Knowing how to prevent or save a customer from canceling is an art – but a worthy one of mastering. After all, no one wants to lose customers. You work so hard to acquire each and every one. After they sign up for your product or service, you pour your energy into a meeting and attempt to exceed their expectations. So when you get that call or email requesting a cancellation, it can be financially and emotionally devastating.
In this article, we’ll look at the importance of customer retention, how to handle a customer who wants to cancel, and how to prevent them from taking their business elsewhere.
What is customer retention?
Customer retention is the rate at which customers stay with a business over a specific period of time. Keeping your customers happy and engaged helps retain them, which decreases the likelihood of customer churn as a result. It’s all about keeping customers coming back to your business.
Customer retention is key to profitability. A study by the Harvard Business Review states that a five percent reduction in customer defection has the potential to double profits. How could such a small decrease in cancellations result in a doubling of profits? Customers who stay with you make more purchases, take less of your time, and are a great source of referral business.
How to calculate customer retention rate
Simply divide your net new customers by your total customers count to find out what your customer retention rate is. The lower your churn rate, the better. It means you lose fewer customers each month.
Customer retention rate formula
Retention Rate = (Customers at End of Month – Customers Aquired this Month) / Customers at Start of Month
Why is customer retention so important?
Your customer retention rate is a key indicator of the health of your business, and it’s important to monitor it. It can provide insight into how many customers may be either satisfied or unsatisfied and leave for competitors. Satisfied customers are the goal, as they remain most loyal to your brand.
According to Zippia, boosting customer retention by 5% increases profits by 25-95%. This alone shows how important it is to keep your customers happy and engaged. It’s also known that the cost of acquiring new clients is five times more than retaining current clients.
How to prevent customer cancelations: 7 customer retention strategies
So, how do you convince a customer not to cancel and save the sale?
Here are six customer retention strategies so you can retain customers who are on the verge of canceling and ensure they stick with you for the long term– even after customer satisfaction issues.
1. Gather information: Why do they want to cancel?
When your customer contacts you to cancel their account, make sure to ask why they want to end their relationship with your company and request as much information as they’re willing to give. For example, if they had a bad experience with your service, ask them to describe what happened in more detail. Let the customer know why you’re asking ahead of time so you can learn from the experience and ensure it doesn’t happen again.
2. Get creative: See what you can do to save this customer
After listening to your customer’s reasons for leaving, consider what you could do to resolve their concerns. Was the customer disappointed with a product that you could easily replace? Even if the solution isn’t obvious, just ask!
Start by, obviously, apologizing to the customer reminding them that you value their business, and asking if there’s anything you can do to change their mind. The proposed solution may be something you hadn’t thought of and possibly less costly than losing a customer.
When offering concessions, be aware of the cost of your efforts to save the customer, but also remember another important measure of success: Customer Lifetime Value (CLV). If your CLV dwarfs the cost to save your customers, it is in your favor to do what’s necessary to keep them around.
3. Reduce future customer churn: Determine how to measure success
If your customer accepts your offer and decides not to cancel, let them know you want to check in to ensure your product or service meets their needs. Keep the frequency at a reasonable rate to respect their time.
A brief, well-timed check-in takes only a minute or two of their time and shows customers that you value their business.
So let’s say you use these efforts and retain your customers. That’s great — but don’t let this experience pass you by. Take proactive steps to prevent customer cancellations in the future.
4. Streamline your pain points: Make payment easy
Asking customers to part with their hard-earned cash isn’t easy, even if you have an amazing product. If it is difficult to pay you for whatever reason, that adds friction to your customer retention, as customers are being reminded just how much money is about to leave their pockets at (arguably) the nadir of their whole experience — checkout.
Accounts receivable software that automates invoicing and collections and facilitates fast and easy payments can do wonders for streamlining your payment processes – particularly for businesses operating in the B2B space.
5. Measure what matters: Regularly review customer data
Purchase history, inbound call volume, chat logs, website interactions, and new customer referrals are all inputs that could be critical to your business. Evaluate the data you collect to determine the right metrics and create a dashboard that you can quickly review on a regular basis.
Look for signs that customers are disengaging or dissatisfied via drop-off in purchase history or site visits or an increase in customer service calls. Determine a proactive plan to reach out to customers who meet specific warning signs so you can get ahead of potential cancellations. This proactive data analysis can uncover issues with your service that can lead to customer dissatisfaction. Shore up this area to increase your customer retention and lifetime value.
6. Build loyalty: Reward your customers
Customers make more repeat purchases when rewarded for their loyalty. According to a study by Nielson, 84% of consumers say they’re more likely to stick with a brand that offers a loyalty program.
If creating a loyalty program doesn’t fit your business, create incentives for customers that are easy to manage. Rewards for customers can be as straightforward as receiving a discount after spending over a certain threshold or free two-day shipping.
7. Iterate: Add customer value
What’s the best way to support customers in your industry? Is it a constantly evolving product or service that requires new content to guide the customer, or do your customers prefer online chat to other communication channels?
Consider ways to give customers extras that make their relationship with your business more valuable. And don’t be afraid to ask — some of the best ideas can come directly from customers. Surveys are a great way to gather feedback.
How to ask why a customer is canceling
It can be intimidating to ask a customer why they’re canceling their services with your business, but feedback is extremely valuable as it helps you improve your products or services. When you receive a cancellation request, one of the first things you should do is ask for the customer’s information so you can pull up their account information. After determining who you’re talking to, it’s time to ask the customer why they’re canceling.
Customer cancellation script examples
1. Ask open-ended questions
Open-ended questions will provide you with more context instead of a yes or no answer. They encourage customers to provide detailed feedback by prompting them to explain their reason for canceling without limitations.
- “We value your feedback. Could you please share your reasons for canceling our service?”
2. Be specific
It’s important to be direct, but non-confrontational. These questions are straightforward but still allow the customer to express their concerns openly.
- “We’re sorry to see you go. Is there something specific that led to your decision to cancel?”
3. Request for improvement
Seek out suggestions for improvement. This helps a business gain insight into changes that could help retain customers in the future.
- “We’d love to know how we can improve our services. Is there anything we could do differently to meet your needs better?”
4. Be understanding
It’s important to be understanding and empathetic when handling a client who wants to cancel. It gives them a safe space to share external factors influencing their choice.
- “We understand circumstances change. Could you tell us if there’s something we could have done better?”
5. Offer multiple choice
Offering options to choose from when you phrase your question helps pinpoint the reason behind their cancelation. This simplifies the response process while still providing valuable insights.
- “We’re sorry to hear that. Did the pricing, features, or customer support influence your decision to cancel?”
Invoiced: Increase customer retention & keep clients coming back
Customer cancellations are an unfortunate side effect of doing business, but knowing how to save a customer from canceling can help reduce your losses. While you can’t eliminate customer churn completely, the right strategies and quality tools can minimize their occurrence, increase customer retention, and improve your products and services in the process.
If you operate within the B2B space, you know that your accounts receivable processes can make or break your business relationships. That’s why Invoiced built our A/R automation software. Designed from the ground up with the end user in mind, we made everything simple for you and your customers.
From e-invoicing with multiple payment methods to A/R analytics and simple integrations, everyone has exactly what they need (and none of what they don’t) right at their fingertips. We win when our customers win — and our customers win when they retain their client base!
Learn what our automated accounts receivable software and accounts payable software can do for you. Schedule a demo today!
