Review our helpful guide on common causes for customer churn and tips to avoid them.
August 30, 2021
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.
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.
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.
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:
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.
Are you losing customers due to this kind of misalignment? Try these adjustments.
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.
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.
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.
This type of churn can be a tough one to mitigate completely, but here are a few tips that can help:
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.
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.
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.
Join 6,000+ subscribers who read the Happy Customers newsletter—it's jam-packed with tips-and-tricks about onboarding, HubSpot, and making happy customers at scale.
Learn how other companies have scaled with Arrows, so their teams can help customers be successful at every stage of their journey.Read customer stories