7 Strategies for SMBs to Tackle Customer Churn
Customer churn is dangerous problem, particularly for SMBs with memberships or subscriptions. It can cause substantial financial loss and damage that an SMB could struggle to recover from. This article covers what churn is, what causes it, and how it impacts a business. It then gives seven strategies SMBs can action to cut churn. It also shows a step SMBs can take to have these strategies performed for them.
In this article:
- What is customer churn?
- Causes for churn specifically for SMBs
- Dangers of churn for SMBs
- 7 strategies for tackling churn
- How Dynamics 365 Business Central and Bluefort can help
For a subscription-offering small or medium-sized business (SMB), every customer counts.
That’s why every time you lose one, it feels like a big deal. And when you lose a few? You can go into damage control mode.
It’s no wonder; churn can cost you both money and growth.
Customer churn is something that an SMB will always have to worry about, unless they have the right strategies and tools to tackle it and turn things around.
This article will talk through what churn is, the causes, the impacts and strategies you can use to negotiate churn once and for all.
What is Customer Churn?
Churn is a measurement of the loss of customers over a certain amount of time, usually annually or quarterly.
Here’s how it’s calculated:
Choose a time period to evaluate and find the original and end number of customers over that time. Then use this formula:
Number of Lost Customers / Total Customers at the Start of Time Period) × 100 = Churn Rate
An SMB needs to keep an eye on the rate, because churn is like a leak in a boat. First it can feel like a little dribble. But eventually there’s a tipping point and it’s too late to stop.
The first step to tackling churn is understanding what it is. And the second step? Knowing what causes churn.
Causes of Churn Specifically for SMBs
Why do customers leave SMBs?
We work with SMBs of all kinds. 9 times out of 10, churn isn’t technically their fault. They just lack the resources to avoid these problems.
Here are the most common causes from the circumstances we hear:
- They don’t see the value: You know the value of your products and business because you’ve worked so hard to build it. But that value isn’t obvious to customers. They act only if they know they’re getting value for money.
- They’re not engaged with you: When customers don’t talk to you (through social media or staying in touch with questions or feedback), chances are they don’t feel attached to your brand.
- They notice your competitors: SMBs often don’t have the resources to study competitors or fight them off. But better-equipped competitors can swoop in and poach customers with temporary offers and discounts, or better service.
- Mistakes and bad customer service: When an SMB’s resources are stretched, mistakes happen in things like invoicing or contract terms. Customer service might be stretched, or not available 24-7.
- Their reality doesn’t meet the expectation: We can fully intend to fulfil promises when we make them. But circumstances change. And then you’re stuck, unable to fulfil, which breaks trust. According to YouGov, 31% of consumers have switched brands because a company was lying about product performance
The good news is that all of these problems can be tackled and solved. But before that, it’s important to look at the impacts of churn. If these causes of customer churn aren’t tackled, what are the problems your SMB is vulnerable to?
Dangers of Churn for SMBs
Churn can damage your SMB’s health and sustainability.
Churn makes your customer acquisition cost go through the roof because you miss out on the benefit of repeat purchases. This forces you to acquire new customers, which costs five times as much as retaining a customer you already have.
This demands you beef up your already limited marketing budget, which means less budget for another part of the business, like product development, training, infrastructure, or employee quality.
And there’s no guarantee it’s going to work either.
Churn wears away your long-term inbound revenue streams. You need a predictable income; it’s absolutely key to your financial stability.
But when a customer leaves, you lose the Customer Lifetime Value too. That’s the amount you would get from them over a long period of time.
That lost revenue will force you into hyper-work mode, struggling to catch-up and find that inbound revenue money somewhere. You may struggle to be able to focus on anything else.
In fact, it can impact your overall operational efficiency because marketing, sales, and customer service now must scramble and figure out what to do, then spend extra time doing it. That’s less time and focus on building a strong customer experience and long-term relationships with them.
It can also siphon off mental and emotional energy, so you haven’t got the ability to problem-solve and make decisions. SMB workers are particularly susceptible to burnout so it’s important to be careful about anything that can cause it.
You’ll also be vulnerable to reputational damage. When customers leave a business, they have a tendency to tell friends and family, and write online reviews.
Without a good reputation, you’ll get stuck in a loop where you can’t attract the new customers you need to help improve your reputation.
Any of these impacts can have a big effect on the stability of your SMB. And if you’re suffering from multiple impacts, you probably already feel unstable.
What can you do to put your SMB back on the path to stability and cut down customer churn for good?
7 Strategies for Tackling Churn
As an SMB, you need to be able to take action to solve a problem fast.
Here are the 7 most important strategies you can use to improve your customer churn rate:
1. Don’t ignore your data. Use it. Customer data sits there in your system waiting to be used. It can provide invaluable insights into customer behavior, buying patterns, segments, and engagement levels.
