Who is a Churn Risk?

Churn risk is simply the probability a current customer will stop doing business with a company or service. Your churn is calculated by the total number of clients a company has at the beginning of a specific time period, divided by the number of customers lost during the same period.

To avoid a decrease in your customer users or even a cancellation of your product/services, you have to identify who can be a churn risk.

In this tutorial, we will give examples of how to identify churn risk in an early stage and strategies to improve the Customer Churn Rate (CCR).

How you can proactively identify churn risk

Churns can appear through reasons like dissatisfaction or a lack of interest or training in the product.

Here, we focus on 3 points to proactively identify a risk of churn in an early stage.

Identifying Churn Risk

1. Target the right customers

It sounds easy but it is often not well executed. Finding and targeting the right customer requires some specific behavioral segmentation. The sales team can segment customers during the sales process. Customer Data Platforms (CDP) like Treasure Data can help you understand customers behavior and preferences. Once you have identified the right target group for your scope, it helps you eliminate customers who show higher risk to churn in a later stage. Identifying and investing in the right customers in the beginning helps to establish long-time relationships with the customer. This customer will be satisfied by being targeted with specific content and will be more loyal to the product/service he/she is using.

2. User engagement

The biggest risk for churn is simply when the customer is not invested in your product or service. This can happen for a variety of reasons such as the customer never fully adopts the use of your product or the product does not actually add value to your customer. The best way to engage customers is to provide them meaningful content. This could be done through offering incentives like special promos, loyalty programs or communities to discuss concerns. The consulting firm Rosetta Consulting found through research that user engagement reduces customer churn risk. Engaged customers are five times more likely to stick with their current product/service.

3. Monitor trigger events

Organizational restructure could lead to a loss of “champions” in the organization. This means the decision makers can leave the company by an unexpected time. Having a plan in place for the situation when the decision maker might have left the company is fundamental. A strategic example therefore would be moving the decision power away from the decision maker. You can do so by making the majority of users dependent on your product/service. Triggering this events can help reducing your churn risk by making sure to stay connected and close to your clients.

Strategies to help you improve customer churn

Hubspot: Hubspot provides marketing, sales and customer service software. Within their inbound marketing strategy, they recommend leaning into your best customers. Defining a roadmap for new customers and often asking for feedback will help to minimize your churn.

Bain & Company: A strategy to reduce the churn rate provided by Bain & Company would be to mine customers data to provide targeted marketing. This could be, for example, offering promos or discounts for special life events.

Salesforce: Salesforce’s strategy to reduce customer churn, focuses on providing outstanding customer service and engagement with clients. Continuous improvement in your services keeps customers engaged and close to your business. The best way to do so is by studying your competition or by conducting surveys. Therewith you can gather detailed information about your customers. Using this data right can lead to a satisfaction of customers needs, which eliminates the risk of customers giving up on your services.

Conclusion

Churn mostly occurs when the customer does not feel engaged enough with your product, service or company. To improve the customer engagement it is necessary to analyze the given data and in the best case to provide personalized promos or incentives. You can eliminate churn risk in early stages. Most important is to pay attention to customers behavior in all stages. Even after following all strategies; creating the best product, offering onboarding and customer engagement plans in place, churn will happen.

You can learn from these churn situations to improve your monitoring of trigger events. Once the churn happened, it is very important to analyze the situation afterward. Analyze the data and look when exactly customers are most likely to churn. Also, analyze how and when the churn happens for your specific customer. Your BI tool can help you in analyzing your data.

Zoé Meckbach

About Zoé Meckbach