Understanding and tackling churn risk before it’s too late

10 min read

Every business loses customers. If you are regularly acquiring new ones and doing a good job of retaining them, the odd person deciding to no longer use your product or service is no big deal. But if that odd person turns into a steady stream of people leaving, you have a problem with customer churn that needs addressing. 

Why?

Because the more customers leave, the less profit and revenue you make, and the more you have to spend to replace them. Ignoring the underlying reasons can harm growth and eventually kill your business.

The good news is, by measuring and understanding why customers churn, you can prevent it from happening and build a sustainable business.

Can you recognise the signs of an at-risk customer? Read on to unravel the mystery of churn risk and discover how to read the signals of unhappy customers. We’ll also explain how to predict churn and give you some tips to increase engagement and retention.

What is customer churn risk?

Churn risk refers to the likelihood that a customer will stop doing business with your brand.

Understanding and managing churn risk is critical to your long-term growth and profitability. Customers leaving at a higher-than-expected rate can: 

• Reduce customer lifetime value (CLV): Customers leave more frequently and spend less during their time with your business
• Slow growth: Constantly replacing customers you’ve lost makes it harder to build a customer base
• Increase customer acquisition costs: It costs more to onboard new customers than to keep the ones you have
• Harm your reputation: High churn rates indicate a problem with your product or service that can spread through word-of-mouth if not dealt with

However, knowing why customers want to leave and taking steps to address issues can help you: 

• Boost customer retention by better meeting their needs
• Improve your product or service through ongoing feedback
• Avoid negative reviews from dissatisfied customers
• Increase CLV by keeping your best customers around

To reap the benefits (and avoid the negatives), you need to identify your at-risk customers. Let’s look at some key indicators.

How to spot and understand at-risk customers

Customers churn for all kinds of reasons. 

Some leave voluntarily, meaning that they make a conscious decision to stop using your product or service. 

This could be due to factors such as a poor experience, lack of features or functionality, decreased budget or a better offer from a competitor.   

Others leave involuntarily due to technical or administrative errors. For example, an expired credit card, a billing error, or not receiving email communications.  

Stopping churn from happening will help to keep your business profitable and sustainable (researching benchmarks for your industry will help give you a figure to aim for). 

So, how do you spot customers at risk of churning? Here are four things to monitor: 

1. Net Promoter Score (NPS)

Net Promoter Score is a voice of customer tool that businesses use to collect feedback from customers. 

NPS surveys ask customers to answer a simple question by picking a number between 0 (low) and 10 (high). For example: 

“On a scale from 0 to 10, how likely are you to recommend our product to a friend or colleague?” 

You can use their answers to gauge customer sentiment by grouping customers into three categories: 

• Promoters: Loyal customers who rate you a 9 or 10
• Passives: Satisfied but unenthusiastic customers who rate you 7 or 8
• Detractors: Unhappy customers who rate you from 0 to 6

Detractors are your at-risk customers and the ones you should investigate. 

Follow up your rating question with an open-ended question to understand why they gave the specific score. For example: 

“What is the reason for your rating?” 

Analysing responses will help you establish common frustrations you can fix to turn detractors into promoters (and reduce churn). 

Say, a common response from detractors is a lack of understanding about how to make the most of your product. Sharing how-to guides and tutorials can increase engagement and help users see the value in your product, making them more likely to renew their subscription.

2. Customer Satisfaction Score (CSAT)

Where NPS gives you a view of customer sentiment to assess loyalty, CSAT measures a customer’s immediate satisfaction with a product, service or interaction. 

For example, after a customer support call, you might send a CSAT survey to assess satisfaction with the service provided. 

Like NPS surveys, you can use a Likert scale (0-10, 0-5 or 0-3) in CSAT surveys to get an insight into overall satisfaction, with follow-up questions to collect in-depth thoughts and opinions. 

Use CSAT surveys across different areas of your business to understand customer experience. Focusing on low scores will help you pinpoint areas that require attention to avoid churn. 

