How to reduce churn rate | 5 tips to boost customer lifetime value

Feeling the burn of client churn? Is that lost revenue putting a ceiling on your business’s growth? We’ve got 5 actionable tactics you can use to pump the brakes on client churn and maximise lifetime customer value.

Customer churn is a measure of how many customers stopped using your products or services in a given time period. You calculate your churn rate by dividing the number of customers lost by the number of customers you had to begin with.

It’s an important metric when it comes to growing your business. It’s not a fun or particularly sexy metric, as it’s not measuring your success so much as it’s measuring failure. It’s really the cold hard look in the mirror that shows you what needs to be shored up to keep your business growing.

Ultimately, if your churn rate is too high, you’re likely losing out on easy revenue and profit, as it costs more to capture new customers than to retain existing ones. The way to minimise churn is to maximise customer lifetime value, which is a calculation of how much a customer will be worth to your business over the entire relationship.

In this article, we’ll run through 5 top methods to reduce client churn by boosting customer lifetime value.

1. Improve your customer onboarding

First impressions count, and plenty of business relationships end as soon as they start due to a lousy onboarding experience. Create an intuitive onboarding process that educates new customers about your product or service and demonstrates its value straight out of the gate.

Regular check-ins at contact points during the early stages can identify and address issues before they become customer blockers, and develop into reasons for churn.

Now this obviously has huge applications in SaaS and other services, or any business involving a subscription, but if your method of selling products involves a process – such as a shoe fit for specialist running shoes, or some other biometric testing protocol for niche hobby gear, this can be intimidating to first time customers. Making their first experience positive is key, so fine-tuning the UX of this selling experience should be your first call in minimising churn.

Whether you’re a conventional retailer or you do things differently, think of someone entering your store or visiting your eComm site for the first time as an onboarding experience in itself and act accordingly.

Pro tip: Create a gamification experience to onboard new customers. This could be to bed them into a rewards scheme and create excitement with chances to win prizes, or if you’re selling software or a service, or if there’s any kind of a learning curve to what you sell, gamification offers a fun and engaging way to get them onboard with new ideas and ways of thinking, and could illustrate features of your product or service that they didn’t realise they needed.

Either approach can be structured through Drimify’s Dynamic Path™, which allows you to combine and customise different game engines from the catalogue to create an immersive onboarding experience for your customers.

2. Proactively audit your customer support infrastructure

Make regular reviews of your customer support systems to ensure they are responsive, efficient, user-friendly, and competitive. For example, if a new CRM comes out that literally changes the game in your industry, make sure you’re not left behind by your competitors.

Invest time and resources in training for your support staff, put in place hard systems to deliver a consistent UX, and implement feedback loops to ensure a continuously improving service.

If you’ve got a chronic case of customer churn: Use all the data at your disposal to identify weak spots. Between your website analytics, your CRM, your POS, and every member of your team, you can locate where you’re losing customers, or where customers are opting out.

When you find the leaks in your system where churn is occurring, you can make a decision on how best to plug them.

3. Focus on profiles with the highest customer lifetime value

Identify your most loyal and profitable customers – those delivering the greatest lifetime value to your business – and double down on these relationships.

Your approach could be to:

• Identify what they have in common to define a persona to target in your sales and marketing
• To reach out to them to find out what keeps them coming back and how you can make their experience with your business even better
• Or it could be to reward them and put them on some sort of VIP plan

Pro tip: Those aren’t exclusive to each other. It might make sense to do all 3. Be more targeted in your sales and marketing so you’re bringing in customers less likely to churn; improve an already high customer lifetime value by catering more effectively to their needs; and turn them from a long term customer to a lifetime customer by showing how much you value them.

4. Personalise your customer experience through gamification

We touched on this in improving onboarding for point 1, but gamification can help support your efforts to reduce churn at every stage of the customer journey.

Gamification is a 2-way means of audience engagement. You capture audience attention with a compelling experience, and utilise their heightened concentration to influence them towards a desired action, or get across a specific point.

With Drimify’s game creation platform, you can include open ended fields or drop-down preference boxes in data collection forms, or questions in Quizzes, to learn valuable information about your customer to enter into your CRM to personalise how your brand interacts with them.

This could be as day-to-day as making sure they’re segmented accurately in your mailing list, to learning more about what they want and are willing to pay for.

There’s no better antidote to customer churn than making customers feel cared about or listened to, and gamification is often the most effective vehicle through which to achieve this as it can give them agency in your communications.

Gamification at every touchpoint? Gamifying across the pirate metrics framework, which is to say before, during, and after a customer subscribes or buys, can be key to minimising churn. See below for the cheat sheet:

• Acquisition & Activation: Use marketing games to introduce your offering to your target demographics, or create longer, more immersive experiences to communicate in more detail how what you do can overcome their pain points. This creates a more informed buyer who is less likely to churn.
• Retention: Gamification can be used to create a more engaging loyalty programme that allows you to stay more connected with your customers. When customers are connected, and up to date, and engaged in your messaging on a regular basis, they’re more likely to stay your customer.
• Referral: Refer a friend, earn points, get entered into a prize draw, and multiply your customer base. If your ideal customer types are acting as your ambassadors, they can likely put you in touch with other customers that match their profile.
• Revenue: Gamification is an incredibly effective delivery system for promotional codes, and educating participants about your offering to start the relationship in the right way. Because they’ve played through to earn the code, they have a better idea of what they’re buying, and an informed customer is less likely to churn later on.

5. Focus on annual plans

Encourage customers to opt for longer-term subscriptions through annual plans. Offering discounts or added benefits for doing so makes the upfront commitment a more attractive prospect.

This approach not only improves cash flow, but reduces the rate of monthly churn. This longer commitment also gives you more time to build a lasting relationship with your customer – after all, meet someone once, you can never see them again and it’s no big deal, but seeing someone every day, even for a week or 2, and you’ll likely find more things in common and be more likely to stay in touch. It’s really not so different with a business relationship. This gives them time to rely on your offering, or to discover what it is about it that they love.

It also encourages the customer to discover more about your business so they can maximise their own investment.

Don’t ignore annual churn: Getting people onto those more lucrative yearly plans might remove monthly churn as a problem, but while annual churn bites less often, it bites a lot harder. Ensure you have multiple customer success touchpoints hardwired into your processes to touch base throughout the year, and ensure you’re delivering added value, and building a relationship that both sides are keen to renew.

Pro tip: Take the Dynamic Path™ format mentioned at the start, and build a digital calendar of experiences to engage, educate, and reward customers throughout the year to make sure your customers are receiving the latest updates, and even to draw continuous feedback through Surveys.

Key takeaway

Reducing your churn rate is a necessary aspect of your business strategy. It’s great to make lots of sales and convert new leads, but if you think about building your customer base like building a thriving community, you then need a certain amount of those people to stay.

Minimising churn starts with the sale – and extends through every customer interaction. The tactics listed here are starting points to lock down your own approach to keeping your customers and maximising their lifetime values.