Why addressing churn quickly is key for smart sales leaders

Philippe Pavillet

Apr 5, 2023

Some of you may still believe that the one key to growing your business is to constantly bring in new customers… But, what if we told you that focusing on retaining existing ones is 5 times cheaper? Moreover, 80% of a company's revenue comes from just 20% of its existing customers. That is why focusing solely on customer acquisition can be short-sighted. If your business is not able to retain its customers, it will constantly have to replace them, which can be difficult and expensive. It is the classic leaky bucket image: no matter how much water you put in it, you can never fill it. In contrast, if you focus on building strong relationships with your existing customers and providing excellent service, they are more likely to remain loyal to your business over the long term. In this article, we’ll explain why smart sales leaders must understand the importance of addressing churn.

Could you tell why many sales leaders may be tempted to ignore customer churn or put it under the carpet? Here are some common reasons: 

1) Lack of understanding: Some leaders may not fully understand the impact of churn on their business. They may view it as a normal part of doing business or assume that the problem will resolve itself over time.

2) Focus on short-term results: In some cases, leaders may be more focused on short-term results and meeting immediate sales targets. They may not realize that ignoring churn can have long-term consequences for their business.

3) Overconfidence: Some leaders may be overconfident in their ability to retain customers or assume that their products or services are so good that churn is not a significant risk.

4) Fear of bad news: Some leaders may be afraid of hearing bad news about customer churn rates. They may worry that it will reflect poorly on their leadership skills or that they will be held accountable for the problem. As a result, they may choose to ignore or downplay the issue.

5) Lack of resources: Addressing churn can be time-consuming and resource-intensive. Some leaders may not have the necessary resources or staff to address the problem effectively, so they may choose to ignore it instead.

However, we are sorry to tell you that ignoring churn is not a sustainable strategy. Eventually, the consequences of high churn rates will catch up with the business, leading to decreased revenue, damaged reputation, and missed opportunities. In fact, as a B2B company, one of the most critical metrics you need to keep a close eye on is customer churn. Churn, or the rate at which your customers leave you for competitors, can have a massive impact on your bottom line. Here’s what happens until churn is addressed: 

  • The revenue is hurt. This is due to lost sales, reduced customer lifetime value, and missed opportunities such as potential upsell or cross-sell possibilities. The good news is that with customer retention software, revenue could be increased by up to 30%! (Request a demo at Fructifi to know more).  

  • The margin suffers. This goes back to the statistic mentioned earlier: keeping a customer is a lot cheaper than acquiring one. Therefore, if the strategy is to let them go and replace them, you will end up spending much more to generate the same amount, hurting your margins in the process.

  • Sales rep time is wasted and morale is affected. Have you ever played whack-a-mole? That's what you ask them to do if there is no clear plan! When customers churn, sales reps may spend time trying to win them back or convince them to stay with the company - which can be a difficult and time-consuming process, and not always successful. Besides, they might need to spend more time prospecting for new customers to replace those that have left, and on top of that, repeatedly address the same customer issues.

  • The brand image is damaged. High churn rates can damage your reputation and make it more difficult to acquire new customers. If existing customers are leaving your business in large numbers, it could be a sign that there are significant problems with your products, services, or customer service, which can deter potential customers. Consequently, negative word of mouth, reduced customer loyalty, perception of poor quality, or a lack of trust can come to the surface. In other words, customers may feel that their needs are not being met, or that your business is not trustworthy, which can damage the brand image.

In summary, churn is an expensive problem for any business. When customers churn, you not only lose out on their future business, but you also lose out on the referrals and positive word-of-mouth that come with happy customers. Additionally, churn can be a symptom of a larger issue. If multiple customers are leaving your company, it's essential to identify the root cause of the problem and fix it. This will not only reduce churn but also improve the overall customer experience, leading to higher satisfaction rates and a better reputation.

In conclusion, customer churn is something we cannot leave on one side. Sales leaders must take proactive steps to address the problem and implement strategies to retain existing customers. By doing so, they can ensure the long-term success of their business and maintain a competitive edge in the market. Download here our whitepaper for free to learn more about top strategies against customer churn and give a twist to the way you do sales for increased revenue!

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