3. Customer support tickets

Like NPS and CSAT surveys, support tickets offer useful insights into customer pain points. Look for trends in the tickets you receive. For instance:

• What technical issues do customers have (e.g., login issues, billing problems, glitches, etc.)?
• Which features do customers most need help with? 
• What are the most common misunderstandings? 

If users are reporting the same problems, these are likely reasons that will cause some to eventually leave. Getting ahead of them will help you improve your overall customer experience.

4. User engagement and activity

While customer responses offer clear and valuable insight, not everyone engages with surveys or voices their displeasure. They simply get fed up and leave. 

To learn about customers who fly under the radar, track engagement and activity. 

Declining usage is a sign that a customer isn’t getting value from your product and a red flag for future churn. 

Monitoring customer behaviour will give you a clear view of their engagement. Look at activities such as: 

• Logins
• Feature usage
• Purchase history (e.g., type of purchase and purchase frequency) 
• Marketing engagement (e.g., email click-through rate and social media interactions)
• Support requests  

Apteco’s customer segmentation software helps you group customers based on their behaviour. You can use this to target at-risk customers with tailored content or offers. 

For example, you might send feature updates to remind customers of the value they are getting. Or use push notifications to pull customers back in. Social media platforms do this effectively to keep people using their apps. 

Segmenting your customers also lets you observe how churn risk impacts customers on different pricing tiers. 

For instance, do customers on lower plans have enough features to stay engaged? Are higher plans priced competitively enough to stop users switching to a rival? 

Understanding this can help you give customers the right level of support, resources and offers to keep them happy. 

How to predict customer churn

To reduce churn risk, you need to predict which customers are most likely to leave and address issues before they arise. 

Collecting feedback and tracking customer behaviour will give you a wealth of data to understand problems. It’s important here to focus on current customers and those who have churned. 

Look at customer records such as purchase history and subscription status to determine which customers have stopped using your product, and research previous interactions (e.g., support tickets and exit surveys) to learn why they left. If you don’t have that information, run surveys or interviews to collect feedback.      

Look for patterns in your data by analysing customers who churn and those who stay loyal. The differences between the two will help you highlight predictors of churn risk. 

Additionally, drill down to spot combinations that increase churn probability when they happen simultaneously. 

For example, if a group of customers contact your support team about a specific feature and show declining usage, they might be at a higher risk of churning than customers who display one of these behaviours.

Using a predictive analysis tool will help you spot common patterns to identify at-risk customers. 

Our predictive analytics, for example, uses multiple data points to recognise significant customer characteristics and behaviours. By assigning customers a score, you can accurately predict who might churn and devise strategies to retain them. 

5 ways to reduce customer churn

Reducing churn isn’t solely about stepping in to save at-risk customers. It’s about meeting needs at every stage of the customer lifecycle, so fewer customers reach the at-risk stage. 

Here are five tips for improving customer experience to cut down on churn.

1.  Create an informative onboarding process

According to Retently, poor onboarding is the biggest reason for customers leaving a business, resulting in 23% of average customer churn.  

If you’re not supporting your customers at the beginning of their journey, you run the risk of them not getting full value from your product or service. 

Educate customers to strengthen relationships from the off, with helpful resources such as: 

• Live or recorded product demos
• How-to guides
• Video tutorials
• A community forum
• Product or service help centre
• Check-in calls or emails to answer questions and collect feedback

2. Reward customer loyalty

Loyal customers are your biggest asset, helping you grow through regular spending, providing feedback and recommending you to others. So, it makes sense to keep them around. 

An effective way to reward your best customers (and stop them leaving) is to enrol them in a loyalty program. 

According to Yotpo, 83% of consumers who use loyalty programmes make repeat purchases. This, McKinsey research found, can boost revenue by 15% to 25% annually. 

