How to reduce the abandonment rate in your business

Churn rate is the percentage of customers who stop buying your products or services in a given period. It is a metric that reflects the level of satisfaction and loyalty of your customers , and that has a direct impact on your revenue and profits.

Reducing churn is one of the main goals of any business, as it involves retaining existing customers and avoiding losing them to the competition.

In addition, acquiring a new customer is usually more expensive than keeping an existing one, so reducing the churn rate also saves resources.

But how can you reduce churn rates in your business? What factors influence customers' decisions to continue or not to buy your products or services? What strategies can you implement to improve your customers' experience and loyalty?

In this article we will give you some keys to answer these questions and help you reduce the abandonment rate in your business.

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What is churn rate and how is it calculated?

The churn rate is a metric that indicates the percentage of customers who have stopped purchasing your products or services in a given period.

It is calculated by dividing the number of customers lost in that period by the total number of customers at the beginning of the same period, and multiplying the result by 100.

For example, if at the beginning of the month you had 1000 customers and at the end of the month you had 900, your monthly churn rate would be:

Churn rate = (1000 - 900) / 1000 x 100 = 10%

This means you have lost 10% of your customers in one month.

The churn rate can vary depending on the type of business, the sector, the market, the life cycle of the product or service, etc. Therefore, it is important to compare it with the average of the sector or with that of your direct competitors, to have a more precise reference.

It's also important to keep in mind that not all customers have the same value for your business. That's why you can segment your churn rate based on different criteria, such as purchase volume, frequency, channel, demographic profile, etc. This way, you can identify which segments are more likely to churn and which are more profitable for your business.

What factors influence the dropout rate?

The reasons why a customer decides to stop buying your products or services can be very diverse and depend on both internal and external factors to your business. Some of the most common factors are:

• The quality of the product or service : If your product or service does not meet the customer's expectations, does not solve their problem or does not provide added value, it is very likely that the customer will look for other alternatives on the market.
• Customer Service : If your customer service is poor, slow, unprofessional or unempathetic, you can create customer dissatisfaction and frustration, which can lead to them leaving your business.
• Price : If your price is too high compared to the competition or to the customer's perceived value, you may lose their trust and loyalty. The opposite can also happen: if your price is too low, you may convey an image of low quality or little differentiation.
• Competition : If your competitors offer similar or better products or services than yours, with more competitive prices or better conditions, they can attract your customers and make them switch to their offer.
• Changing needs : If a customer's needs or preferences change over time and your product or service no longer fits them, the customer may no longer find you relevant or useful to their situation.
• Lack of communication : If you do not maintain constant and personalized communication with your customers, you can lose contact and interest with them. You can also lose opportunities to offer them new products or services, promotions, discounts, etc.
• Lack of loyalty : If you don't offer incentives or benefits for your customers to repeat their purchases or recommend you to others, you can lose their loyalty and commitment to your business.

How to reduce churn in your business?

Reducing the abandonment rate in your business requires a prior analysis of the causes that cause it and an appropriate strategy to prevent and reverse it. Some of the actions you can implement are:

• Improve the quality of your product or service : You must ensure that your product or service meets the needs, expectations and desires of your customers, and that it provides them with a differential value compared to the competition. To do this, you can carry out satisfaction surveys, quality tests, market studies, etc.
• Improve customer service : You must offer fast, professional, efficient and empathetic customer service that resolves your customers' doubts, queries, complaints or suggestions. To do this, you can use different communication channels, such as telephone, email, chat, social networks, etc.
• Set the price : You must set a fair and competitive price for your product or service, which is in line with the value perceived by the customer and the positioning of your business. To do this, you can perform an analysis of the competition, costs and profit margin.
• Analyze the competition : You must be aware of what your direct and indirect competitors are doing, what products or services they offer, at what prices, under what conditions, etc. This way, you can identify your strengths and weaknesses and look for ways to differentiate yourself and stand out.
• Adapt to changing needs : You must be aware of market trends and changes in the needs or preferences of your customers. This will allow you to innovate and improve your product or service, or create new ones that adapt to new demands.
• Maintain communication : You must maintain constant and personalized communication with your customers, informing them about news, offers, promotions, discounts, etc. that may interest them. You should also take advantage of the opportunity to ask for their opinion, thank them for their trust and encourage dialogue.
• Build customer loyalty : You must offer incentives or benefits so that your customers repeat their purchases or recommend you to others. To do this, you can create loyalty programs, customer cards, redeemable points, gifts, raffles, etc.

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Written by Moises Hamui Abadi : I am an entrepreneur, founding partner of Viceversa and SoyMacho. After leading several digital businesses and advising several other businesses, I decided to form MHA Consulting, a digital marketing consultancy dedicated to growing and empowering digital businesses in more than 7 countries and generating more than 1,500 million pesos.