Customers churn for a lot of different reasons. In today’s world of subscription-based business models and limited trial periods, many brands risk losing a large swath of customers after a certain time frame has passed. No brand is immune from customer churn, either.
This means that companies need to pay attention more than ever to the customer experience.
By understanding why customers churn, you can identify which areas of your business need the most improvement. Fixing problem areas in your customer experience can yield the greatest benefits, including increased growth around revenue and customer advocates.
In this post, let’s take a deeper look at the role customer effort plays in retention and churn, as well as how you can measure this throughout the course of a customer relationship.
Why Are Your Customers Churning?
Customer churn is defined as the total number of customers lost over a certain period of time. This is not to be confused with customer churn rate, which is the total number of customers lost / total number of customers at the start of the time frame you’re measuring.
So, what’s considered a “good” customer churn rate?
These rates vary by industry, so it’s challenging to pinpoint what a true “good” rate is. It’s important to look at both your company’s past and current performance to get an accurate picture of how you are trending in terms of retention and churn.
Below are a few key numbers to help clarify customer churn:
- Software-as-a-Service (SaaS) companies have monthly churn rates of around 5.4%.1
- Credit card companies usually have customer churn rates that are around 20%.2
- Verizon has reported ultra-low churn rates, such as 0.84%.3
What Does This Mean for Your Business?
More than likely, your disappearing customers aren’t writing you five-star reviews as they walk out the door. Something is broken (or at least misaligned). This is a problem.
Customer churn means you not only lose revenue each month, but you’re also up against several other consequences that could severely impact your business. This may result in a loss of brand advocates and potential new business—or it could mean you’re sending out a new class of detractors into the market each month.
Luckily, experts believe that it’s possible to remedy customer churn.
In order to maintain steady growth, you have to acquire your ideal number of net new customers in addition to restoring the customers you lost as a result of the churn.
This is where customer advocates come into play. Your best customers can help revive your online reputation if need be and help generate a new group of happy customers.
The Impact of Customer Effort
There are many ways to measure customer experience. With metrics like Net Promoter Score (NPS) and customer satisfaction (CSAT), you can leverage your findings to gauge how you’re performing. But are those metrics allowing you to see the whole picture?
The Customer Effort Score (CES) is a way to fully understand the customer experience on a holistic level.
According to a study organized by the Harvard Business Review:
“Loyalty has a lot more to do with how well companies deliver on their basic, even plain-vanilla promises than on how dazzling the service experience might be. Yet most companies have failed to realize this and pay dearly in terms of wasted investments and lost customers.”
From this study, we can conclude:
- Entertaining customers doesn’t build loyalty when it comes to handling customer service issues; reducing customer effort, or the work required of them to resolve their issue, does.
- Making changes to your customer service process per this insight can help reduce customer service costs, decrease customer churn, and improve your customer service experience as a whole.
Customers are bound to run into issues at some point or another, whether it’s with a recent order or with a course they signed up for. What makes or breaks their experience is how quickly their issue is able to be fixed.
Having an issue resolved in a way that requires little to no effort on their end can make a major impact on how they view your company.
Asking customers about their experience with an individual service representative or with a recently purchased product is important in understanding the user process and perception of your company. But asking them how easy it was for their issue to be resolved takes this a step further.
The Customer Effort Score sheds light on a crucial part of any customer experience—one that could save you from losing revenue and customers.
How Reducing Customer Effort Increases Customer Loyalty
Now, let’s get to this question: What is the relationship between customer effort and customer loyalty?
Simplicity is the name of the game in this case. Making processes as easy as possible will go a long way when it comes to increasing their likelihood of sticking around. It’s also important to analyze customer effort at key touch points and fix weak areas right away.
Key customer touch points include:
- Customer service interactions (e.g. phone calls, chat boxes, social media, etc.)
- Website visits
- Online checkouts
- Customer meetings/consultations
Once you understand your company’s CES regarding the “red” customer touch points—the most important ones—you can assess your process and make adjustments where needed.
A Few Other Ways to Reduce Customer Effort
1. Reach out
Many customers, no matter their problem, won’t reach out to a support team due to preconceived notions of it being more trouble than it’s worth. Be proactive and check in with customers frequently throughout their experiences. This shows that you not only care about them, but that you’re also there if they do run into any problems.
2. Encourage customers to share feedback
You know feedback is essential when it comes to making any kind of business decision (big or small). The key to getting feedback is to make it effortless for customers to do so. Ask for feedback on a regular basis and create an “open door policy” around how customers can reach your brand to share insights.
3. Learn from past customers
Unfortunately, there are going to be customers who leave despite your best efforts. The good news is: You can still gain insight on how to improve with feedback from this group.
Sending an exit survey via email will increase the likelihood of these customers providing feedback.
Understanding your Customer Effort Score is imperative to growth and forming lifelong relationships. With this information, you can fix any weak points in your customer journey and reduce your customer churn.
Let’s review what we’ve learned:
- Friction in the customer experience builds up over time, which can be detrimental to your business and customer base.
- Having a clear picture of your customer’s experience and effort will help you make adjustments at key touch points, thus improving the experience.
- Reducing effort can help drive repeat business, increase your revenue and create customer advocates.