How to Reduce Customer Churn and Boost Your Revenue

May 20, 2020 Richard Blatcher

When it comes to sustaining and growing your business, one of the most important factors is retaining customers. No matter how many new customers you may have, if the customer attrition rate (number of customers who cancel or leave) is greater than customer retention, you will experience a loss in revenue.

This loss in customers is often referred to as customer churn, and while it is a normal part of business and to be expected, it’s important to keep it within a healthy range, which varies depending on the industry. 

Unfortunately, many organizations don’t know their churn rates or do not have the proper tools in place to analyze churn and how it happens. The distribution industry, in particular, is quickly changing with the introduction of digital tools that can provide valuable insights into customer metrics, but many distributors have yet to capitalize on these tools.

Thankfully, a combination of insights, metrics, and action by distributors can help to close service gaps that may be contributing to higher churn rates. So, why does churn happen and what can you be doing to improve customer retention? Keep reading to learn about why customer churn happens and the best ways to reduce it. 

 

Why Does Customer Churn Happen?  

In an ideal world, organizations would not experience customer churn, but the reality is that it exists. There are several reasons for this, including:

Customer sold their business or acquired a new one 

Customer went out of business (involuntary churn)

Customer can no longer afford products or services

Customer did not find value in the product or service (voluntary churn)

Customer found another provider  with better product and/or buying experience

Customer did not feel cared for or valued

Customers lose trust  in distributor because of bad experience or slow service

While some of these reasons are unavoidable, like a customer going out of business, there are a number of ways to help you retain customers. Tracking customer churn can be a big undertaking, especially if you are managing a large distribution operation. 

Thankfully, there are a number of effective digital tools that can help you assess details about your customers and how they buy. With these tools, your distribution business can be more agile and responsive to the unique needs of your customers and changes in your industry. 

 

7 Ways to Reduce Customer Churn 

Churn management doesn’t have to take up all your time with the right tools, metrics, and action items. Check out these seven ways to help you reduce customer churn to boost revenue and improve the customer experience.

1. Track Purchases and Revenue for Existing Customers 

While we’re focusing primarily on customer churn, revenue and changes in buying behavior can signal customer attrition rates. Ideally, you want to see revenue increasing for existing customers and their purchases to continue for the long-term for all products. If a customer is no longer purchasing a particular item, it’s a potential sign of customer churn beginning to happen. 

The challenge for distributors is that most of their customers are buying hundreds or even thousands of items, making it difficult to notice when one of those items is no longer being purchased. Without the right technology in place to track customer behavior, distributors could be missing out on opportunities to address this change, checking to see if it’s because of seasonality or that a customer went to a competitor.

With the right software tools, distributors can quickly detect these slight purchasing changes and stop customer churn before it happens. They can address problems the customer may be having with their service before the customer starts looking to a competitor. 

Another thing to consider in regard to customers going elsewhere are customer acquisition costs (CACs). Distributors don’t want to lose customers because it can be more expensive to get new customers than retain current customers. Identifying where your customers need the most support is crucial to maintaining a good relationship that allows distributors to focus on nurturing customer relationships rather than constantly finding acquiring new ones.  

2. Empower Sales Teams with Customer Segmentation 

Illustration depicting a distributor identifying opportunities tailored to a specific customer segment

One of the major pain points distributors have is navigating the complexities of a fast-moving industry with slim margins. Pricing decisions aren’t always made based on specific customer needs, but rather, by lowering prices to remain competitive. Unfortunately, this often leads to poor margins and ineffective sales strategies. 

With the right digital tools, distributors can identify sales opportunities that are tailored to specific customer segments. This better serves the customer and ensures sales reps are using an optimal price for your organization.

Using opportunity detection software can also help sales reps offer appropriate upsells to current customers, showing commitment to the customer’s needs. They may be able to call out specific products or services that are being under-utilized or alert customers of a new offering. By recognizing the customer’s needs, distributors can help reduce customer churn with prompt, proactive, and personalized service that truly supports the customer. 

3. Decrease Quote Turnaround Time 

New and existing customers want to feel valued. If they inquire about a product or price and get no response or a very slow one, chances are good that they’ll start looking elsewhere for what they need, leading to customer churn. This is especially concerning in regard to existing customers.

So, how do distributors reduce turnaround time? Optimize the configure, quote, and price process with CPQ software. CPQ software can help distribution sales teams deliver more accurate quotes in minutes, offering optimized prices for every sku and every deal.  It also ensures that consistency remains between negotiated prices and online prices. Additionally, you can avoid over-discounting products and services, which could lead to lost revenue. 

As customers feel attended to, they’re much more likely to stick around and take advantage of your great services. 

4. Listen to Your Customers to Build Trust

Vector illustration depicting the ways a sales team can listen to their customers

Building good relationships with customers is vital in the distribution industry. Customers seek out distributors that become their partners, showing that they care about their needs and are willing to efficiently and effectively resolve problems when they arise.

Listening to customer interactions helps distributors get more familiar with them. The information gathered from different resources allows teams to address customers quickly and appropriately to take a more proactive approach to engagement.

