How to Reduce Customer Churn: Top 5 Causes & Best Practices

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    How to reduce customer churn

    More About Customer Churn Prediction

    It’s 2023 but customer retention is still a big challenge for B2B businesses. Around 5% of B2B customers churn today, a number that customer success leaders are desperately trying to bring down. But how to reduce customer churn? Read on to understand the main reasons why B2B customers actually churn and learn about the 5 best practices to grow faster.

    My NRR is great! Why is reducing churn so important? 

    Most companies, regardless of their size, have been focusing on measuring their Net Revenue Rate (NRR) over the last few years. This is a great thing to do from the business standpoint, but it doesn’t really point to drops in customer sentiment or risks that have freshly appeared in accounts. Businesses can only respond after the damage is done, something that forces them into reactive strategies.  

    This is why reducing churn, even if it’s not looking bad, is key.

    You can only address the problem and reduce customer churn by analyzing it. This action is becoming more and more crucial for business growth today. Analyzing churn impacts not just your ability to prevent it, but also grow from it. Accurate insights can improve your GTM and business strategy, while also better defining and accurately planning your product roadmap to improve customer happiness. 

    Reducing churn vs improving NRR

    The two things are similar in many ways, but still are different at their cores.

    Focusing on your NRR will help you expand happy customer accounts by using various upselling and cross-selling tactics. On the other hand, reducing churn and analyzing it helps prevent unhappy customers from leaving. Furthermore, the latter will also help you push them up the happiness scale and lay the foundation for future expansion. It is safe to say that today, Retention and churn fighting is equally important to new business deals.

    Read More: The Ins and Outs of Churn Analysis

    Top 5 reasons for customer churn 

    Before learning how to reduce customer churn, it’s important to understand why it actually occurs. There are dozens of reasons that create churn, based on specific industries, geolocations, and other factors. But some stand out across all verticals.

    Here are the 5 main reasons why customers churn:

    • Organizational Changes – The best example can be the sudden departure of the champion in a key account. This development can come out of the blue and create risks that are hard to uncover with traditional methods or metrics. You can also be unaware of upcoming funding rounds, expansions, sudden promotions, departmental restructuring, and similar unexpected events.
    • Tough Competition – Today’s markets have become very competitive, often with very little technological differences between rival offerings. Customer success ops and post sales cycles that analyze churn can now help product teams learn more about the latest trends, preferences, and requirements. This eventually allows businesses to achieve a better product-market fit.
    • Unsuccessful Onboarding – Customer onboarding isn’t a process, it’s a mindset. Failing to recognize the importance of this key concept can lead to elevated frustration, lack of engagement, and eventually churn. Some B2B products and applications can even have an “overengineered onboarding” process that can prove to be confusing and counterproductive. 

    Simply put, the customer will churn if the first success takes too long. A disproportionate amount of churn occurs between the acquisition stage and the first success. The gap is often too wide for comfort.

    The Success Lifecycle, Courtesy of Groove

    • Bad Product Experience – Creating a capable and feature-rich B2B offering is just the beginning. You also need it to be accessible and user-friendly to make a true impact on the customer. For example, cumbersome and buggy interfaces can lead to more complaints from the end users (to support and their bosses) that can lead to the dreaded outcome – churn.
    • Poor Response Times – It’s no secret that customers want quick responses from support teams and their tickets to be resolved fast. But they are now also expecting post sales teams to be more proactive with their strategy and allow them to handle issues in a self-served manner. For example, they prefer to get access to online video tutorials, knowledgebases, and more.

    How to reduce customer churn 

    Now that you have a better understanding of what issues are the main causes of customer churn in B2B setups, you can and should start creating your playbook after asking yourself and your team a set of strategic questions.

    • What are your main challenges currently?
    • Of the ones you have listed, which ones are the most painful?
    • Why are they painful? How do they impact your day to day activity?
    • What will be your best case scenario with your customers? 
    • Is this scenario achievable and what are the roadblocks?

    Once you have the answers to these strategic questions, you are left with the everlasting dilemma – how to reduce customer churn. You can get closer to your goals by integrating the following best practices into your playbook.

    1. Proper customer relationship tracking

    Customer success teams simply can’t afford to sit back and wait for #@&% to hit the fan anymore. Relationships within accounts are constantly changing and you need to be on top of things. Set stakeholder KPIs and track them relentlessly. Once you are prepared for organizational changes beforehand, you can make the shift to a proactive approach. For example, you can groom a new champion if needed.

    1. Take on your competition

    Being proactive is the name of the game again. Learn your competition, conduct conclusive market research, and prepare battle cards before you go to war (literally). Feel the pulse and understand customer pains via customer communications, review websites (G2, Capterra, etc.) social media channels, and surveys. This is the only way to stay ahead of your competition and keep your customers happy.  

    1. Optimize your onboarding 

    The idea here is simple. You need to make things straightforward and guide customers to their first aha moment as soon as possible.  For example, you can show them previews of what’s to come or a streamline tour of the product’s features. Once the customer can visualize success and experience demonstrated value, the possibility of churn gets left behind in the rear-view mirror.

    Furthermore, CSMs have to turn customers’ into strategic product consultants. The discovery part has to be addressed and customer pains need to be uncovered. This is the only way to plan, create, and amplify the aforementioned aha moments.

    1. Improve the product experience

    Customer success teams need to be on top of things also when it comes to creating optimized product experiences. They can do so by tracking customer sentiment in real-time and pinpoint the friction areas to help product teams optimize things. Drops in customer sentiment and other risk signals can then be addressed with cross-department actions, a shift from traditional reactive approaches.   

    1. Robust communications 

    Communication channels are multiplying and CS teams can no longer be selective with their approach to them. A thorough channel mapping and response strategy needs to be in place for best results. CSMs must improve their email responsiveness, while resolving tickets faster without ignoring Slack chats and social media messages. Strive to improve your communication metrics across the board.

    Using AI to boost customer retention

    While the aforementioned best practices can help your retention efforts significantly, how to reduce customer churn is a question that will still be looming in the background. But the power of AI can now help you almost nullify churn in more than one way – it can help you analyze root causes of churn, detect risk factors (relationship changes, sentiment drops), and be more proactive in general.

    Staircase AI is a true game changer because it helps you with all of the above. You can manage your account via one centralized dashboard for enhanced visibility. Churn risks are highlighted for quick(er) responses, sentiment levels are monitored 24/7, and you even get a live customer journey map to detect new friction points. Only this kind of end-to-end approach can help you achieve sustainable growth.