Customer Churn (Part 1): Benefits of Reducing Attrition

4 minute read, posted on 12/23/2021, by VXI Marketing

Customer Attrition

Customer attrition, also known as customer churn, is what in business is also known as a silent killer. Customer churn is an occurrence when customers of a business choose to stop patronizing and not continue purchasing their products as well as decide to no longer interact with the business. Deciphering the mysteries of customer churn is integral to any business because it is a well-known fact that keeping customers is cheaper than acquiring new ones.

Fortune 500 companies will agree that keeping existing customers loyal is important in keeping their businesses alive. There are several reasons why a business needs to take care of existing customers.

Cost-effective. Recent studies show that it costs 5 percent more to acquire a new customer than it does to keep a current one. It costs 16x more to bring a new customer up to the same level as a current one and 82 percent of companies agree that retention is cheaper to execute than acquisition. It also costs more to court new customers because of all the ads you have to pay for, the marketing legwork, customer education, and many more that go into winning new customers. Existing customers, on the other hand, already have a working knowledge of what your product does. That means mess talk time for your customer service representatives.

Free marketing. Loyal customers who love your product will never stop talking about it: to their family members, acquaintances, and just whoever has a willing ear to listen. That is some valuable free marketing that you will never get anywhere else, not even through business process outsourcing services.

Devoted customers are more tolerant. Your customers have come to know you as a friend—or in more intimate cases, a family member. This statement rings true if you take car owners for instance. Many Americans have stayed loyal to General Motors over the years it has existed and you will hear children buy the same Chevy or Cadillac model that their father or great-grandfather had bought. By familiarity and sentiment, loyal customers will be more forgiving and will stick by your product no matter what your slip-up or blunder may be.

Freedom to experiment and innovate. Since it is established that loyal customers will stick by you no matter what, you will be free to experiment and innovate to show your customers how important it is to keep developing your product (and make a profit in return). Loyal customers will be able to give you enough wiggle room to try new things. This brings us to the next point.

Ready feedback. Your loyal customers should be the first ones to be informed about any new product or innovation, and they should also be the first ones to tell you whether you are on the right track with it or not. Engaged customers will provide your business with the feedback that you need. That being said, loyal customers may tend to be the most resistant to change, and they will make it known if they do not like something. Take heed.

Better Employee Health. Loyal customers are, for the most part, happy customers. If customers are happy, then it is assured that your employees are pleased too: the less angry customers call into your call center outsourcing, the happier your employees are. Take advantage of these moments to make your employees feel that they are being cared for by the company they are working for too.

Understanding the reasons why customers decide to leave is also integral in keeping your business afloat. Next time, we discuss how to reduce customer churn. In the meantime, you can get in touch with us so that we can help you with customer retention.

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