Did you know that reducing client churn by 5% can boost your profits by 25 to 125%? And that the probability of selling to a current customer is 60% to 70% while the probability of selling to prospective clients is only 5 to 20%?
The numbers are clear: client retention is key to the success of your B2B brand, and customer churn is detrimental to your business goals.
So what is client churn, and how do you reduce it?
We’ll describe three primary ways you can put a lid on leaving clients. But before that, let’s find out what client churn is and how to calculate it.
What is Client Churn?
Client churn is the number of clients that leave your business in a specific period. Your churn rate reveals how your business is retaining its clients.
Why is The Churn Rate Important?
Why does finding out and fixing your churn rate matter? Because it’s too expensive both for you and your clients to stop business transactions with your brand. For instance, it’ll cost you 16 times more to pull a new client to the same level as a current customer.
And in terms of your overall revenue, client retention is the major driver of a company’s revenue, according to a KPMG study.
How to Calculate Your Churn Rate
The simplest churn rate calculation is:
the number of churned customers/the total number of customers
Divide the number of clients that left your business over your chosen period by the number of clients you had at the start of that period.
For example, if we were to calculate the churn rate for July, it would look like this:
- you had 4000 clients on July 1st
- you had 3789 clients on July 28th
Subtract 4000 – 3789 = 211
Calculate your churn rate: 211/4000
Churn rate = 5.3%
With that said, also consider other factors like:
- Time Frame: Is your total client number calculated for the annual cycle, year, month, etc.?
- Moment of Client Churn: The moment of business cancellation by the client
- Sample Size: Is your sample size out of 10,000 or 1,000,000? It’s crucial to maintain your sample size for all churn rate calculations.
The Ideal Client Churn Rate
The ideal client churn rate is 5% or less. When you reach a churn rate of 10% or higher, it’s a red light that your client experience needs to change fast. Make sure you analyze your costs and use win/loss reason codes for better CRM reporting.
3 Ways to Reduce B2B Client Churn
As you can see, focusing on decreasing churn is crucial to keeping your business profitable. But not too many brands understand where to start with churn reduction.
Let’s examine three ways you can maintain client retention and reduce your churn rate.
1. Improve Customer Service
Horrible customer service is the leading reason for client churn. A study by Oracle on customer experience revealed that the two primary reasons for clients leaving a business is slow service and incompetent/rude staff.
Also, churn due to low-quality service is at 70%. So you don’t want to downplay the effect of poor customer service.
Data reveals that 58% of clients won’t use a business again after just one negative experience, which means your game needs to be topnotch consistently.
Making sure your clients get the first-class service all the time will save you from losing them and others linked to them.
2. Be Aware of Customers’ Unique Position and the Needs of their Business
Research shows that 91% of customers would use an online knowledgebase over contacting a support or sales agent if it was tailored to their needs.
This is important information for your business because the needs, goals, and reasons for each client’s engagement with your brand are individual, and you need to be aware of these unique needs in your sales process.
A one-size-fits-all approach will rarely work if you have clients with varying budgets, problems, or decision-making authority. That’s why you need to determine what your clients are looking for in your brand. Once you understand what your clients are after, you can tailor your sales process to correspond with their profiles.
Here are some of the most common approaches to the selling process:
- Value selling: Focusing on your customers’ needs over anything else. Show the client the value that they get for their money.
- Solution selling: Identify your clients’ pain points and then offer your product or service as a solution to that problem.
- Conceptual selling: Understanding why your clients make certain decisions and aligning your business to that frame of thought, so your brand becomes relatable to your clients.
If you present your business in such a way that it speaks to your client, you have a much higher chance of reducing the churn rate.
3. Be Diligent about Deadlines and Deliverables
It’s a fact that 68% of customers leave because they believe the company doesn’t care about them. And one way to nurture that belief in clients is by failing to deliver on deadlines.
The worst you can do is not meeting deadlines, not communicating the reason to the client, and not discussing how you plan to fix the issue.
It’s vital to agree to realistic deadlines only and ensure that you stick to them. This boosts your clients’ trust in your brand and shows them how important they are to your business.
However, business mistakes happen, and you may miss a deadline for reasons beyond your control. In such situations, always reach out to the client, tender an apology, and explain why deadlines were missed. Then ensure the new deadline you set is met.
Communicating with clients is crucial as well during ongoing projects, so your client can tell where you are with the project and won’t get surprised if you’re unable to meet up.
Client churn is detrimental to any B2B brand. Knowing how to discover when it’s happening and how to reduce it is vital for business success.
The three ways outlined in this piece will enable you to cut down on unsatisfactory service that leads to client churn and boost your retention rate.
If you have additional ways, tips or questions feel free to comment below!
Heather Redding is a part-time assistant manager, solopreneur and writer based in Aurora, Illinois. She is also an avid reader and a tech enthusiast. When Heather is not working or writing, she enjoys her Kindle library and a hot coffee. Reach out to her on Twitter.