No one likes a leaking bucket. On one side, you spend a substantial portion of your budget in digital marketing and sales to on-board clients. Complex B2B involves significant investment of time and resources in pre-sales, transition and on-boarding. It hurts when such clients leave in a short while. And when global accounts or key accounts churn, it causes un-repairable damage to reputation and financials. Here are some broader points on why your organization isn’t growing due to high client churn.
Impact on Overall Company Growth
High client churn in B2B companies can hurt overall company growth in several ways:
Loss of revenue: High client churn can lead to a loss of revenue, as businesses lose customers and the revenue they generate. In B2B, revenue from a few key accounts can be significant and losing them can have a big impact on revenue.
Increased customer acquisition costs: High client churn can also increase the costs associated with acquiring new customers. When a business loses a significant number of customers, it must spend more money to acquire new ones to replace them.
Damage to reputation: High client churn can also damage a company’s reputation. If a business has a high rate of customer turnover, it can signal to potential customers that the company’s products or services are not of high quality or that the company does not provide good customer service. This can make it harder for the company to acquire new customers and grow.
Reduced customer lifetime value: High client churn can also reduce the lifetime value of a customer. When a business loses a customer, it loses not only the revenue from that customer but also the potential revenue from future sales to that customer.
Difficulty in forecasting: High client churn rate also makes it difficult for a company to forecast future sales, which makes it harder to make accurate financial projections and plan for growth.
Overall, high client churn can greatly impact a company’s growth by reducing revenue, increasing costs, damaging reputation, reducing customer lifetime value and making forecasting difficult. This is why it’s important for B2B companies to focus on customer retention and minimize customer churn.
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There are several measures of client churn in B2B, including:
Rate of churn: the percentage of clients that cancel or do not renew their contracts over a certain period of time.
Revenue churn: the amount of revenue lost due to clients canceling or not renewing their contracts.
Gross churn: the total number of clients that cancel or do not renew their contracts over a certain period of time.
Net churn: the number of clients that cancel or do not renew their contracts, minus the number of new clients acquired over the same period of time.
Lifetime value of a customer: The amount of revenue that a customer generates over their lifetime with the company.
Retention rate: the percentage of customers that remain with a company over a certain period of time.
It is important to note that any of these measures of client churn can be used to identify areas where a company is losing clients and to help develop strategies for retaining those clients.
Short term and Long term impact of High Client Churn
In the short term:
Organizations will face difficulty in scaling the business. High client churn can make it difficult for a business to scale and grow, as it will need to continually invest resources in acquiring new clients to replace those that have been lost.
If the company spends additional resources to prevent client leakage such as discount in billing, non-billable services, management attention and cadence, etc., it can directly impact the account level profitability. If the trend continues, it will question the viability of doing business with that particular client.
In the long term:
High client churn can damage a business’s reputation if it is seen as a sign of poor customer service or low-quality products or services.
Employee morale and satisfaction will be impacted. This will lead to a cascading effect on overall company outlook and aspirations
Yet, such a situation can be completely avoided, if your team takes proactive measures. What are those proactive measures and what are those which are relevant to your situation?
Even if you haven’t experienced such a situation, is there a ‘Client Churn Vaccine’. And the answer is a ‘Yes’!
If you are looking for ways to minimise client churn, contact us