Targeting Retention: How To Reduce Churn Rates

1 Jun 2023

Targeting retention: How to identify users at risk of churning

What is customer churn?

Churn is the unfortunate situation where customers stop engaging with a brand. 

A company’s churn rate, then, is the number of customers who discontinue their relationship in a given timeframe. 

It’s a little more complex than simply calculating how many users remain at the end of the period. There’s per-customer revenue loss to consider, as well as competitiveness and customer trust.

Churn is a little murky, given the complexity of human behaviour. But the one thing we all agree on is that high churn rates are bad. There are a lot of strategies to pull customers back from the brink of churning.

As the flip side to retention – which focuses on deepening customer relationships – reducing churn involves identifying people who are likely to disengage and earning their renewed loyalty.

5 benefits of reducing customer churn rates

1. Forecasting and financial stability

Stabilising churn rates makes accurate forecasting easier. While some customer churn is natural, spikes hurt the bottom line. 

2. Lower marketing budgets

Customer acquisition is more expensive than retention. That’s especially true for businesses with long sales lead times and/or higher margins for ongoing services, like insurers and subscription-based brands.

3. Customer loyalty

Satisfied customers are any brand’s best asset. There are more opportunities to up-sell and cross-sell, contributing to higher CLV.

4. Brand advocacy

Here’s where personalised marketing makes all the difference; empathetic brands earn loyalty, leading to more referrals and repeat business.

5. Long-term growth

Lower customer churn rates allow marketing and sales to find new business rather than continuously replenishing an emptying funnel.

Thomas Fordham TAP London

Don’t buy new martech without reading our guide to investing in better marketing.

Where does churn happen?

Churn can occur at any point in the customer lifecycle, although it’s most visible at the fulcrum points of conversion and renewal.

We’ll lay out some strategies to identify and reduce churn shortly. But first, it’s helpful to understand the two different types. Churn is like cheese; there’s hard and soft, with several varieties of each.

Hard churn

Hard churn refers to customers actively severing ties with a brand. It’s easier to identify since it involves clear and intentional actions by the customer, like:

  • Unsubscribing from a service
  • Cancelling a membership
  • Closing an account
  • Actively exiting the funnel

Soft churn

Soft churn is like ‘ghosting’. It happens when customers go dormant or disengage without taking concrete steps. They might still exist in the database, but they’ve reduced their interaction to a point where they can’t really be considered customers. Soft churn looks like:

  • Significant time passing since the last purchase
  • Months of unopened emails
  • Unresponsive to sales messaging
  • Abandoned wish lists or carts
  • Failure to renew a subscription or update payment details

“You might hear that soft churn is harder to spot. But that’s not universally true. As CXM consultants and data management specialists, we help organisations understand their customers’ behaviour signals and implement workflows to reduce hard and soft churn.” 

How to identify disengaged customers and reduce churn rates

Because churn happens throughout the lifecycle (and gradually), and because every business is unique, there’s no ‘bat signal’ identifying customers with one foot out the door. By the time they’re out, it’s often too late to win them back.

So, the solution is to look within. Not in a navel-gazing, soul-searching sense, but rather to look within customer data.

TAP CXM delivers data-driven intelligence without the fluff. Get practical solutions for sustainable business growth.

Pinpoint the problem

Monitor key metrics to see where engagement is in freefall. For example, are sales declining over time? Or are customer retention rates lower this year than last? 

Some helpful metrics to track include:

  • Purchase frequency
  • Average customer value
  • Lead conversion rates
  • Contract renewal percentage
  • Products per customer
  • Engagement frequency (website visits, app logins, sign-ins)
  • Interaction with product update content 

It’s not uncommon for growing companies to have a hidden churn problem. Revenue gains make it look like things are hunky-dory, but in reality, there’s an increasing number of customers cutting ties or not renewing.

Adobe Analytics has a powerful feature, cohort tables, which identifies declining trends. Using cohort tables, marketers can segment audiences and target high-priority churn factors.

Look at things from the customer’s perspective

Once you identify the trend, try to figure out what could be happening to prompt hard churns or discourage retention. 

For example:

  • Low lead conversion rates could be a symptom of sales and marketing misalignment 
  • Declining revenue on an app but not a website could indicate a bug-shaped barrier blocking customers from making a purchase or receiving timely communications
  • Decreasing engagement could be your customers politely telling you to improve content relevance
  • Falling renewal rates could be many things, like increased competition or a decline in perceived value
  • Shrinking average customer value could prompt the development team to roll out new features or products 

Adopting a customer-centric approach enables organisations to proactively solve problems and reduce churn rates.

TAP CXM worked with Petplan, part of Allianz Insurance, to adopt a customer-centric approach that started with enriching customer profiles.

Test and learn

Data analysis tools like Adobe Analytics can identify where churn is happening. Martech can even shorten the road between where and why. 

AI is making martech smarter, but it can’t create content or design workflows (yet).

Marketers still need to consider the types of content a user might respond to and prioritise retention strategies based on organisational goals.

Once the content is created, martech is back in the picture. Multi-channel engagement platforms like Adobe Campaign and Marketo Engage enable marketing and sales teams to engage customers with personalised messaging. 

The big advantages here are speed, scale, responsiveness and measurement. With an integrated customer data dashboard, it’s possible to analyse the impact of retention strategies on the individual level and zoom out to see macro trends.

See how TAP CXM helped Specsavers engage customers at risk of slipping through the cracks.

Can churn be a good thing?

In short? Yes. 

The fact you’ve read this far means churn is leading to positive change in your organisation. 

If that’s the case, our CXM consultants are looking forward to hearing from you. Our collaborative and pragmatic approach to customer experience management delivers measurable ROI for clients. 

We’ll help you identify and reduce churn rates for short-term turnarounds and long-term growth.

Get in touch with TAP CXM to speak with a customer experience specialist. 

Related posts