customer attrition

How to Reduce Customer Attrition and Keep Your Best Customers

Article Outline

Budget cuts, doing more with less, and consolidation of business tools are all on the rise in 2024. Jeff Coleman, chief customer officer at Act-On, explained during an interview that, as the economy contracts, customers are deciding to use fewer products and consolidate the ones they already have. And that leaves many battling to protect at-risk business.

Research shows that only two-fifths of companies focus equally on customer acquisition and retention, despite customer churn costing U.S. providers $168 million annually. The challenge is that even if you’re focusing on retention, cross-sells, and upsells, doing these tasks well isn’t always easy, and the job begins the moment the customer transitions from prospect to customer.

Jeff explained that the hunting and farming analogy is a common way to illustrate the difference between acquiring new customers (hunting) and retaining existing ones (farming). However, he thinks of it more like fishing at a friend’s lake.

“If I show up at your dock and you let me fish in your lake, you’re being nice, right?” asks Jeff. “But if I leave my litter, overfish, and behave badly, you won’t let me fish there anymore.” 

In other words, this bad situation happens when customers aren’t getting what they need after the initial sale (when we visit their ‘lake’). As we cultivate stronger relationships with our customers, we can deploy strategies from the onset that help build a foundation for reduced customer attrition and improve future growth.

The risk of customer attrition makes customer marketing and customer success crucial for today’s teams.

Two Types of Growth

Not all growth opportunities are created equally, with some being significantly easier to land. Jeff breaks opportunities into a couple of categories, which are:

Adoption-Led Growth

With adoption-led growth, you’re capturing opportunities that exist due to a natural evolution of business. “If your company uses Slack and hires five more people, you probably need five more licenses,” says Jeff. “Or if you have 1,000 employees using software and only have 700 licenses, it’s time to sell the additional licenses. These are the easiest opportunities to land.”

Capturing the “low-hanging fruit” is important, but you also want to master the more challenging opportunities, which require more complex strategies and time to execute.

Sales Expansion Growth

Sales expansion growth, which includes your cross-sells and upsells, is trickier than adoption-led growth. The challenge is that a “post-sale” isn’t like a traditional sale, yet you can’t approach it with a service-only mindset either. Expansion requires strategic planning to protect your existing business.

“Salesforce is an interesting example of this, where the salesperson is responsible for a loss up to a certain point,” says Jeff. “You can’t sell something new if it causes churn on the other side. You don’t get to count the increase unless you count the decrease.”

Before expanding, the key is to get the customer to use fully what they’ve already purchased. According to Jeff, most expansion is built on successfully deploying what the customer purchased the first time. In other words, it’s hard for a customer to justify buying more when they haven’t fully realized the value of what they already have.

Jennifer Blanco, director of customer marketing at Act-On, explains that when marketing to existing customers, an inverted pyramid is used.

Putting a stop to customer attrition is priority one for customer marketers. Learn how to engage customers from our experts.
Once your customer makes a purchase, customer attrition becomes enemy number one!

“The first hurdle the new customer needs to get over is onboarding, and the second is adopting your solution,” says Jennifer. “A great onboarding and adoption are the overall key to success, but not nearly enough companies put enough emphasis on these areas.”

When considering customer growth and retention, an important distinction is customer satisfaction versus customer loyalty.

In a recent McKinsey & Company study, customer care was cited among the top three priorities for participants. And despite companies working really hard at customer care and service, Jeff suggests that you can’t differentiate yourself on service alone. He explains that you need to get people to use your product successfully. It needs to be embedded in the infrastructure of what they do.

“I read this book about net promoter scores, and it talked about loyalty,” says Jeff. “It said, ‘How many times have you heard someone say, Yeah, I like that steakhouse, but if there’s a new one in town, I’m totally going to try it?’ There is a difference between satisfaction and loyalty.”

Building loyalty is one of the reasons why investing in a strong onboarding process is critical when it comes to getting embedded into customer workflows and helping them experience the full product value faster.

Customer Attrition and Building a Stronger Foundation 

Building a stronger foundation and reducing customer attrition start with your welcome series, according to Jennifer. She shares that, at Act-On, we break this into a couple of initial nurturing sequences:

  1. The new welcome nurture sequence. We give our customers the lay of the land and tell them what to expect during the onboarding process.
  2. The brand-new user welcome series. This nurture campaign is designed for users who have never used Act-On before. It has a few touchpoints focused on what to expect and beginner resources.

“I’ve found it’s amazing how many customers aren’t doing the basic things to get off to a great start,” says Jennifer. “We know that onboarding tasks are critical to our customers’ success, so it’s also critical to our success, right? The purpose of the nurtures is to make sure customers have the basics checked off their lists.”

Marketing automation is helpful for setting up these experiences with customers, but Jennifer highlights the importance of combining automation with a human touch.

“I’m constantly asking our customer-facing teams, ‘Hey, what have you heard from our clients lately?’” says Jennifer. “I want to find out which of our customers have recently had successes so we can celebrate with them and send them a gift or something special.”

This cross-functional balance is an important part of success. It improves the experience and builds stronger relationships to prevent churn and build loyalty.

Listen to your customers and help them solve problems: step one to stemming customer attrition.

Churn Reduction and Rethinking Measurement 

Customer marketing isn’t always straightforward to measure, mostly because there isn’t a single variable to track and calculate. When Jennifer measures success, she often looks at the overall impact:

How many customers participated in the program?

How many have upgraded to this specific feature?

What was the revenue impact of all of that?

For example, we recently relaunched a customer success program that involved transforming a basic customer webinar series into landing pages, office hours, and hands-on workshops.

During the first year, 286 accounts attended, and that attendance grew to 400 the following year – a 140% increase. Participants who attended had a 24% increase in retention.

So, remember: it’s a long game.

“If you can retain and grow your customer base, you’re going to continue to see your revenue go up,” says Jennifer. “But if you can’t keep and grow your existing customers, you’ll always be playing catch-up.”

Looking at existing strategies for churn management and customer relationship expansion can help prepare for stronger growth, because you won’t be fighting an uphill battle created by lost business.

Do you need help developing a stronger strategy to reduce customer attrition, reduce churn, and improve cross-sells and upsells? We created a step-by-step eBook to help guide you:

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