Prevent These Top 7 Reasons That Customers Churn

Review our helpful guide on common causes for customer churn and tips to avoid them.

Kim Hacker

August 30, 2021

11 minutes

No matter what service or product your business offers, customer churn is a threat to your bottom line.

The immediate revenue hit is obvious enough. When your customers take their dollars to your competitor, you lose out on revenue.

But customer attrition also hampers overall growth. If growth is about filling a pool with committed customers, churn drains the pool from the bottom while your sales team repeatedly refills it with a fresh flow of buyers. Real, explosive growth will only happen once you plug the leak.

The scope of the problem is alarming. According to the CallMiner Churn Index, U.S. companies lose a staggering $136.8 billion per year in avoidable customer churn.

The good news is that most of the reasons why customers churn are predictable and preventable, tied to a handful of common causes. In this guide, we’ll review each cause and give you actionable tips to turn customer churn into customer retention.

7 Primary Causes of Customer Churn

Some customer attrition is inevitable, so we aren’t saying your goal should be zero. Still, every lost customer is lost revenue. So if there are simple steps your company can take to reduce churn, it makes sense to take them.

Consider these seven top reasons for customer churn. Even with incremental progress in just one or two of these areas, your business could see a measurable reduction in churn. You’ll reap the revenue benefits of retaining more customers for longer, as well — and you’ll most likely improve customer relationships at the same time.

1. Customers Aren’t Properly Onboarded

Proper onboarding is crucial to healthy customer relationships. Why? Because when customers don’t get the chance to properly learn your product, they tend not to use your product very effectively.

Poorly onboarded customers often end up deciding your product isn’t meeting their needs and move on to another solution. Unfortunately, this happens even when your solution is, on paper, the better choice.

Business leaders know this is an issue, even if they don’t have actionable solutions. According to one Harvard Business Review survey, 85% of executives concur that quality customer onboarding links directly to long-term customer loyalty.

The scope of the problem is widespread, too. Most companies aren’t meeting their customers’ expectations. According to research from Wyzowl, more than 90% of customers responded that companies “could do better” in the new customer onboarding process.

There are many ways that inadequate training or incomplete onboarding can harm user experience and lead to high churn rates. For example, inadequate training can create a lack of customer expectations, where customers aren’t aware of or excited about all the benefits of your solution. You may also have customers who lack the technical skills to use your tool correctly and walk away dissatisfied.

Tips To Avoid This Type of Customer Churn

Setting up an onboarding process isn’t always easy, but it’s crucial for customer satisfaction and sustainable revenue. Follow these tips to avoid customer churn due to insufficient or incomplete onboarding:

  • Make sure your company has a unified definition of onboarding success.
  • Pay attention to the right metrics to measure the effectiveness of your onboarding program.
  • Always reach out to churned customers or those in the process of cancelling. Tell them you’ll close their account without any issues, you just ask that they explain why in a quick email or phone call. This will be some of the most valuable feedback you receive.
  • Survey existing customers to find out what they wish they had learned during their onboarding process. Then, make improvements where you can based on this feedback.

2. Your Product, Service, or Tool Doesn’t Align with the Customer’s Needs

Sometimes your product, service, or tool just isn’t the right fit for the customer, even if they line up with your ideal customer profile. It stinks, but it happens.

Many B2B SaaS solutions are complex products meeting complex needs. Sometimes, an incompatibility or true deal-breaker may not come to light until after the subscription has started or the contract has been signed, and a customer simply decides they need to move on.

But other times, this happens due to significant misalignment between the sales team and customer success team. When sales teams promise functionality that their tool or solution can’t deliver, you’ll end up with misaligned customers. And, sooner or later, those customers are going to churn.

Tips To Avoid This Type of Customer Churn

Are you losing customers due to this kind of misalignment? Try these adjustments.

  • Keep your sales team on message and on brand. Make sure they’re aligned and communicating with the product and customer success teams to understand the features and benefits of your product.
  • On the flip-side, learn from what your sales team is hearing and seeing as they engage with customers. That valuable feedback can shape product direction and give you visibility into your customer’s expectations ahead of having the next call with them
  • Consider providing deeper technical training to your sales force. Make sure they truly understand what your solution can — and cannot — do.
  • Tighten your marketing messaging as well. Sometimes, low-quality prospects are worse than no prospects. You’re spending money to convert customers who just aren’t going to stay.

3. Price Gouging the Customer During the Onboarding Process

Another reason customers leave is when they feel like they’re getting price-gouged, like the entire onboarding process is one giant bait and switch.

Now, upselling undoubtedly has a place in the onboarding process, but you have to approach it carefully. Customers shouldn’t feel like they were promised one price point, only to discover that the features they really need are only available in a higher tier or as a pricey bolt-on service.

When the customer onboarding process devolves into an extended sales funnel, customers lose trust in the business.

