Top 5 reasons for customer churn (and what to do about it)
If you’re losing membership customers to churn, get these top five reasons for customer churn to discover how exactly to combat it.
You’re sitting there staring at your sales stats for the month after spotting a growing customer churn rate.
After launching your recent membership marketing strategies, this is the last kind of trend you want to see.
You do everything in your power to not panic as you rack your brain and hunt for something that resembles an explanation.
Why on earth are you losing customers?
While it might not feel like it, there is a solution, and it starts with understanding why your customers are churning.
Here are at least five of the top reasons it’s happening and how to fix each of them.
5 big reasons you’re losing members to customer churn
#1. Your users aren’t engaged enough
The first glaring reason you’re losing membership customers to churn is you’re lacking engagement from your customers.
Put another way, the initial value that your customers gained when they joined your service has faded, and they’ve stopped interacting with your membership portal.
The reason for their disengagement?
According to Marketo’s State of Engagement report, it’s likely that they just don’t find the content relevant to them anymore.
Not only is your content (possibly) irrelevant, but you may be missing the mark with your communication channel, too.
According to the same Marketo report, the top touchpoints that B2B and B2C customers expect to be integrated with your service, but where marketers are falling short, is email.
So, what’s the fix?
Naturally, it’s to encourage your users to engage with your membership by sending relevant content in a series of emails.
There’s no better way to nail relevant content than by personalizing it. Check out how YouTube sends a custom recap summary of how its member performed in the previous month.
The personalized report makes the content very relevant to the user by not only congratulating its members based on the first time they signed up but also featuring stats that detail the user’s progress after joining the service.
Of course, the email includes call-to-action (CTA) buttons that draw the recipient back to using its dashboard, check it out:
Pretty encouraging for engaging again, right?
Another great way to entice your members to re-engage with your service is to send a personalized email based on their recent actions and behaviors in your membership.
For example, this Netflix email reminds its user what they just finished watching and then follows up with a range of related suggestions on what to watch next.
The “find something new” CTA entices the member to log back into the portal and re-engage.
You can follow in the footsteps of Netflix and state your members’ recent activity and make suggestions on specific next steps to take inside your membership.
Alternatively, you can mimic what Skillshare does by sending an email with personalized benefits to take advantage of, just like they did with their custom list of course recommendations in the email below.
Of course, the above approach only works if your membership has the right benefits for your customers -- our next topic.
#2. You have a poor product-market fit
Another reason why you may be losing customers to churn is you have a mismatched product-market fit. In other words, your membership site isn’t the right fit for your customers, and there’s no market need for your service.
This isn’t an uncommon problem to have.
In fact, the top reason why startups fail is that there’s no market need.
That’s not to say your membership will fail if there’s no market need. But, if there is a mismatch between your product and the market, then customer churn is likely an outcome.
Another way to look at it is: you could have a membership product with a market need, but you’re attracting the wrong audience with your marketing and content messaging.
Either way, there’s only one way to win the fight against a lack of product-market fit, and that’s to conduct customer research and dive deep into your customers’ heads to find out more about their biggest pain points.
Your main objective with your market research is to find out your audience’s biggest problem, so you can solve it through your membership.
To do your due diligence in customer research, gather primary data directly from your customers and prospective clients by reaching out and asking questions. You can use tools like Typeform and Google Forms to create surveys and send links to your questionnaires.
They both have tons of templates to use, including this great, ready-to-go customer churn template from Typeform:
Alternatively, you can poll your following on social media channels or set up one-on-one phone or video chat interviews.
Regardless of your channel of choice, some market research questions to consider asking are:
- What problem does our membership solve for you?
- How does it fit into your daily life?
- How well does it meet your needs?
- What do you wish the membership had that it currently doesn’t?
- What do you like [most/least] about it?
Broken record reminder, but a necessary one: focus on uncovering and solving your audience’s biggest problem in your questions, and it’s hard to go wrong.
