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Advantages Of Using Emails To Reduce Customer Churn Rate

Churn is your arch rival. Retaining existing customers is much more important (and cost-effective too!) than acquiring new ones. What is the point of spending all your resources, energy and time on the acquisition of new customers while ignoring the existing ones?

Customer Churn Rate
Image Source: Freepik

Customer churn rate is the worst enemy you can have while marketing your product. The churn rate refers to the number of customers lost over a period of time. It can be calculated on a quarterly or monthly or yearly basis.

Wikipedia explains Customer Churn Rate as “a measure of the number of individuals or items moving out of a collective group over a specific period. It is one of two primary factors that determine the steady-state level of customers a business will support.”

Calculating Customer Churn Rate

Calculating your customer churn rate is not difficult. The most straightforward way to do it is:

(Total no. of customers who left/Total no. of customers in the starting) X 100.

For instance, if you had 500 customers in the starting of the quarter and 5 customers left, then your customer churn rate comes to:

(5/500) X 100 = 1% for that quarter.

Like we said, this is the simplest way to calculate your customer churn rate in percentage. You can also calculate the churn rate based on the recurring loss value for your business or the number of customers lost.

Customer Churn Rate impact

(Image Source: Churn Rate 101)

Note for eCommerce Brands: Calculating the customer churn rate for eCommerce brands can be a little dicey but not impossible. This is because many times customers make repeat purchases within one-quarter itself. In such scenario, the brand can mark that particular customer who did not make any purchase during that quarter as ‘Churned’.

Calculating Customer Churn Rate: The Challenging Part

Many marketers confuse between revenue churn rate and customer churn rate. Although both look similar, they are actually different. Let’s take an example to clear out this confusion:

Let’s assume a company ABC has two product lines- basic and pro. Now, let’s say there are about 3,000 customers who pay around $300/month each. This brings the total value to:

3,000 X $300 = $900,000 MRR

The other product, Pro, let’s say has 1500 customers who pay around $100/month each. The total value comes to:

1,500 X $100 = $1,50,000 MRR

Summing it all up, ABC has in total 4,500 customers and $1,050,000 MRR.

Now, let’s assume that about 150 basic customers and 50 pro customers churn in one month.

Customer Churn Rate:

{(150+50)/4,500} X 100 = 4.44%

Revenue Churn Rate:

[({150 X $300} + {50 X $100})/1,050,000] X 100 = 4.76%

This indicates that the customer churn rate and revenue churn rate cannot be identical because of the two product lines, basic and pro, have different revenue values. This discrepancy keeps increasing, as the number of product lines increases. Hence, when calculating, it is crucial to note which method you are using.

Revenue Churn Rate: Helps in analysing the overall brand performance and financial status of the company.

Customer Churn Rate: Helps in retaining existing customers and re-establishing bonds with them.

 

For more details on various ways to calculate customer churn rate, you can refer to the cohort analysis by everengage.

Factors Responsible for Increase in Customer Churn Rate

According to research, about 20 percent of your existing customers contribute to 80 percent of your company’s future revenue. This just gives your team more reasons to work on reducing the churn rate percentage. Various factors cause your customer churn rate to spike up. According to a Preact poll, customer churn rate increased due to poor onboarding (23 percent) and underperforming product (20 percent). Some noted causes are:

Misleading Information = Customer Dissatisfaction

Your customers signed up with your brand because you promised to solve their problems or address their needs, and they believed you. However, if you are delivering nothing close to what you promised, you are literally making way to increase your customer churn rate steadily! Hence, it is paramount to stay relevant, stick to the context, and deliver what you have promised. If you can exceed their expectations, you surely hit the jackpot. It increases the brand loyalty manifold times and brings down the churn rate strategically. However, it is important that you do not spread information that is irrelevant, misleading and out of context.

High Subscription Cost

Charging your potential customers more than they can afford or more than any other competitors is more like turning your back to your customers. Ofcourse that does not mean you will bring loss to your brand, but maintaining a standard price is going to benefit you in the long run. If charges are excessively high, those customers who signed up for the free trial will switch to another product or service immediately. You cannot help but accept the fact: Customers always have many options to choose from. It is up to you to convince and retain them once they sign up for your product or services.

No Customer Engagement = Increased Customer Churn Rate

If you are not engaging with your subscribers, you can very well expect a subscription cancellation soon enough. The essential part is to engage with your customers the moment they sign up. Yes, that is the exact reason why you receive welcome emails from brands the moment you sign up. If you can get your subscribers to use your product or services almost immediately after signing up, the chances are high that these customers will turn out to be your long-term customers.

Failed Payment Gateways

Let’s assume your subscription plans are fantastic. They are cost efficient and enriched with useful features, services or solutions. You delight your customers with your comprehensive line of products. They now plan to get onboard as paid customers. When everything was going so great, your customers start facing unnecessary failed payment issues. It is common that more customers often result in payment issues due to reasons like expired credit cards, exceeding card limit, bank declining payments, and so on. These factors turn off your potential customers. Your hard work goes in vain unless you take a detour and recover these issues through dunning management practices.

Giving ample scope to your competitors to poach your subscribers

Okay, so that is the worst thing you can do. Making way for your competitors is like knowingly risking your customer base. It is necessary that you continuously innovate and engage your subscribers. You need to retain your existing customers before they change their minds and switch to another service or product.

Emails Reduce Customer Churn Rate Effectively

Emails have always been the best way to communicate, nurture and engage customers. Time and again, marketers have turned to email campaigns to create brand awareness, maintain brand loyalty and also establish a bond on a personalized level. When it comes to retaining customers, emails are touted as the best way to do so. In other words, you can bring down your customer churn rate with your emails.