And specifically, it helps predict churn by spotting at-risk customers (and larger patterns) so that you can proactively take care of issues before customers go.
2. Make it personal: Customers both value and expect a personalized experience. They will give loyalty to a brand that makes them feel valued and understood. Using that data, you can create entirely unique in everything from communication, offerings, pricing, customer service, loyalty programs and everything in between.
3. Roll out the red carpet: Customers should feel beyond valued and appreciated. Invest in your customer service rep (or team). Give them the training and resources they need to make sure that every customer problem is either anticipated or sorted out right away.
And tap into the value of customers’ feedback – that information is gold because they’re telling you what they want. It also reinforces brand positivity.
4. Mean what you say: Sometimes black swans happen. Unexpected events can stretch your SMB’s resources, push back deadlines, etc. That can’t be helped. But when it comes to regular communication about your products and services, mean what you say.
Don’t overpromise on product offering, launch dates, performance, or whatever else. It instantly destroys trust and once they leave it can be hard to get them back.
When you treat trust as something that’s non-negotiable, it will never backfire on you. So when things go wrong, communicate with your customers and offer solutions. Don’t wait till they contact you wondering what’s happening.
5. Reward loyalty: We live in a world where we don’t see a lot of loyalty. And when we do, there isn’t a lot of reward for it. So be different from most SMBs. Reward your loyal customers with specialized discounts, exclusive offers and products, and early access to your new offerings.
The more special and appreciated you make your customers feel, the more likely they are to stay. Why would they go anywhere else?
6. Stay flexible with subscriptions: Subscriptions are a great way to build long-term relationships with your customers (link) because you stay in constant communication with them. They’re regularly exposed to the value of your products and brand.
When you do offer subscriptions, give control to the customers who want it. Flexible subscriptions allow them to change or pause when they need it so that they won’t have to cancel outright. It’s an extra that helps avoid churn.
7. Keep an eye on your competition: It can be hard to cut down on churn if you don’t know what your industry landscape is like. What are your competitors doing? What advantages do they have over you? What are weaknesses? And how are you different to them.
Competitors can be ruthless. They’ll comb through your social media and the comments people leave on it. They’ll study your reviews. They look at message boards to find what people are saying about you. Then they scoop down and poach those customers with what they’re looking for. Can you do the same back?
After looking at this list, you might be thinking, “My resources are already stretched to the limit. How on earth am I supposed to add all these to the pile of work we already have?”
And you wouldn’t be wrong. It is a lot of work. Unless you have a tool that can do everything for you.
How Dynamics 365 Business Central and Bluefort Can Help
Imagine a little fairy who can swoop down, wave their wand, and take away the work for you and your team.
Sounds impossible. But that’s what the right cutting-edge solution will do.
Business Central is the perfect ERP system for SMBs. It’s flexible and it grows with you.
And Bluefort are the recurring revenue experts. We can implement Business Central for you with all the customization you need to get the most out of it.
Here’s what the combination brings:
- Better analytics: Reliable, in-depth analytics to pinpoint customers who are at-risk of leaving your business. Then it creates tailored suggestions for offers and interactions to keep them on-side.
- Complete revenue recognition: No matter what the terms, how often customers change their contracts, or how fast you’re scaling.
- Personalization: Customers are analyzed and segmented giving an experience that’s as personalized as possible. Each customer gets the pricing models, offerings, and communications that they want, when they want it.
- Feedback and loyalty: Feedback collection avoids nasty surprises. You won’t have to wonder what they want or what they’re thinking. And you can give them the bonus of loyalty programs specifically created for them and their needs. That puts you in a proactive instead of reactive position.
- Customer service that stands out: The tools will integrate the personalized customer experience with what your customer service teams need to ensure that any problems that arise can be dealt with fast.
- Flexible subscriptions and memberships: Easy subscription management, giving customers the flexibility they need to stay with your business.
- Accurate, timely, and optimized processes and operations: Silos between sales, finance, and customer service silos are gone. So are the delays and mistakes they cause. In their place you have streamlined and automated information flow and operations- from contract terms, to invoicing, payments, reconciliation, reporting, and compliance.
You’ll finally have the time to focus on creating more amazing products, building relationships, and creating collaborations.
It’s not often that something that is complex, like customer churn, can be made simple with one decision.
But with the right tools, you can end up working less and in a much better position with your customers.
And it can get better as you scale too.
Conclusion
Cutting customer churn is about more than just hanging on to your customers.
It’s about building the types of relationships with your base that last the test of time by consistently demonstrating the value of your products and your brand.
That comes down to seeing what causes the churn in your SMB, and getting down to those strategies before too much damage is done.
You can have growth. You can enjoy excellent relationships with your customers.
You just need the right tools. And the D365 Business Central and Bluefort combination equips you with the way to cut churn and thrive against your competitors.
Curious to learn more? Ready to tackle churn head-on? Request a Discovery Call with our team today!
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