Customer attrition is when customers end their relationship with an organization. It is also referred to as customer defection or customer churn. Organizations consider a customer to be churned if there has not been any interaction with or purchase from the organization. If many customers defect from the organization, then it means that the objectives and strategies do not align with the needs of customers. For any starting business, it is crucial to maintain a very low customer attrition rate for it to flourish because marketing to get new customers is more expensive than marketing to keep existing customers.
Attrition can be both voluntary and involuntary depending on the level of customer satisfaction. When a customer leaves a company to obtain services from another; it is referred to as voluntary attrition. Involuntary attrition takes place when a customer abandons a company due to personal reasons like poor health, death or relocation to a different area. During analysis of data, companies only focus on voluntary attrition.
Before introducing any new products or services, companies should continuously measure customer attrition rates in order to track the effects caused by the implementation of any changes in the company. The following are ways of reducing customer attrition rates.
- Deliver on the promises given: Some companies find it wise to promise so little and conversely over deliver. However, other companies promise so much and fail to deliver. When exaggerating the benefits of a product and it turns out to be a disappointment, then, customers will not stay for long. To reduce churn rates, companies should deliver on what they promise.
- Value existing customers: It is advisable for a business to expand its customer base. As efforts are being put into marketing and promotions, businesses should also consider nurturing their existing customers. It should not be forgotten that competitors are spending a lot to make them their own, so it is important to know their needs and satisfy them fully.
- Talk to customers: Continuous communication with customers helps build a relationship that will allow a business to identify how the customer feels about the products and services being offered. If there are high attrition rates, ask them why they do not feel satisfied with what the company is offering. Ask them what they think the business can improve and do better. These are referred to as exit interviews. Their purpose is not to try and win the customers back but the information obtained is priceless. It can be used to reduce attrition rates.