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Guide

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Loyalty & Retention

Why are Churn Rates for Happy and Unhappy Customers Similar?

Chris Minnich  //  August 4, 2022  //  8 min read

Last year, churn rates for Fans (AKA people who have self-identified as loving your app) and Risks (people who don’t love your app) were comparable. This finding challenged the assumption that most unhappy customers will leave once they’re dissatisfied with their experience. Clearly not all Risks are leaving in droves. So, what is keeping them? And how can brands capitalize on this finding?

The following post answers the “why” behind this question and provides actionable steps to turn your unhappy customers into Fans.

Mobile customer churn and retention rates

To begin, let’s define customer churn and customer retention. Customer retention is a measure of a brand’s ability to keep customers over time. Customer churn is the inverse of retention and defines how poorly a brand keeps their customers. As soon as you calculate one you can calculate the other. 

For example, if your retention rate is 45 percent then your churn rate is 55 percent (100%-45%= 55%).   See this practical guide for more differences between retention and churn rates and how to calculate both.

Churn rates for Fans and Risks

You’ll see us referencing Fans and Risks in the following sections. A quick summary of these two cohorts goes like this:

Fans: People who have said, “Yes, I love this app,” via the Love Dialog question deployed within a mobile app. 

Risks: People who have said, “No, I do not love this app.”

One of the most intriguing findings that came out of our 2022 Mobile Customer Engagement Benchmark Report was that Fans and Risks churned at a similar rate. Risks are your unhappiest customers and you would think they’re more likely to churn, but the gap between Fans and Risks is smaller than you would expect.

2021 retention rates and churn rates by fans and risks

Over the course of 2021, Fans had an average churn rate of 35 percent, while Risks had a churn rate of 39 percent. An unexpected difference of only four percent.  

Keep in mind, a four percent difference may not look dramatic on paper, but if you apply that figure to hundreds of thousands of customers it represents high and costly customer churn.

With that said, an annual retention rate of 61 percent for unhappy customers is surprising to say the least. Let’s unpack this thought further.

Why do unhappy customers stay?

We know that a majority of unhappy customers stuck around in 2021, but why?

Brands are getting better at proactive engagement

The digital transformation and corresponding rise of mobile is making it easier than ever for brands to build personal relationships with their customers. With in-app mobile feedback, brands proactively ask for feedback, rather than waiting for the customer to raise their hand. 

Typically,  96 percent of unhappy customers churn before ever complaining. However, 98 percent of customers said they are likely to provide feedback if asked. These two statistics make it clear that many brands don’t hear from most of their unhappy customers, but these customers still want their voices to be heard. 

By proactively engaging customers with in-app Surveys and the Love Dialog, brands can identify their unhappy customers and give them a voice. After 90 days, customers who interacted with the Love Dialog in 2021 were 21 percent less likely to churn than customers who didn’t have that interaction. This data shows that customers who interact with your brand are far less likely to churn, even if they are unhappy. 

Brands are getting better at giving their unhappy customers a voice by proactively engaging with them. When unhappy customers have the opportunity to voice their frustration, they are less likely to churn and more likely to stick around.

Personalized interactions with customers

Personalizing customer interactions is the key to short-term retention and long-term loyalty. Personalization centers on delivering the right message, to the right person, via the right medium, at the right place and time within the app.

Brands now have access to precise in-app targeting capabilities, which are necessary to personalize customer interactions. With Apptentive, they can use customer emotions, shifts in customer sentiment over time, and past behavior to trigger targeted and personalized actions.

This means that brands can retarget at-risk and unhappy customers with surveys asking for more details on why they are unhappy. You can even target these customers with deals or discounts to win them back.

Survey targeting graphic

By utilizing these new targeting capabilities, brands create personal experiences that are more effective at reaching customers, both happy and unhappy, where they are at. Growing adoption and usage of these new re-targeting capabilities certainly has an impact on keeping unhappy customers.

