Keep your Churn Rate Low

Churn Rate is an annualized percentage at which a business having recurring customer base (customers hooked onto a plan offered by the business such as subscriptions etc.) loses its customer base. For example, a churn of 5% means that the business loses 5% of its customer base during a year.

So why it is important? This is going to happen in any business and we can always get new customers.

This thinking is wrong and can prove expensive for the business. We focus so much on customer acquisition that customer retention tends to get ignored. It is a proven statistic in any business that acquiring a customer is much more expensive than retaining your existing customers. Hence it becomes important to focus on customer churn. Rather than spending all of our marketing budgets in acquiring new customers, we should look at spending a significant amount on retaining the existing ones. A business cannot get onto a sustainable high growth trajectory merely on the basis on new customers.

How do we reduce churn?

To retain customers, we need to look at customer experience and feedback. Customers will keep coming to you if you build trust first and can subsequently offer a service which is equal to/better than your competitors. Focus on how users interact with your product, what they like, what they dislike, and use these metrics to keep enhancing their experience over time.

'Eat your own Dog Food'

This phrase implies that a company uses its own product or service in it's operations. If I claim that our product is good and adds value to the customer and if my company or any part of it falls into my target market, I should be my own customer.

Using your own product helps in identifying the benefits and shortcomings of the product. As a customer, we can know exactly where the product pleases me and where it needs improvement.

Also if I do not accept my own product, why will the rest accept it? This is one situation I had faced when I was working in the Business Development of Meenakshi Public School, a CBSE School based in Gurgaon. We had identified a particular target market based on income, location and background and nearly all our own teachers fell in it. We felt that we are providing a very relevant offering to our target market. However, on analyzing, we realized that hardly any of our teachers were admitting their children into our own School. On analyzing further, we realized that the teachers felt that there is a lot lacking in the offering and we needed to improve in a lot of areas. This kind of feedback was great for us since it was internal and hence comprehensive, and also since it was very relevant coming directly from our target customers.

To sum it up, if your company or any of it's team members can be your own potential customer, it becomes very important to become one or analyse why you are not becoming one.

Customer is King!

We don’t realize that our business is structured around 1 stakeholder, i.e. the Customer. And if it isn’t, it’s should be. The customer determines how a business is structured and how it operates.

Marketing: Our entire marketing effort is based on our customer’s behavior. Looking at our customer’s activites, we should analyse what channels will give us maximum visibility and should use the requisite tools to maximum sales. For example in Beveragewala, we knew that one large set of customers would be health conscious people. So we tried to brand ourselves in health blogs and sent our promotional material through affiliates operating in the healthcare space.

Operations: Our operations and supply chain systems should accommodate our customers’ needs. In Beveragewala, we got feedback that our deliveries were quite late in general. Based on that, we started using a faster delivery service (though it costed us more) to satisfy the wants of our customers.

Business Model: Bitequest was a restaurant reservation portal and we were targeting a premium clientele for it. Hence our business and revenue models were structured accordingly.

Hence, we must realize that our business is should be structured keeping our target customer as the centre. This will help create loyalty towards our business and will make the sustainable in the long term.