There are a number of ways to listen, including:

Evaluating the amount of time a customer spends viewing a product online

Purchase experience

Information from their visit to an eCommerce site

Email interactions

Complaints

Phone conversations for sales or troubleshooting

As you gather feedback, you can make adjustments to your offerings and customer service as needed, showing that you are responsive and attune to your customers. 

5. Upgrade Your Digital Experience for Efficiency and Transparency

While many industries are moving at lightning speed to improve the customer’s digital experience, many distributors are struggling to keep up. In today’s digital world, B2B buyers expect a seamless online experience just as much as they do great customer service. In fact, if they don’t get the service or answers they want quickly, it may start to trigger customer churn.

To solve this dilemma and engage in good churn management, distributors need to focus on adapting their digital strategies to meet the demand for quick, accurate pricing and service. AI-powered dynamic pricing tools can meet the demands of the ever-changing digital marketplace so that distributors can keep up with the competition.

Customers also desire transparency, particularly when it comes to online pricing and interactions. They want as much information as possible to know that the prices and products available are truly the best ones. With optimized pricing tools, customers can get a clear view of the data underlying recommendations, fostering a sense of trust in the distributor’s service. 

 6. Build Strong Customer Relationships from the Beginning 

Illustration depicting 5 tips for building stronger customer relationships

The process of nurturing new and existing customer relationships is key to preventing customer churn. Starting from the onboarding process, customers desire to feel like each part of their journey is personalized and being attended to. 

Starting with a good onboarding process can help set the stage for a good customer/distributor relationship. This process may look different for each industry and business but having a clear process for it can help reduce customer churn. In fact, some studies reveal that the top reasons for customer churn are related to poor onboarding, causing the relationship to sour at the start. Here are a few tips for putting together a solid strategy for building better relationships with customers:

1. Tailor customer journey to the persona you’re speaking to. 

As we mentioned above, customer segmentation is important for offering the right products and prices to your customers. Distributors may be serving customers from different backgrounds and industries, so it’s important to speak to them in a way that they understand. If you have customer personas set up in you CRM, this is a good opportunity to draw on data and metrics that can help you personalize the onboarding process, just like you personalize the sales process. 

2. Communicate clearly. 

Make sure the customers know what they’re receiving, understand expectations, and where to go if they need help. You may also want to put together tutorials to help educate them on how to use a product, or navigate platforms associated with your distribution services. Breaking information in a clear and concise way will help your customers feel empowered and supported. 

3. Stay engaged. 

Encourage and motivate customers with strategic email communication that offers reminders, tips, and acknowledges milestones they hit along the way. Continue to engage with customers even after they’ve signed up for your offerings.

4. Keep tracking. 

Continue gathering feedback and information that will help you identify areas of growth for your distribution business and the onboarding process, which can help reduce customer churn over the long run.  

5. Stay ahead of renewals. 

With CPQ software, it’s much easier for distributors to keep track of when customer renewals are on the horizon and what types of negotiations have happened and may need to happen to best serve the customer. 

7. Foster More Customer Engagement 

Your customers don’t want to be forgotten about–they want to feel like they’re valued before, during, and after the sales and onboarding processes. So, be sure to continue engaging with them across various channels to remind them how much you care about their experience and keep up good churn management.  

One way to do this is to track metrics for each customer’s journey. Evaluate where they struggle, when attrition happens (is it during onboarding, after, a year in?), website and email metrics, social signals, and other metrics relevant to distribution. With proper tools, you’ll understand who your customers are and what they need so that you can create more meaningful engagements with them. A few examples of ways to engage are:

Upgrade eCommerce channels for easier user experience

Create streamlined mobile experience for customers using devices

Offer educational opportunities like webinars 

Update customers regularly via email newsletters with tips and special offers

Establish social media presence that speaks to specific customer segments

Identify additional services customers may want and offer them

While these are all great things to include in your customer journey, don’t forget to be responsive. Providing information and engagement opportunities is helpful, but if a customer doesn’t feel that it’s reciprocated, customer churn is more likely to occur. 

 

Reduce Customer Churn with AI-Powered Software 

If you’re wondering how to reduce customer churn, look no further than PROS AI-powered software solutions. PROS’ churn forecasting algorithms identify where customers are struggling, where they fall off in the customer journey, and where opportunities exist. Even better, PROS Dynamic Pricing and CPQ software can be easily integrated with your existing CRM to automatically provide data-driven recommendations, helping your sales and customer service teams offer the most value to customers. 

Read more about how PROS AI-powered pricing guidance helped a leading industrial distributor fine-tune their pricing strategy, resulting in millions in profit. 

 

About the Author

Richard Blatcher

Richard Blatcher, Director, Industry Marketing & Business Intelligence at PROS, manages the global go-to-market strategy for PROS in its strategic industries. He has over 30 years’ experience in the industry originally based in Europe moving to the US in 2010. He spent the first part of his career in media, publishing and direct marketing managing the delivery of marketing and sales enablement services to many manufacturing and distribution blue-chip enterprises. He has also held EMEA and Global Marketing roles for $2Bn+ software company Autodesk including being responsible for launches of market disrupting SaaS software solutions into the market.

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