5 Strategic Tips to Reduce Customer Churn


Customer churn can be a significant challenge for businesses. Fortunately, there are several strategies that companies can use to reduce churn and keep their customers coming back.

This guest post was written by our friends over at Faye, one of Ultimate’s valued partners.

By taking a proactive approach to reducing customer churn, businesses can ensure that their customers remain satisfied and loyal. Here's why lowering your churn rate is so important, along with 5 tips to help you do just that.

What is customer churn?

On a technical level, customer churn is extremely easy to understand. It’s a measurement of attrition, or how many customers your company has lost over a given period. If 92% of your customers renew their annual subscriptions, but the rest don’t, your company has an 8% annual churn rate. If your churn rate is increasing — or if it’s high to begin with — that’s a strong indication that there’s a bigger problem.

A high churn rate can happen for various reasons, including dissatisfaction with the product or service, a bad customer experience, or changes in the customer’s purchasing needs or circumstances.

The rate of customer churn will vary by industry, but a high rate of customer churn is always a sign that action needs to be taken.

Why reducing customer churn is important

As outlined above, high customer churn can harm any company. It can lead to a significant loss of revenue, as well as lost customer referrals. There are many ways to reduce customer churn, but it’s important to note that the most effective strategies vary from industry to industry.

For example, customer loyalty programs are an excellent way to improve customer retention in industries that sell goods or services that are frequently purchased. However, it may be challenging to implement loyalty programs in industries like financial services, or healthtech that provide highly customized services. In all sectors, however, customer churn can be lowered through excellent customer service. Thankfully it is something that every company can implement, no matter what type of business it is.

By finding ways to reduce customer churn, companies can lower their customer acquisition costs, increase customer retention rates, and improve their bottom line.

Let’s look at 5 strategic tips to consider as you begin tackling customer churn at your company.

1. Ensure your products are still a good fit for your customers

When a product or service closely aligns with the customer’s needs, it has a good product-market fit. Customer needs always change over time, and to keep that fit tight, those products and services need to adapt. 

The story of Blockbuster Video serves as a cautionary tale for the importance of regularly evaluating product fit. In the era of home video rentals, Blockbuster had a nearly ideal product-market fit, allowing them to dominate the national video rental market. However, the company's failure to adapt to changing customer preferences as streaming took off ultimately led to its downfall. Blockbuster infamously rejected an offer to acquire Netflix for a mere $50 million.

Today, Netflix is worth nearly $140 billion and continues to grow. Furthermore, Netflix has recently overcome concerns of customer churn and devaluation by reporting strong Q4 earnings, exceeding subscriber growth expectations in the US, and maintaining solid international growth. Additionally, they have also announced plans to release a new ad-supported tier in the US, which is expected to bring in additional revenue. This demonstrates how Netflix has successfully adapted to changing product-market fit in the streaming age and continues to innovate and expand within the entertainment industry.

Chances are that Blockbuster’s analysts were aware of their skyrocketing churn rate. The company sadly ignored those flashing warning signs until it was too late.

2. Determine if your products and services provide real value

It can be easy to forget just how many of your customers genuinely depend on the things your company provides. That’s true no matter what products or services your company sells. Your customers have every right to expect a certain level of value from their purchase.

If the company changes something to alter the value of their purchase — perhaps making it less secure, reliable, or cost-effective — it’s not hard to see why those customers would go elsewhere. If churn is increasing, it may be that your company isn’t delivering the same level of value that it once did. 

3. Actively engage with your customers

Your company’s competitors are willing to spend a lot of time and money convincing your customers to dump you.

The competition is:

  • Actively seeking your customers out using social media listening
  • Nudging them toward their own products through paid search results
  • Overwhelming them with ads across the entire internet with retargeted advertising

Your competition may even know exactly how much it costs to acquire one of your customers. How? By using detailed cost-per-acquisition analysis. If you want to keep your customers, you need to be ready to fight for them.

You need to use every engagement tool at your disposal like your competition is. Even a simple engagement strategy can make an enormous difference over time. For instance, a marketing automation drip campaign for customers at the highest risk of churn can make an impact. 

4. Invest in automated customer support software

One of the most obvious reasons for a high customer churn rate is poor customer support. Customer support is a notoriously difficult operation to scale up as a company grows. This is particularly true without the right software.

An increasingly adopted way to offer high-quality support without needing a huge team is investing in conversational software powered by artificial intelligence (AI) like virtual agents.

By leveraging AI-powered chatbots, companies can provide their customers with immediate and accurate support, 24/7. This allows customers to receive answers to their questions quickly and conveniently without having to wait on hold or speak with a live agent. In addition, this software can securely track customer data which gives customer service teams invaluable insights into customer behavior, allowing them to target specific customers with relevant offers or information.

While this may seem daunting for your customers, Ultimate's 2023 Customer Service Trends report found that 92% of respondents’ trust in AI has increased over the past 12 months. Clearly, fears around AI are becoming outdated, and with that comes increased interest in utilizing tools like conversational AI-powered support software.

5. Have a strategic focus on customer retention

According to Ultimate's recent Customer Service Trends report, businesses are trying to do more with less, and a focus on customer retention is their number 1 priority for achieving this in 2023.  

The first step to improving customer retention is to identify the factors that are causing customers to leave.

For example, is it because of a problem with your product or service? Or is it because you're not meeting customer expectations? Once you know the cause, you can take steps to address it. By taking these steps, you can ensure that your business is well-positioned to weather any economic downturn and improve customer retention.


Remember: the simplest way to keep your current customers as satisfied as possible is by providing excellent customer service. This can be achieved through ensuring product-market fit, keeping your systems and processes running smoothly, responding to issues quickly, making sure your customer have positive experiences, and investing in the correct technology to help you accomplish all of this.

After all, the happier your customers are, the more likely they are to stick around, renew their orders, subscriptions, and contracts — and bring you more revenue.

Get ahead of the hottest CS trends in 2023