Another way to conduct market research is to hunt through secondary data by combing through relevant online forums, groups, and communities to find notable issues and problems your audience is experiencing.
For instance, a quick search for “coaching” within Facebook Groups turns up a range of relevant groups that post 10-50 times per day, which makes for plenty of discussions to dig into.
You can even peruse through related Amazon book reviews and identify key phrases and verbiage from people who write book reviews.
As an example, The Coaching Habit, has over 2,270 book reviews at the time of writing by people interested in the topic of coaching that you can check out.
Whether you gather primary or secondary data (or better yet, both), once you complete your market research, leverage your findings.
There are a few ways, one of which is to update your messaging to use the exact wording from your audience.
It’s a surefire technique to describe how you can help your prospective customers in a way they’ll fully understand. After all, you’re merely reflecting their language back to them.
You can also use your newfound (deeper) understanding of your audience for copywriting that sells.
The way to do it is to accurately illustrate, with nitty-gritty detail, your audience’s pain points and desires. Copywriting expert, Joanna Wiebe, refers to this as describing their moment of highest tension (MOHT) and moment of highest pleasure (MOHP).
But even if you don’t use this data to rework your messaging, you’ll need it to tackle the next big cause of churn where your market fit is fine, but your product isn’t living up to its promises.
#3. You’re providing a customer experience that’s not ideal
A third top reason why you’re losing paying members to churn is a poor customer experience.
This is, sadly, an area where the majority of companies are missing the mark.
So much so that a bulky 51% of customers claim companies are falling short of their expectations for a great experience, and 54% of them don’t believe companies even have their best interest in mind.
A huge part of your customer’s experience is customer service. So, if you’re delivering a customer service level that’s pretty weak, it’ll cost you paying customers.
In four different, bottom-line-crushing ways, to be exact. 58% of your customers will stop buying from you, 52% will switch to a competitor, another 52% will recommend that others don’t buy from you, and 48% likely won’t purchase from you again.
Three out of the four ways impact your current customers’ behavior, which means a poor customer service interaction adds your customer churn rate in a major way.
But the poor customer experience doesn’t stop at customer service. There’s also user experience (UX) to consider, which, of course, also contributes to your customer churn if presented poorly.
Wondering how to fend off a bad customer experience?
There are three ways we recommend combatting losing your members to poor customer experience. The first is to run user testing and moderate your customer behaviors, which helps monitor your UX.
The second way to fight your customer churn from a bad customer experience is to gather feedback from your members through surveys, questionnaires, live chats, and conversations (just as you would in your customer research).
(Speaking of live chat messaging, if you’re looking for a chat tool that’s built into your online storefront and membership site, this 2-week free trial gives you access to the only all-in-one platform with an integrated live messenger tool.)
Of course, it goes without saying that merely collecting feedback isn’t enough.
Take it a step further and obsess over your customer feedback and act on it, so you can iterate your product or service to deliver exactly what they want.
I.e., If your customers report not liking an aspect or expecting something different than what they’re getting, change your membership to suit their tastes.
(And if you think that their expectations are mismatched to the product you want and intend to deliver, review the previous cause of churn and pivot on your messaging.)
Finally, double down on supporting your paying customers and focus on providing an excellent customer experience.
To do this, start at the customer service level and work your way up. Tools like Zendesk, Zoho Desk, and Freshdesk are all great solutions to make sure your customer service is top-notch and that no customer issue slips through the cracks.
The main takeaway is to discover exactly what your users want and need from your site by collecting data from user tests, surveys, and customer service tickets. Then, take those results and turn them into an all-around improved customer experience.
If you do, you’re less likely to lose your customers to your competitors, which is our next reason.
#4. Your competition is pulling your customers away
Another reason your churn rate may be up is you’re losing customers to your competition.
We already learned that 52% of your customers will switch to a competitor if they encounter a bad customer service interaction.
