What is customer retention or churn rate? It’s the ability of a company to keep customers repetitively purchasing products and services they sell. At the same time reducing or preventing customers from leaving and purchasing competitive products or services.
We are talking about retaining repeat buyers and keeping them as loyal customers.
Many CRM systems can track the last time a customer purchased and how often they purchase by combining the information from invoicing and historical annual/quarterly sales in the system.
This is the easier and higher margin way to get sales: Generate new purchases from existing customers each month instead of trying to find new prospects that must be converted to customers.
Not only should sales be connecting with lost customers, but they should be reviewing the buying habits of existing customers. What they will find is a customer may be buying less or has just stopped buying. Sometimes the reasons are obvious to a sales team that knows its products, understands various timelines to repurchase, and recognizes the buying patterns of existing customers; other times it requires research.
Here are some reasons customer sales decrease or stop:
- They forget about your products and services.
- They don’t use your product or service efficiently and need help using it.
- They don’t know you sell related products they could use.
- They don’t know you can customize a purchase of products or that you sell packages/bundles.
- They get a call from a competitor that offers to discount what they buy from you.
- Sales should have a goal of keeping the churn rate under 5 percent. Obviously the lower the better, but 5 percent is considered a “good churn rate” in any industry.
- If your customer churn rate is averaging over 10 percent you’re in trouble!
Just think about the impact this has on your company’s sales and profitability. We know it is more expensive to generate and convert more prospects to customers. Now your sales team is working over 10 percent harder to find more customers above the monthly customer generation rate in your industry. It means longer hours, extended time to convert to customers, and increase expenses to go through your sale funnel to conversion.
Don’t know your retention and churn rates? It is important you reach out and get help finding the information. Choose a consulting company that can not only help you analyze the information in your CRM, they can guide you in selecting the CRM that is right for you and get it up and running if you don’t already have a good CRM in place.
With accurate, timely, and meaningful customer purchase information you’ll be able to reduce your churn rate and increase repeat customer purchases.
-Courtesy Joe Norcott