How to Reduce your Magento 2 Store’s Churn Rate
- What is Churn Rate in Magento 2?
- Reasons for a High Churn Rate
- How to Reduce the Churn Rate in Magento 2
- Make it Easier to Cancel
- Allow a ‘Pause’ Option
- Provide Discounts
- Set up a Loyalty Program
- Track Customer Analytics
- Offer a Grace Period
- Final Thoughts on Reducing Magento 2 Churn Rate
The churn rate is the biggest concern for every business owner. Before we discuss ways to reduce it, let’s first develop a comprehensive understanding of this term.
What is Churn Rate in Magento 2?
In the simplest of terms, it is the percentage of customers who stop doing business with your store in a specific period. For example, you had 100 customers in the first year but 50 cancelled their subscriptions i.e. stopped doing business for the next year. Thus, the churn rate will be 50%.
A high churn rate will hamper your store’s growth and may eventually force you to close it forever. To avoid this situation, you need to focus on reducing the churn rate. But before you jump to conclusions, it is important to understand the reasons behind such a high churn rate.
Read More: Churn Rate and How to Calculate It by the Corporate Finance Institute
Reasons for a High Churn Rate
Unless we have access to the relevant metrics, we cannot say with 100% confidence why you are dealing with a high churn rate. Nevertheless, the most common reasons include:
- Financial Factors
The customer’s financial situation may not be the same as before. They may have lost their job or have their income reduced. Thus, they may see your product as an unnecessary expense or something which they can no longer afford.
- Product Issues
There may be issues with the product which you have failed to rectify despite the customer’s constant reminders.
- Competitor Influence
A competitor may have a much better product for similar or even lower price. Thus, the customer may want to take their business to your competitor.
- Customer Service
Even if your product is perfect and the customer has no financial problems, poor customer service can force the customer into moving away from our store.
- Lack of Post-Purchase Engagement
After buying a product, all of us love to receive emails regarding the experience and maybe even discount offers on future purchases. When store owners ghost their customers once the purchase is complete, they are unlikely to return.
- Lack of Personalisation
When product recommendations or messages are generic rather than personalised, customers are likely to feel undervalued. They would prefer a store where the owner has the time and resources to at least send a personalised message.
How to Reduce the Churn Rate in Magento 2
It can be difficult to pinpoint the precise reason for the churn rate since there can be multiple factors at play. Nevertheless, the following strategies can prove effective for all types of store owners:
Make it Easier to Cancel
This may seem perplexing since the goal is to convince customers to continue their relationship with the store rather than end it. But you need to understand that by making it easier to cancel, you are creating trust with your customers. They’ll understand that even if the product is not to their liking, they can simply cancel it. You may think that cancelling a subscription requires no effort.
Well, think again. Customers are constantly exposed to subscription scams throughout the world. When customers sign up for a subscription, they can only cancel it through a phone call, message, or even an in-person visit. Most recently, the US Federal Trade Commission has enacted a ‘click to cancel’ law, allowing subscribers to cancel their subscriptions through a website or app.
This prevents customers from being trapped in a convoluted process. Therefore, when you offer customers a quick way to cancel their subscription, they are more likely to try your product or service. Of course, you should clearly communicate the benefits you offer on the subscription cancellation page. This will make the customers think twice before cancelling their subscription.
Allow a ‘Pause’ Option
You can also allow customers a ‘pause’ option. Instead of cancelling the subscription altogether, the customer can simply pause it while they consider their decision. This can prove beneficial on retaining customers who are facing financial difficulties but would like to continue using your products or services once they recover financially.
Provide Discounts
Although we don’t recommend this strategy for everyone, yet it can prove beneficial. When a customer’s renewal deadline is approaching and they don’t have auto-renewal on, you can incentivise them to re-subscribe by offering a discount. The reason we don’t recommend is that the customer may become used to discounts.
They would be reluctant to renew unless you offer them a discount again. The problem with consistent discounts is that they undervalue your product. The rest of the customers may be let down as well. After all, why should they pay a higher price when they can simply wait for a discount offer as well.
Set up a Loyalty Program
Most Magento 2 store owners don’t have a loyalty program. What they need to realise is that offering a loyalty program is one of the most effective ways to reduce the churn rate. By incentivising people to use more of your product or service in exchange for better rewards, you can expect a noticeable decrease in the churn rate.
Track Customer Analytics
Most customers who cancel their subscriptions exhibit the following behaviour beforehand:
- Long periods of not logging in to their account.
- Stop using it as before.
- Frequently raise problems with the product or ask for new features.
By tracking these customers and analysing their behaviour, you can determine the root causes of the churn rate. By focusing on these issues, you can improve your customer retention rate.
Offer a Grace Period
Don’t block out the customer’s access the moment the renewal deadline expires. Instead, ensure uninterrupted access, while you keep sending reminders to renew. A 14-day grace period would be enough for most businesses.
Final Thoughts on Reducing Magento 2 Churn Rate
This concludes our article on how to reduce the churn rate in your Magento 2 store. If you are still dealing with high churn rates, you can reach out to our customer support team. We will set up a meeting with our Magento 2 experts who will identify the issue and then come up with a tailored strategy.
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