But that’s not the only deciding factor encouraging them to make the switch. There’s a slew of reasons why your customers could jump ship to your competitors, and the best way to find out why is through competitive intelligence.
If you’re wondering where to start your search, 93% of businesses track competitor websites, 88% track competitor content accounts, and 87% look into competitor social accounts.
Once you have your competitor data in hand, it’s time to level up and iterate your membership, so it’s, naturally, more competitive.
For instance, if you find that your competition offers a high level of customer support, iterate your membership to deliver even better customer service.
This may translate to adopting a customer service ticketing tool or providing supportive educational resources when a customer onboards.
For an example of supportive onboarding done well, check out this example from Glitch. It provides a menu of supportive content, resources, and next steps on how to get started.
Basically, with an improved membership that’s designed to be better than your competition, your chances of losing customers to competitors shrinks.
And, take heart. Even if you do lose a customer to your competitor, all is not lost.
You can win back your former customers by using the aptly named win-back strategy.
If you’re looking for a proven win-back offer, a study of over 40,000 customers revealed four successful strategies:
- Offering a discount has a 45% success rate and 668% ROI
- Offering an upgrade has a 41% success rate and 793% ROI
- Bundling your offer has a 47% success rate and 302% ROI
- Tailoring your offer has a 45% success rate and 596% ROI
As you can see above, you’ll have to absorb a little cost to execute on a win-back strategy, but it’s nowhere near the cost of losing that customer altogether.
Conduct market research and analyze what your competition is doing. Then iterate your offer, product, and service to make your brand the better choice.
OK. While competitive analysis requires some digging and diligent research, our final topic today is more straightforward.
#5. Your customers have failed payments
A final reason why your customer churn is happening is failed payment charges, which is a type of passive or involuntary churn.
If you’re curious about how often this type of involuntary churn happens, about 10-15% of recurring payment charges fail.
Within passive churn, according to a Forrester study, 40% of involuntary churn is due to credit card changes, and 32% is due to a technical payment processor failure.
This means churn can be involuntary and unintentional.
These allow you to run payment recovery campaigns by using automated emails, like this one from Spotify that lets their customer know the payment failed and a retry will occur in a few days.
You can also send triggered alerts, custom texts, and other timed notifications to your customers. Payment recovery tools also let you customize landing pages dedicated to updating your customer’s payment information.
On top of that, you can run payment analytics and reports with metrics like past due amounts, recovered totals, and recovery rates, so you can pinpoint where the bulk of your passive customer churn is coming from.
The gist of it is:
While active churn is usually the top-most concern for creators who rely on recurring revenue, passive churn shouldn’t be ignored. It can be an easy fix with the right tools and proactive outreach, and unlike active churn, it doesn’t require a ton of work once you automate it.
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Pinpoint your biggest reason for customer churn to reverse it
While there’s nothing great about customer churn, once you find out why you’re losing customers, you can quickly act to turn it around.
Here’s a recap of the top five reasons for customer churn:
- Reason #1. Your customers aren’t engaging enough with your membership. The fix: send relevant content in a series of emails to entice them to re-engage.
- Reason #2. You have a mismatched product-market fit. The fix: conduct customer research to uncover insights that will help you iterate your membership so it is the right fit.
- Reason #3. You don’t have an excellent customer experience. The fix: gather customer feedback and run user tests to find out where your customer experience is lacking, so you can give it an upgrade.
- Reason #4. You’re losing customers to your competitors. The fix: research how and what your competition is doing and design your membership to be the better choice.
- Reason #5. You’re losing customers to passive failed payments. The fix: use a payment analytics tool to send triggered message campaigns that proactively recover failed payment issues.
Will addressing all of these problems stop customers from ever leaving you? No. But it will take a big bite out of your churn, and in turn, your churn will stop taking such a big bite out of you, and that, I think we can all agree, can only be a great thing.