Tips To Avoid This Type of Customer Churn

  • Make sure you guide customers towards realizing that first moment of value from your product. This sets them up to use and eventually grow their business with you, resulting in the upsell you were after anyway.
  • Use transparent, upfront pricing at all points in the customer journey.
  • If you use tiered pricing and packages, build your tiers around cohesive feature sets and actual use cases.
  • Make upgrades and bolt-ons visible from the start (nothing with dollars attached should be a surprise during onboarding).
  • Use after-purchase and mid-onboarding upselling sparingly.

4. Ghosting Customers, Especially in Low-Touch Onboarding Programs

Churn can also happen because businesses engage with a customer and sell them a solution, only to completely pull back from interacting once the customer enters the onboarding process.

In other words, businesses sometimes ghost their customers, and it’s no surprise that customers ghost the business right back!

Low-touch onboarding programs are especially vulnerable to this cause of customer churn. Automated, set-it-and-forget-it onboarding has its benefits, like allowing businesses that are scaling or have small CS teams to efficiently onboard customers.

But when there’s little-to-no human interaction built into the process, it’s possible for customers to fall through the cracks and be forgotten.

Tips To Avoid This Type of Customer Churn

  • If there’s unintentional ghosting going on, you may need to switch to a less automated, high-touch onboarding system. (Check out our handy guide on this.)
  • If you’re low-touch because you lack the people-power to go high-touch, invest in an onboarding system like Arrows to stay on top of customer relationships.

5. New Stakeholder at Your Customer’s Company

When your customer gets a new stakeholder (maybe a new manager, marketing lead, or IT admin), that person often brings in their own preferred tools and workflows. Unfortunately, your solution might not be one of them.

This decision-maker won’t yet be convinced of your product’s value and may be looking for opportunities to cut it. When this happens, the stronger your relationship is with the current team, the better.

Ideally, your customer will have concrete results, use cases, and first-hand experiences to show the new stakeholder why your solution deserves to stick around.

Tips To Avoid This Type of Customer Churn

This type of churn can be a tough one to mitigate completely, but here are a few tips that can help:

  • Customer success teams must forge relationships quickly with the new stakeholder.
  • Build unparalleled loyalty with the in-place team through superior onboarding and ongoing support. The stakeholder may be convinced to stick with your solution based on overwhelming team feedback.
  • Reach out to the stakeholder directly, if possible, and offer a modified “new customer” demo to show the merits of your product.

6. Money Flow Changes (Payment Updates and Loss of Budget)

A common reason for churn with SaaS companies is something seemingly as simple as an expired credit card. Before they plug in their up-to-date payment information, your customer may stop to re-examine the value of your product and decide it’s not up to scratch.

This may be the case even with your long-time, loyal customers. The pause in service offers a clear-cut opportunity to stop and re-evaluate. And of course, your customer churn rate is likely to increase if segments of your customer base are facing significant market changes or budget cuts.

Now, in the face of serious financial pressures, few tactics will stop this kind of churn. But if you can prove to the customer that they’re getting a positive ROI thanks to your solution, you can stop many instances of financially motivated churn.

Tips To Avoid This Type of Customer Churn

  • Work to reduce your Time to Value (TTV), so your customers have that “Aha!” moment sooner— then keep that value in front of your customer for the long haul.
  • Implement frictionless payment methods that don’t need updating.
  • Show the client that your solution is an asset to their organization, whether it’s with built-in data reports or monthly account meetings.

7. Your Tool Is So Low Cost That It’s Forgotten

Some providers offer tools that are so low cost (and low touch) that they get forgotten. The price is so customer-friendly that users don’t feel immediate pressure to use the tool. But, like a cheap gym membership, eventually customers realize they aren’t using it all that much, and they cancel.

The real problem here likely isn’t the low cost. It’s the low value proposition. Your customers aren’t getting enough value out of your tool to use it, so they churn. Of course, the tool is worthwhile for your ideal customer. (You’re still in business, after all!) But due to hands-off onboarding or training, customers aren’t convinced of the value.

Tips To Avoid This Type of Customer Churn

  • Implement a high- (or higher) touch onboarding process to show the value of your tool or service quickly.
  • Solve the perceived lack of value with current customers (educate them about important, existing features for their use cases or add them to your roadmap).
  • If all else fails, experiment with raising prices to keep your tool front of mind.

Arrows’ Onboarding Platform Helps Fight Customer Churn

Customer churn can be a significant drain on your resources, but you can significantly reduce churn from most — if not all — of these causes with some smart adjustments. Addressing issues with your customer onboarding process will solve or improve many of these causes of customer churn, and Arrows can help you do it.

At Arrows, we’re redefining onboarding, giving you the tools to build high-touch, high-impact onboarding experiences. From personalized onboarding plans and templates to automated email reminders, our platform helps you keep your customers engaged and get value from your product faster.

Ready to reduce churn and boost customer satisfaction? Sign up for a free demo to see our platform in action.

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