7 Key Strategies To Reduce Customer Attrition Rate

Customer attrition, another name for customer churn, can be a helpful indicator of a business’s health. In basic terms, this business metric captures the rate at which customers leave (or churn). A high attrition rate can spell serious trouble for a business’s financial posture and longer-term longevity.

Read on to learn why you should feel motivated to calculate churn rates in your CRM and what your salespeople can do to safeguard recurring revenue, minimize customer attrition, and manage turnover rate.

What is Customer Attrition Rate?

Businesses can calculate the customer attrition rate by dividing the number of customers lost during a specific period by the total number of customers at the beginning. Most of the time, defection is represented as a percentage.

In a hypothetical example, if a company had 100 customers on September 1st and lost 10 customers in 30 days, the customer attrition rate would be 10%. Continue reading to learn more about this formula.

Why is Customer Attrition Important?

Customer attrition matters for a number of reasons. Here are a few areas that it can affect and why your business reps should follow this number closely as your sales representatives analyze, grow and retain your book of business.

Brand Loyalty

Loyal customers are more apt to make repeat purchases, speak highly of your company and its services to friends and family, and leave glowing reviews. In contrast, a high customer attrition rate tells you that you’re struggling with brand loyalty, and you might need to rethink some key elements in your product or service to get in front of high turnover rates and low customer retention rates.

Revenue Impact

Losing customers en masse, or customer attrition, means you’re jeopardizing potential sales and income. A consistently high churn or customer attrition rate will lead you down the road of declining revenue and going out of business if you don’t intervene to improve the turnover rate, customer experience, and customer relationships.

Cost of Acquisition

Money is better spent on preventing the loss of a customer than trying to acquire a new one. A high customer attrition rate makes it challenging to remain profitable and sustain recurring revenue year after year,

You can calculate and analyze your customer churn rate by doing the following:

Calculate the Churn Rate

This method is commonly used to calculate turnover because it’s straightforward. Use this formula to accurately track and analyze customer attrition in the larger context of customer relationships:

Churn Rate = Total Customers Lost / Total Customers at the Beginning of the Period

Track Customer Lifetime Value

This number is helpful because it tells you the total revenue a customer generates over the lifetime of the relationship. A high client attrition rate in your CRM negatively impacts customer lifetime value.

Monitor Customer Engagement

Aside from the traditional rate formula percentage, you should keep a watchful eye on indicators of customer churn. You should review markers such as website traffic, email engagement stats, and social media interactions, to spot customer attrition trends that might suggest customers are less than pleased after onboarding. Unhappy customers put your brand at risk of higher turnover.

Conduct Customer Surveys

Business intelligence tools like customer service surveys can be a great way to collect feedback from your customer base after onboarding and correct course as needed. Surveys can help you understand your audience, hit sales quotas, and positively impact customer attrition.

Analyze Customer Support Tickets

Take the time to audit customer service tickets, especially after the onboarding process. In doing so, you might uncover common customer service issues and trends shaping customer attrition after your sales team converts them.

Active vs. Passive Churn

It’s helpful to know the difference between active and passive churn rates, as well as which one applies to your customer base and quotas. Active churn is the kind that happens when customers elect to cancel their accounts or subscriptions. In contrast, passive churn happens when customers drop off due to factors beyond your control. For instance, in this turnover scenario, they might have forgotten to update their credit card or relocated. That’s involuntary churn and not as concerning as other causes of high turnover rates that can impact your quotas.

The acceptable range for customer attrition rates is not static. Rather, customer attrition and turnover rates will vary by industry and other factors. Still, the prevailing wisdom is that between 2 -8% is a safe range for a rate formula. A higher customer attrition rate l can be a sign that you need to retool your customer retention strategies.

Top 10 Reasons Why Companies Experience Customer Attrition

1. Pricing and Cost

A higher customer attrition rate can be due to high prices or unexpected fees, diverting and prompting customers to find options that better fit their budgets.

2. User Experience

Making it difficult to do business with you can send even the most loyal of customers running for the defection hills. For example, a clunky website or products with a steep learning curve can create dissatisfaction and result in a less-than-satisfactory customer attrition rate.

3. Poor Customer Service

Less-than-stellar customer service can tarnish customer relationships and cause a high turnover rate. Customer attrition is directly tied to the everyday customer experience.

4. Attracting the Wrong Customers

Alignment matters in customer retention, as well as for customer attrition on the other side of the coin. Acquiring customers who don’t fit in your target market can drive up this involuntary attrition rate. 5. Lack of Personalization

A generic customer experience can be a turn off and cause customer churn not long after the onboarding process. Some will leave because they get fed up, even if your salespeople were exceptional and addressed all of their pain points.

