increase in profits. Here are a few ways you can improve customer retention:
1) Track customer retention and churn in a way that helps you understand the root causes
Many businesses track churn, but they often use it strictly for financial reporting. To dig into customer retention consider adjusting your reports to include the following:
  • Separate upsells from losses in your reports – including upsell in your churn reports make the numbers look great, but it doesn’t do anything for you in terms of helping you figure out how to retain customers.
  • Even if you sell a yearly subscription, track the churn by month – especially if you bill on a monthly or quarterly basis. Then you can see how churn rates change as you enhance your product or adjust the pricing.
  • Track cohorts to find patterns such as time of year vs cancellation rate, what types of promotions lead to highest renewals rates and the average lifecycle of your renewals.
2) Assign executive ownership of customer success
Subscription companies with low churn rates place a high value on customer success. It’s not just the responsibility of one department – the company culture embraces customer success and thrives on it.
That being said, you still need an executive to be accountable for customer success and have ownership of customer retention KPIs. For some organizations it’s the VP Customer Service while others might assign ownership to the Director of Marketing. Whomever you choose, make sure they have the right resources on their team to achieve the goal.
3) Understand how customers interact with your product
Sometimes this is called customer monitoring, or customer engagement – whatever term your company uses, customer interaction is a vital component of the business.
Monitoring customer engagement is about tracking customer activity before they cancel their subscription. It’s about identifying the customer who are at risk of leaving so you can take steps to re-engage with them.
You can collect this information from your servers by installing a java script to track individual activity. A good way to focus your tracking is to look at:
  • How often do your customer visit your site and for how long
  • What actions do they take? Are they looking at the help menu, are they engaging with your key features or are they clicking around without much purpose?
Once you enable tracking, take the time to score your customers on key performance indicators. For example, you can determine how much time the average user who renews their subscription spends on your site, then make that number a baseline to score all your customers against.
Then put triggers in place to notify the customer success team when an individual customer is below the baseline so they can reach out via phone and email to try and re-engage the customer.
4) Build a product that customers love
If your product isn’t quite right and doesn’t quite meet a customer pain point, then it is going to be very hard to retain customers. With the subscription business there are three product design areas to consider:
  1. Ease of set up – make sure your product is easy to set up so your customers can start using it right away
  2. Ongoing value – consider how much value your product offers over time. Sometimes customers received 80% of the value of the product in the first three months. If that is the case, you’ll need to ensure you are continually adding enough new customers to make up for the churn rate.
  3. Quality and ease of use – your product should be high quality, helpful, accurate and easy to use
The consequences of customer retention can compound over time, and sometimes in unexpected ways. Even a tiny change in your process can cascade through the business and impact long-term profit and growth. So make sure to take some time to understand how your company handles customer retention and implement changes carefully.
—Jason
Jason Kiwaluk
Ideation Manager

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