Enigma of Customer Churn: How to Predict and Prevent It?

Customer Churn can crush your business if unattended. Find out how to reduce churn and improve your bottom line with tips on improving the onboarding experience, customer service, and product adoption with Trainn.

Sudhersan Sugavanam
  • 2 weeks ago
  • 7 min read

Roaming around carnivals, we all would have spotted a tarot teller - the one who predicts the future, at least that’s what they claim. What if we ask them about customer churn?

In an ideal situation, for your money’s worth, they could tell you which customers are more likely to leave, why they leave, and what is to be done to make them stay. This input can help you retain your customers, increase revenue, expand your existing accounts, gain more referrals, and probably beat Saudi Aramco with your bottom-line figures.

But you don’t need a tarot teller to predict churn. All you need is a clear understanding of your customer friction points and of their reasons for churning. Once you are able to do it, you can predict and prevent churn.

What is Customer Churn?

Customer churn measures the percentage of customers who stop using your product or service. You can calculate the churn rate by dividing the total number of customers unsubscribed during a period by the total number of subscribers at the beginning.

Churn rate = The total number of customers unsubscribed/ Total number of customers in the beginning

Any business that aspires to grow should try to reduce its churn as much as possible. Because a higher churn rate causes a significant negative effect on the business, including loss of revenue, increased expenses for acquiring new customers, and lowered customer lifetime value.

Why Do Customers Churn?

Churn can be classified into voluntary and involuntary. While voluntary churn happens when a customer decides to stop using your product for several reasons, including failing to reach desired results, involuntary churn occurs as a result of unavoidable causes beyond the company’s control, such as the expiry of a credit card, change of customer’s strategy, etc.

Understanding the primary cause of your customer churn is important to prevent it. While involuntary churn cannot be controlled, a business can work to stop voluntary churn. Here are the top three reasons your customers churn:

  1. Poor Onboarding
  2. Lower Product Adoption
  3. Poor Customer Service

1. Poor Onboarding

It's not a secret that New Year's resolutions can be challenging to maintain, and this is especially true when it comes to fitness and health goals. The key to sticking to a workout plan is ensuring it is tailored to individual needs and aligns with desired outcomes. By understanding how the workout plan fits your overall goals, you can stay motivated and focused on the bigger picture.

Similarly, onboarding is the phase where your users interact with your product for the first time. Hence it is pivotal to make your users feel welcomed right from the beginning and show them how your product can be the solution they’ve been looking for. If users are not guided properly, they might not be motivated to use your product, which may result in early frustration and disengagement.

In summary, a good onboarding experience should reaffirm your users' choice to sign up and showcase the benefits of using your product. A simple sign-up process that takes users straight to the core feature of your product, along with a checklist to track their progress, can be a quick fix.

2. Lower Product Adoption

Product adoption involves making people aware of a product's value and encouraging them to begin using it. It is the doorway to achieving almost any business goal, including reducing churn, increasing revenue, and building brand loyalty.

Your product may contain the core functionality to solve your customers’ problems, but still, your customers may not achieve their desired outcomes. The only problem is that your customers must thoroughly understand your product to see its value. When there is friction, it demotivates users from using your product, resulting in lower product adoption.

For example, a user may find value in the core features of a project management app but may need help understanding the value of additional features like reporting or analytics. This could lead to users not fully utilizing the application and abandoning it for a competitor's product that conveys these features in a better user-friendly way.

Quick Tip: Customer educational videos can come in handy when introducing and explaining your product's functionality and how to use it. Also, 73% of customers prefer videos to learn new features. Connect with Trainn to start creating customer educational videos on the go.

3. Poor Customer Service

Ali Cudby, CEO of Alignmint Growth Strategies,  in her book, Keep Your Customer, says,

“When customers feel seen, heard, and valued, they get invested in their relationship with the company.”

Customer service is the arch over customers and the product. Your users may find your product to be a perfect solution to their problems, but without the bridge, aka good customer service, they may eventually quit. Every unresolved issue, delay in communication, and hostile response might cause a customer to stop using your product.

Loyal customers are built when they feel heard and cared for. Being wary of every small sigh of your customer seems easier when said.

Ali emphasizes 'authentic replies' to make your users feel heard and ratifies authenticity only occurs when a human sends the customer an acknowledgment, not an automated response.

But it may only be possible for a SaaS business at a later stage. Alternatively, proactive customer service with omnichannel support can give your customers the freedom to choose the support they need and make them feel cared for.

How Can SaaS Businesses Predict Churn?

The process of churn prediction considers various factors that may influence a customer's likelihood of leaving a company. The data collected may include demographic information, usage patterns, and behavior-related information. Predicting churn in advance helps the CSMs to reach out to the customer at-risk to take proactive steps to stop them from quitting.

Churn prediction allows a company to reduce its churn rate by identifying the pain points of customers who are more likely to leave. Analyzing and fixing pain points can enhance the product or service, increasing customer satisfaction and retention.

As a general rule, there is no one-size-fits-all model. To this end, we have outlined a few models for predicting customer churn.

It All Begins With the Data

Customer data will enable you to predict how customer churn will affect your business. The first step is to collect all historical data that may cause customers to quit. Next, segmenting the data can help you determine which group of customers is most likely to churn. This can help you identify the causes and helps resolve them before the customers step out of your door.

Olay, an American beauty company, collects data from its customers through Skin Advisor AI by asking questions about their skincare routines and preferences. The AI also analyzes the data on frequent purchases, search history, etc., and identifies user preferences and needs. With this information, Olay personalized user experience by displaying the relevant product users seek, making them revisit their page, and also it allows them to identify the products in demand.

For example, Olay’s Skin Advisor AI learned that most consumers preferred fragrance-free products. This helped Olay manufacture those products that their development team did not consider initially.

Know Your User’s Usage

When users don’t interact with the right features, they are away from getting the desired results, which may lead to churn. This applies to new customers because they may not know a particular feature exists. That makes tracking your user behavior data essential. User behavior data refers to user interaction, including completing onboarding checklists, hovering over icons, purchasing additional features, etc.

This data can help you identify the users who fail to use particular features that aid them in achieving their goals. Next, providing them with essential support guides can nourish them with the necessary knowledge to use the feature. This allows you to educate not only new customers but also existing customers who haven’t tried your new features.

Speaking of customer education, 94% of marketers confirmed that videos have helped them increase their understanding of products or services. Trainn helps users create and share videos effortlessly. Trainn also allows you to track total views, total engagement time, average engagement time, and many more in one place. Download our extension to start recording, or you can connect with us to get a dedicated demo session.

Putting Exit Surveys Into Action

Despite your measures, some customers will abandon your business for several unavoidable reasons. This can involve voluntary and involuntary activities. The sad truth is that you can’t stop them.

But you can use an exit survey that collects feedback which you can use to improve the user experience. Also, this data can be used to show the existing customers what they lose and gain a chance of winning them back.

For example, you can offer an affordable alternative to the plan if a customer churns due to price. That’s exactly what Moz, an SEO research tool does.

Any business wishing to retain its customer base and increase revenue must predict customer churn. Identifying which customers are at risk of leaving allows you to take proactive measures to resolve any issues causing dissatisfaction and retain these customers.

Providing personalized experiences, monitoring regularly, and using exit surveys can help improve users' performance and reduce churn. Trainn can help you reduce churn by welcoming your customers onboard more engagingly, showcasing the value of your product through videos, and giving your customers a more personalized and interactive support experience via a knowledge base. Book a demo now.