Profitability has become an increasingly important topic as DTC businesses plan for Q4 and the increasing cost to acquire a customer.
Churn rate is one of be best ways to increase profitability at a customer level. It may be a longer term metric to move the needle, but most effective.
A 5% reduction in churn rate can increase profitability by 25-125% (Source: Fundera).
Churn rate simply refers to the measurement at which a business keeps changing customers, due to lack of innovative ideas and customer engagement. A lower churn rate implies a higher retention rate, and this has a direct impact on a company’s revenue.
Customer loyalty stats reveal that businesses focused on customer acquisition suffer from a high churn rate.
According to TechJury:
- 54% will consider dropping you If your business is not doing enough to engage your customers.
- 75% of consumers will favor a brand if there is a loyalty program that rewards members.
- 43% of customers spend more on brands that they are loyal to than those that they are not.
Now… how best to reduce churn?
3 ways:
- Focus on Top Customers – Rather than diverting time and resources to retaining any customers on the verge of leaving, refocusing on retaining the most profitable customers diverts you to revenue and encourage testimonials and referrals.
- Value-added Freebies – By providing your customers with relevant education or inspiration that helps solve a pain point is a small gesture can go a long way to build loyalty.
- Stay Competitive – Your customers’ needs and demands will change. Keeping a close pulse on your customer’s changing pain points will help you uncover messages and solutions that build brand value in the hearts and minds of your customers. While keeping your product or service cutting-edge is important, it’s also vital that you stay relevant with an intentional customer insight focus.
Tackling Churn with Data and Insights
Reducing churn starts with understanding why customers leave. Use data to pinpoint problems and fix them quickly.
Create Personalized Experiences
Customers prefer brands that make them feel special. Personalization can work wonders. A Salesforce report found that 84% of customers value being treated like a person, not a number.
Communicate Proactively
Don’t wait for problems to arise. Regular check-ins, quick surveys, and updates can build trust. For example, email campaigns with exclusive deals can re-engage disengaged customers. A well-timed message often saves the day.
Act on Feedback Immediately
Happy customers rarely churn. Negative feedback tells you what needs fixing. McKinsey found that 70% of customers leave because they feel businesses ignore them. Listen, act, and show you’re making improvements based on what they say.
The Secret Sauce: Consistent Effort
Retention isn’t rocket science—it’s about showing up consistently for your customers. Think of it like watering plants. Stay attentive, and they’ll grow into loyal advocates. Neglect them, and they’ll wilt.
Final Thought
Churn is the silent killer of profitability. Nip it in the bud with these straightforward steps. After all, keeping a customer costs far less than finding a new one.
What are your plans for reducing churn for the 4th Quarter? Tell us in the comments below!