In a comprehensive article, BareMetrics, a subscription analytics and insights tool, had noted down 17 emails they sent to reduce their churn rate, increase engagement and boost up their revenue. Starting with Onboarding emails spread through 14-days to follow up emails and in-app interactions- they have listed it all here.

How email marketing can reduce your customer churn rate?

Emails can be the gateway through which you can build a healthy and personal relationship with your customers. Let your emails speak for your brand, and boost the brand loyalty. Retaining existing customers is not a rocket science. All you need to do is nurture them with the right emails at the right time.

Before we discuss more on this, it is the prerequisite to know that getting a 0 customer churn rate is impossible. Be it anything, do whatever you want- you just cannot satisfy every single customer. However, you can always work towards bringing down the percentage considerably. Here are few ways in which emails can reduce your customer churn rate:

Send personalized emails to build relationships

There has been a detailed discussion on why personalized emails are a necessity for any brand. This email from GoodReads is a great example of customer retention-Customer Churn rate Goodreads

I received this email when I organized my lists of books that I have read and those that I wish to read. Although it is not like they are announcing a product launch or new event invitation, this email is highly personalized and contains ‘news’ tailored just for me.

Emails help in building personal relationships with your customers. The more they trust you, the better are the chances they will not switch. The whole experience with your emails should be smooth, personalized, and highly relevant. It has been revealed that about 89% customers move to another brand due to bad customer services. Innovate and engage with your customers from time to time.

Groove, a SaaS startup, was consistently having a customer churn rate of 4.5%. Although there was a steady inflow of new customers, their churn rate was not reducing. What Groove did was to segment their subscribers into a group comprising of those subscribers whose first session was less than 2 minutes. Then they sent out the following email to this group:

Customer Churn rate

The results were magnificent. More than 40 percent of those who completed the process stuck with the brand for about 30 days.

Segment Your Customers

The above case study of Groove also enunciates the importance of segmenting your customers. It is very important to segment your subscribers based on their behavior, how long they have been associated with your brand, whether they are on a paid or free plan, and so on. There is a huge difference between those customers who are with your brand for over a year and those who have just completed that 30-day free trial. You cannot send the same email to both these categories.

Send out educational content

Your emails should not be restricted to just announcing new launches or providing customer services. Sending out educational content that are relevant and useful plays a big part in strengthening the brand-customer relationship. When you provide free relevant content that is useful, you create a brand impression. For instance, this email from

LeadFuze:

Lead fuze customer churn rate The opening lines will definitely strike the right chord with marketers. You get a vibe that you can trust this brand to deliver all that it had promised when you signed up.

Another way is to provide small crash courses on various aspects related to your product or services and customer segment.

Send email workflows and reminders

Telling your subscribers explicitly what they can expect in the next email is more like preparing the ground beforehand. Apart from that, email reminders are an excellent way to establish a personalized bonding. You show that you care. For instance, this email from Viator

Customer churn rate example viatorIt helps your customers to go over all the requisites prior to their destination. You can say, Viator provides a checklist just when you are all set to go.

You can also send reminders for account renewals, account expiry, coupon expiry, and so on. For instance, this email from Dollar Shave Club. If you skip filling out the credit card information section when signing up with Dollar Shave Club, expect an email like this:

Customer Churn Rate This is just one of the many retention emails Dollar Shave Club sends out. The subject line and the email content, both are appealing and convincing at the same time. The ‘Free’ month promise and the image of this beautiful box are alluring enough.

Send feedback emails

One unique feedback email example is that from ClickinsightsIO. Their email campaign is like a triggered loop. Below is an example of one such email-

Customer Churn rate

This email does two things:

 

  1. First, it gets feedback if anything is wrong or not.
  2. Secondly, the links help them to track the user behavior and in turn trigger more personalized emails in future.

Another example is how the renowned marketing blog Kissmetrics handle feedbacks. A feedback bar is implemented for users. Users can provide suggestions or report complaints.feedback kissmetrics

Congratulating your subscribers for their achievements

It is the human psychology to feel elated when someone congratulates you for any achievements. So why not utilise that in your emails. For instance, this email from Elevate not just makes the recipient feel good but also nudges him/her to go forward and explore more.

Give out incentives and other such offers

It is vital to probe your subscribers to engage with your brand, and the best way is to offer something. One method is akin to what Dropbox does-Dropbox

The idea of getting more storage by referring is a great concept. Dropbox recorded a 60% spike in their sign ups after implementing this referral program.

The whole idea is to give something valuable to your customers so that they stick to your brand.

Some more ways to retain users through effective email campaigns:

  • Announce feature updates
  • Say Thank You to your customers for choosing your brand and sticking with you
  • Investigate why your customers chose to leave your brand

All the above ways can be summed up as follows:

Personalized and relevant emails can help in reducing the customer churn rates. The more you are able to connect with your subscribers, better are the chances of them sticking with your brand till the end. Like I mentioned already, it is always easier to retain customers than acquiring new ones. If you have used emails in any other form to retain your customers and have been successful, do let us know in the comments section. It is always good to keep learning!

Comments

1 Comment

Gregory Bennett

It is very clear that any business works on the no. of satisfied customers connected to it. Churn rate is the biggest enemy to any business. It is the no. of customers who stop using your services. In this post, the various factors responsible for the increase in churn are explained this would surely help a lot of people to overcome this situation.


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