Asaf Darash is the founder and CEO of Regpack, an online payment management platform. He holds a Ph.D. in New Media.
Silent churn could be the reason your business is declining or at least not growing, even though you might not know it. The impact of silent churn on your business can be hard to detect initially, but the effects are insidious.
Your revenue may seem stable, but in reality, it is slowly decreasing as customers leave unnoticed. More importantly, you are not able to see or understand the reasons clients are going to competitors, hence hurting your long-term growth. No business leader wants to lose customers, but customer churn is a serious problem throughout many industries. In fact, churn rates can be as high as 25% for some industries.
Acquiring new customers can cost much more than retaining existing ones, which makes it crucial to identify and combat silent churn before it becomes a major problem. If you’re unaware of how churn could impact your business, you could already be going down.
Understanding (Silent) Churn
Simply put, churn happens when people don’t see the value in your company anymore. It’s when clients stop using and paying for your services, therefore rescinding their desire to be on your client list. Churn can happen in two ways:
First, there is the very loud and noticeable churn. This includes frustrated clients threatening to leave your business by borderline harassing your support team and leaving bad reviews. Then there is silent churn, which is much more dangerous.
When silent churn occurs, there is no indication that the client is about to leave and stop doing business with you. This can be concerning, especially if there are a significant number of such customers. If your business results are underwhelming, you might be wondering what went wrong.
When it’s time to charge customers for the next period or renew service agreements, these customers are nowhere to be found. They do not respond to any messages, and they cancel their payment method on file or issue a cancellation for the charge. You don’t know what happened and cannot fix the problem.
This makes the quiet ones the most dangerous! Without a remedy, silent churn can be the killer that eats away at your revenue, consumes sales capacity and leaves you struggling to survive.
An analogy from the field of medicine might help: When paramedics arrive at a multiple-casualty event, they quickly sweep the area looking for anyone not responding. They then go to those people first since they are in the most danger. Either their airway is blocked or they are unconscious. Someone screaming is still breathing, therefore, they are less urgent at the moment. You should take the same approach with your client base.
Beware that reticent clients are most likely looking elsewhere and have already stopped using your service—or they’re contemplating it, even if the contract is not over. When it is time to renew, they will most likely ignore you since they have a new solution in place.
A high churn rate may not sound like a problem if you are accumulating a steady flow of new customers, but silent churn can be a compounding issue—and it can get out of hand easily. Eventually, the cost of acquiring a new client will not be able to cover the churn rate and income will start to decline. What’s the point of putting in the work to bring in new customers when old ones are continuously jumping out the back door?
Bottom line: Churn is an expensive fire to put out, costing U.S. providers an estimated $168 billion in 2019. Silent churn can go unnoticed for several months, and it can lead to stagnation. However, there’s a silver lining—if your churn rate is low, you’ll have more time to identify the root cause of the issue.
Four Indicators Your Clients Are Churning
A high churn rate could signal many things are going wrong within your business, from poor customer service to inadequate value proposition or ineffective marketing. It could also alert potential customers that your business is sinking, leading to a negative brand reputation.
To get ahead of your loss, you must identify the leading indicators of customers losing interest. These indicators include:
1. A decreased amount of time spent in your service or the elements they use in the service—also known as abandonment: It’s crucial to keep customers engaged to retain their loyalty. Engaged customers can also help you attract new ones through referrals and word-of-mouth marketing
2. Decreased Net Promoter Score (NPS): When there is a decline in the NPS, it’s an indication that customers are not satisfied. If customers express their dissatisfaction, make sure to take their feedback seriously. Ignoring their concerns may lead to faster customer churn.
3. An increased number of customers who are downgrading services: When customers notify companies that they are looking to decrease their use of certain features or services, this should be an immediate red flag.
4. A decrease in support tickets: Support tickets indicate that customers are at least using your product. I’ve noticed that the less effort a user puts into fixing problems with their service, the less likely they are going to remain with your company.
Believing that 100% of the customers who bought from you on day one of your business will remain with you several years down the line is unrealistic. That said, if your customer churn rate is high or increasing over time, it’s crucial to address the issue.
When left unchecked, silent churn can lead to a reduction in market share, decreased revenue and a weakened brand reputation. In this fiercely competitive business landscape, it is more important than ever to identify and mitigate silent churn to ensure the long-term success of your business.
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