Most loyalty programmes fall into one of four categories: 

1. Points-based: Customers collect points by purchasing or recommending products to redeem for freebies or perks
2. Tiered: Customers receive higher levels of rewards and benefits based on their spending or engagement
3. Paid: Customers get immediate and ongoing benefits for a recurring or one-time fee
4. Value-based: Customers are rewarded for actions that align with brand values, such as sustainability, social responsibility or community involvement

The right loyalty programme depends on your business model and target audience. Use surveys, polls, and customer data gathered using our software to test what incentivises your customers to sign up for a loyalty scheme and which rewards appeal to their purchase habits. 

For example, if customers are price-sensitive, percentage discounts might encourage repeat purchases. On the other hand, if you sell an enterprise-level product, members are more likely to be motivated by VIP events and early access to new features. 

3. Personalise marketing and communication

Personalisation is no longer a benefit—customers expect it. According to a McKinsey report, 76% of consumers get frustrated when they don’t receive personalised communication and offers. That frustration can result in churn. 

However, if you deliver personalised experiences, customers will reward you for it. 

76% of consumers are more likely to make repeat purchases, and 78% are more likely to recommend companies that personalise. 

Apteco’s targeting and analysis tools help you identify and segment important customers and engage them with relevant content. 

For example, by tracking purchase activity, you can recommend complementary products or provide personalised support to help customers make the most of their product. 

Personalising their experience across different touchpoints helps grow engagement, boost loyalty and increase customer lifetime value. 

4. Offer proactive customer support

Your support team is a crucial link between your business and its customers. Service quality has a direct impact on customer experience (CX). 

According to a study by Marigold, over half of consumers say that excellent customer service support is more important than price. 

There’s a financial impact, too. Zendesk Benchmark data shows that 3 in 4 consumers spend more with businesses that provide good CX. However, 73% will switch to a competitor after multiple bad experiences. Worse still, over half leave after only one bad experience. 

Here are some tips to deliver proactive support that quickly addresses issues and reduces churn: 

• Create a self-service resource library with guides and FAQ's to empower customers to solve problems on their own
• Provide omnichannel support (phone, live chat, email, social media, etc.) so customers can easily reach you on their preferred channels
• Use chatbots to engage customers who need quick answers to common questions
• Respond to support tickets promptly, keeping customers updated on progress and resolutions
• Track response times and customer satisfaction to spot weaknesses and make improvements
• Reward customer support staff for their efforts to boost morale and motivate them to maintain high standards 

5. Follow up with customers 

Listening to your customers is the best way to understand what they want, so you can keep them happy and prevent churn. 

When a customer purchases or interacts with a product or service, use NPS and CSAT surveys to gauge their overall experience. 

Additionally, set reminders to check in with customers at specific milestones. For example, you might email a customer two weeks after purchase to make sure everything is okay with the product. An alternative is to call them in the run-up to their renewal date to discuss packages. 

Making customers feel valued, appreciated and respected is a proven way to win their loyalty. 

How to measure customer churn

To measure how effectively you are reducing churn, you need to keep a close eye on your churn rate. This can be done in Apteco dashboards, where you can easily set up a target vs. actual number cards to measure key performance indicators against predefined targets. 

Periodically calculate your churn rate by dividing the number of customers lost during the given period by the number of customers at the beginning of the given period. Then multiply that figure by 100 to get a percentage. 

For example, if you have 1000 customers at the start of the month and lose 100 customers by the end of the month, your churn rate is 10%--(100/1000) x 100 = 10%.

Compare data over time to track progress and identify patterns or trends in customer behaviour.

Reduce customer churn with Apteco

Reducing churn is an ongoing process that involves fully understanding your audience and continuously analysing and adapting to meet their needs. The better you understand your audience, the easier it is to meet their needs. The answers you need are in the data. 

With Apteco’s end-to-end marketing platform, companies can leverage the full power of their data to track and analyse customer behaviour and identify the causes of churn. When used alongside predictive analytics, this allows you to automatically detect at-risk customers who show signs of leaving and then automate personalised, highly targeted campaigns across multiple channels to boost long-term engagement.

Book a demo today to see how our marketing platform can help you turn churn risk into opportunities.