Industry-specific churn rates

Churn rates and retention rate benchmarks will vary industry to industry. Certain industries have high switching costs or lack competition, making it difficult for unhappy customers to leave. For example, only 18 percent of unhappy utility app customers churned after 90 days. Utility providers are location based, so unhappy customers typically aren’t able to  switch their provider without physically moving, dramatically reducing churn.

Banking apps also have a low churn rate because people don’t usually switch banks, due to convenience and the amount of time it takes. Only nine percent of customers that expressed negative sentiment about their banking app churned after 90 days.  

On the other side of the spectrum, there are industries that have low switching costs and operate in highly competitive spaces. Fitness apps had a churn rate of 42 percent for unhappy customers after 90 days and eCommerce apps had a churn rate of 25 percent for the same segment over that time period. With plenty of competition and limited, if any, switching costs, it is easy for Risks to churn in these spaces.

Industry-to-industry variations have an impact on the overall average rate of churn for unhappy customers.  When you look at overall averages, it is important to note the nuances that different industries provide and how they impact the overall app churn rate for customers categorized as at-risk.

A holistic approach to customer churn and retention

We know that many brands are getting better at reducing churn and improving retention, even for their unhappiest customers. Applying this finding to your own business, how do you keep your unhappy customers and turn them into Fans?

#1: Identify your Fans and Risks

It all starts with identifying which customers are Fans and which are Risks. Fan SignalsⓇ automatically segments your customers into one of several Fan Signals groups, based on their Love Dialog responses across a span of time. This critical emotional data helps your mobile team measure expressed customer sentiment over time and then identify your Fans and Risks.

How the Love Dialog segments fans and risks

#2: Collect feedback from unhappy customers (Risks)

After a customer has expressed their negative sentiment about your brand, you can follow up with the customer and ask for the “why” behind their response. The best way to do this is by pairing the Love Dialog with in-app surveys. So, after a customer has expressed sentiment you can quickly gather critical feedback on what is impacting their experience.

#3: Analyze and determine root causes

Before taking any action, it is important to take the time to analyze the feedback that unhappy customers provided and look for root causes and themes in their responses. Fan Signals can even track sentiment based on keywords included in the customer’s written feedback. This data can be used to find common threads associated with unhappy customers and help determine necessary actions to reduce churn.

Analysis of common phrases mentioned in customer feedback

#4 Take action and reduce churn rates

Acting on feedback can take many forms, so here are few ways to utilize the feedback that your unhappy customers provide: 

  • Product roadmap prioritization: Insights from customer feedback can validate or disprove your ideas and help prioritize product improvements. For example, if a portion of unhappy customers mentioned a certain feature that would improve their experience, then you know that the feature is a priority.
  • Re-target with promotions: You can send customers at-risk of churning a discount code or other promo item. This encourages customers to give your app and brand another try before they leave for good.

#5 Close the loop

To keep unhappy customers and turn them into Fans, it is important to close the feedback loop and let customers know that you are not just hearing their feedback, but taking action too. One of the best things about collecting in-app feedback is that it simplifies the process of responding to customers. For example, after adding a feature or an update you can send Notes to the customers that made the request. Responding to customer feedback is a proven way to let customers know that you care about their experience with your mobile app and that you are taking steps to listen and improve.

Graphic showing how customers can be retargeted after completing a survey

Wrapping it up

Unhappy customers are sticking with brands longer than expected, but it takes proactive engagement and personalized messaging to keep them around. You can take advantage of this finding and turn your unhappy customers into fans  by implementing a robust mobile feedback strategy that puts the customer first.

If you want to learn more about reducing churn and improving retention, we’re here to help. Sign up for an Apptentive 30-day free trial or request a demo!

About Chris Minnich

Chris Minnich is a Content Specialist at Apptentive. He enjoys telling stories with written and visual content.
View all posts by Chris Minnich >

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