6. Limited Product or Service Offerings

Businesses must make voluntary changes to meet changing customer experience needs to lower customer attrition. If they don’t rise to the occasion, customers may seek alternatives. You’ll lose out on recurring revenue because of the mass customer churn and missed opportunities to deepen customer relationships. A high turnover rate may be a sign that you need to retool your product mix.

7. Competition

A compelling value proposition and customer experience can lead customers to switch brands if they sense they might get more for their money. Your sales team might need to up the ante on its efforts to address a high customer attrition rate.

8. Negative Word-of-Mouth

The perception of a poor reputation can lead to defection because existing customers might wonder if there’s a larger pattern and don’t want to fall victim to a poor-quality experience. In this way, customer attrition can be contagious and sour even good customer relationships.

9. Lack of Innovation

Don’t be afraid to introduce new products or services on a voluntary and proactive basis to see what sticks. Creativity can help you retain customers and drive down your customer attrition rate.

10. Lack of Incentives

Many customers are motivated by loyalty programs that encourage repeat business. Without some sort of incentive program, customers might feel less inclined to stay the course, bringing down your retention rate.

7 Key Strategies To Reduce Customer Attrition

You don’t have to hope for the best when it comes to customer retention and avoiding defection. Rather, there are actions you can take to improve your position and keep loyal customers engaged. A few to keep in mind when trying to mitigate customer attrition include:

1. Targeted Customer Acquisition
   Focus on growing your customer base with consumers that represent your ideal custome profile. These individuals are more likely to stick around so your sales team can be more successful in bringing in recurring revenue from existing customer relationships.
2. Improved Offering to Prevent Customer Attrition
   Innovate to improve your products or services so they better resolve pain points.
3. Better Customer Experience
   Customer service is crucial, so be sure to make this a priority. Dial in customer service and take care to invest in a positive customer experience to reduce involuntary churn rates,
4. More Effective Customer Marketing
   Embrace the power of targeted messaging to help your sales team connect with customers on an individual level, keeping them in the loop about promotions or new products. When customers feel more engaged, it’s easier for sales reps to close the deal.
5. Engage Customers Regularly
   Encourage your sales reps to connect with customers regularly, even after onboarding, to help them feel valued. It’s the perfect time to inquire about any concerns and curb churn and attrition rates at the same time.
6. Upgrade Customer Onboarding and Support
   Prioritize an intuitive onboarding process and educate customers on how they get the most value from your products or services. For example, you could host live demo-style events on Facebook and Instagram.
7. Improve Retention Strategies
   Introduce loyalty programs, referral incentives, and other retention strategies that give customers a reason to stayand continually have a greatcustomer experience.

Manage Customer Attrition With Podium

These strategies can help you significantly reduce customer attrition rates, calculate sales quotas, and support overall customer satisfaction. In addition to these strategies, you need a partner in your corner who can bolster your retaining efforts and help improve the rate formula.

Podium’s leading platform helps sales teams retain customers by automating interactions and improving the customer experience. Here’s how Podium can help your sales reps enhance customer relationships and reduce customer attrition:

1. Lower Churn Rates With Enhanced Communication Channels

Use Podium to engage with customers via text. This customer retention method is often faster and more convenient than email or phone calls. A few of the practical applications to reign in customer attrition include appointment reminders, follow-ups, and responding to customer inquiries. Texting is a great way to interact with customers on their terms and stay organized while keeping customer attrition rates in check. Plus, the unified inbox pulls in interactions across all channels, so your team never miss a message and can revisit conversations at their convenience.

1. Curb Turnover Rate With Customer Reviews and Feedback

Use Podium to request customer reviews through automated messages. Good reviews are crucialfor businesses, especially for startups that don’t have social proof. Endorsements can encourage other customers to do business with you.

In cases in which the feedback is less than ideal, you can use these insights to make strategic improvements that impact customer attrition and customer acquisition. Listening to and addressing customer concerns shows you value them enough to translate their critiques into action. If one person speaks up, the chances are that others are thinking the same thing. You might find that following up on a complaint can help you turn the ship around and avoid a high turnover rate or defection on a larger scale.

2. Lower Client Attrition with Improved Customer Experience

Podium’s live chat functionality means you can respond quickly, a key factor in reducing customer attrition. Prompt responses can improve customer satisfaction and discourage them from going to your competitor. Plus, by interacting with customers via their preferred channels, businesses can show they’re invested in the customer relationship and not just looking at customers as a revenue source alone.

Watch a demo today and see for yourself how automated solutions can help your team achieve and exceed your customer retention goals and quotas, reduce high client attrition rates, and improve your business.