You have certainly heard it before: it’s more expensive to get a new customer than to retain an existing one. As common as it is, this statement holds true. Research suggests that it’s 5-25 times more expensive to acquire a new customer than it is to retain an existing one.
To help you figure out your customer retention strategy, we’ve put up this guide to stopping customer turnover and implementing customer retention. After reading this article, you’ll get a better perspective on customer churn. Also, you’ll find the proven strategies worth implementing to retain more customers and reduce customer turnover rates.
What is Customer Turnover?
Essentially, customer turnover (a.k.a. customer churn or customer attrition) is the value of your revenue attributed to customers who decide to cancel their subscription or stop paying for the product or service you provide. In other words, customer turnover refers to the percentage of the customers that your company loses during a given period of time.
If you want your business to thrive, you must focus on keeping customer turnover low. Many aspects of your business, from revenue and profitability to customer satisfaction, are affected by customer turnover.
To help you get a better picture of the role customer turnover plays in your business, let’s look at the key reasons why you should monitor the churn rate.
- Profitability. Monitoring churn rate helps to ensure profitability and steady revenue.
- Performance evaluation. By keeping track of customer turnover, you’ll stay informed on the performance of your strategy.
- Improvements. Churn rate patterns can be used to identify which elements of your business perform well or, oppositely, need further improvement.
- Forecasting. Monitoring customer retention is central in forecasting future budgeting decisions.
How to Calculate Customer Turnover?
Use this formula to calculate customer churn rate.
Churn Rate = (Number of Customers Who Left During a Given Period ÷ Number of Customers at the Beginning of a Given period) × 100
What is Customer Retention?
Customer retention refers to your ability to retain customers over a given period of time. More specifically, customer retention is the opposite of customer turnover as it shows you how many new customers you have succeeded to retain by the end of a given period.
Customer retention is majorly impacted not only by how many customers you’ve obtained but also by how many existing customers churn.
Similarly to customer turnover, customer retention is a key performance indicator (KPI) that impacts your revenue, customer satisfaction, and overall growth of your business.
Here are some key reasons why customer retention is important:
- Economic value. Retaining existing customers is cheaper than obtaining new customers.
- Customer loyalty and referrals. Research suggests that retained customers buy more often and spend more than first-time customers. Also, repeat customers are more likely to refer their family and friends to your brand.
- Revenue. Unlike customer turnover, retention proves to increase revenue.
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How to Calculate Customer Retention?
Use this formula to calculate your customer retention rate.
Customer Retention Rate = [( Number of Customers at the End of a Given Period – Number of New Customers Obtained During a Given Period) ÷ Total Number of Customers at the Start of a Given Period] × 100
10 Ways to Stop Customer Turnover and Improve Customer Retention
Now, as we’ve covered the basics, let’s dig deeper into the strategies worth implementing to stop customer turnover and improve customer retention.
1. Track customer satisfaction with NPS surveys
Net promoter score (NPS) is typically collected through surveys that interview customers on how likely they’d be to recommend your products to their family, friends, and colleagues on a scale from one to ten.
Based on their responses, customers are categorized into three categories – detractors (0-6), passives (7-8), and promoters (9-10).
To calculate NPS, subtract the percentage of detractors from the percentage of promoters.
Net promoter surveys are a crucial part of any customer retention strategy as they help you to analyze customer behavior and identify the level of customer loyalty and satisfaction. You can later use the results of your findings to increase customer satisfaction, reduce turnover, and retain more customers.
Give your customers a voice and understand how their feelings relate to your services, products, and brands.
Monitor your NPS on-going, pre- and post-delivery.
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2. Send out proactive customer support emails
Here’s what many professionals fail to realize – oftentimes, customers who have a problem with your product or service won’t reach out to inform you about it. Research by Lee Resources International suggests that, on average, for every customer who complains about a problem, 26 other unsatisfied customers don’t say anything. Customers choose to remain silent for several reasons:
- It requires too much effort to place a complaint.
- Customers don’t see the point in sharing their feedback.
- Fear of unknown outcomes, such as the perception of being a troublesome customer or getting someone fired.
- Companies fail to ask customers to share their feedback in the first place.
Sending out proactive customer support emails is a great way to collect complaints from your customers. Let them know that their feedback is appreciated and won’t be used for any other purposes other than improving service.
3. Surprise your customers with customer appreciation gestures
Sending hand-written thank-you notes is a proven way to go about earning customer loyalty and increasing retention. Show your appreciation to customers for doing business with you, and they will be wired to give back.
Send out handwritten (or pre-printed) customer appreciation notes to your customers either by email or snail mail. Express your gratitude and include details about why you enjoyed your journey with a particular client.
4. Reduce customer effort
Customer effort refers to the amount of effort that customers must execute to do business with your company. Customer effort directly impacts your customer turnover and retention. The more effort customers have to put into doing business with you, the more likely they are to churn.
If you’re not sure where to start with reducing customer effort, start with easing and facilitating the onboarding process. As a bonus, you can offer thank you gifts for customers who have succeeded with the onboarding process.
5. Make it easy for users to contact you
Having your communication channels open and working is another strategy that will greatly impact customer retention.
Experts from Ivory Research, an essay writing company, highlight the importance of making it virtually impossible for users to fail in contacting you. Keep all of your communication channels open and ensure your customers know where to go if they need help.
Here are some tips to make it easier for customers to reach out to you:
- Display contact information clearly on your website / social media platforms, as well as in your emails and other forms of communication.
- Make it easy for your customers to reach human service representatives. Chatbots and automated answering systems are certainly helpful. Yet when it comes to customer service, software should not fully replace human-to-human communication.
- Offer a live chat option with 24/7 assistance. This way, you can address urgent customer issues that require attention at any time.
6. Implement gamification techniques
Gamification refers to the process of applying game components to standard processes to make them more engaging and entertaining. When it comes to decreasing churn, gamification proves to drive customer retention and loyalty.
If you’re not particularly sure how to apply gamification into your strategy, start with developing reward programs. For example, you can give customer points (that they can later use to purchase products) for completing purchases.
7. Launch customer loyalty programs
Customer loyalty programs are soaring as they’re extremely popular amongst consumers. In fact, studies show that 77% of consumers participate in a retail loyalty program.
Starting a customer loyalty program is a great way to motivate customers to purchase more of your products. This becomes a win-win situation in which you benefit from repeat purchases, and your customers get more value every time they shop.
8. Deliver excellent customer service
The level of your customer service has a major impact on customer retention and turnover. Excellent and effective customer service has the power to turn an unhappy and churning client into a loyal customer.
The golden standard you should aim for is a fast, friendly, professional, and consistent customer service.
9. Offer multiple shipping and return options
Shipping and return policies can also help you retain more customers. By providing multiple shipping options, you show that you care to consider the differences in your customers’ planning abilities and needs.
If your business can guarantee overnight delivery, customers facing the deadline will appreciate your promptness by purchasing again. The same idea applies to returns. Making the return process easy and fast is another step to improved retention.
10. Stay in touch with your customers
Reaching out to your customers and consistently reminding them of your brand is another way to stop customer turnover.
Collect the contact data of your customers and always keep it updated. Reach out with special offers, extra benefits, useful content, new products, or an occasional thank you email.
The bottom line
To succeed in the long run, you must create an environment for your customers where they can communicate with your brand as effortlessly as possible.
Using these strategies will help you stop customer turnover and improve retention. Additionally, make sure to monitor your overall performance to notice churning signs in advance. This way, you’ll be able to direct your resources into addressing the declining interest of your customers before they churn.