Client churn is a problem for service businesses. It simultaneously decreases revenue and increases costs. Attracting new clients costs up to seven times more than retaining current ones.

To understand your client churn, you need to know your churn rate and the reasons behind the numbers.

In this article, you’ll learn why clients churn and how to track it. You’ll also get expert tips in preventing client churn for greater business stability and growth. 

Let’s start with the basics.

Why You Should Track Your Client Churn 

Client churn is another term for customers who are no longer doing business with you. Of course, some attrition is natural. 

People move out of the area. Or they simply no longer need your services. If you have a diaper service, for instance, families don’t need diapers once their kids reach a certain age. 

However, churn can also come from customers who stop hiring you and turn to a competitor. That’s the kind you really need to worry about. 

Why is client churn important to understand?

If you own or manage a service business, repeat customers are a cornerstone of your stability and growth. Not only do they make multiple purchases, but they are also more likely to recommend you to others. 

Word-of-mouth referrals carry a great deal of weight. Multiple studies show that over 90% of consumers trust reviews from people they know when making a purchasing decision. 

Referrals from happy repeat clients lead to another cornerstone of service businesses. That’s new customers. About 85% of small businesses are discovered by word-of-mouth referrals. 

New customers help your business grow, whether you want more revenue or to expand to more locations. And they replace those lost through unavoidable attrition. 

Notice we said “unavoidable” attrition above. Most customer churn is actually avoidable. If you can minimize avoidable churn, you can reap multiple benefits: 

• Improving your income 
• Meeting goals for growth 
• Weathering difficult economies 
• Staying ahead of the competition 

Retaining customers also costs less in the long run. You always spend more to bring in new customers than you do to keep your existing ones. 

You must first capture their attention with marketing and paid advertising. Then, you have to move them along your sales funnel. Getting a new client to book a service could take months or even years. 

You have a better chance of cross-selling or up-selling to your current clients, too. So, a small increase in customer retention can translate to a large increase in revenue.

Common Causes of Client Churn 

Avoidable churn usually comes from a list of common causes. Narrowing it down can help you address the problem.

Poor Customer Service 

You might think that customer service is simply catering to unhappy clients after you’ve provided a service. But customer service encompasses a wide range of things, starting well before the job is finished. 

It includes booking your service in the first place. Say you run a plumbing business. A regular customer can’t reach you late at night for a burst pipe? They’ll move on to the next plumber on the list. 

So, customer service can involve scheduling and communication. It can also be related to payment. If customers have difficulty paying you, they may think hiring you isn’t worth the hassle. 

Unfortunately, there are still small service providers only take cash and checks. But customers today want to pay with a debit or credit card. Being able to easily pay online is critical to customer satisfaction. 

Then, there’s the part of customer service that deals with poor perception of your actual service (see below). How do you respond to complaints and bad reviews? Do you ignore them or work to make things right, even if it eats into your profits? 

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Dissatisfaction with Your Key Service 

Some clients may be willing to overlook shoddy customer service. But they won’t get past poor performance of the service they hired you for in the first place. 

You have probably experienced this yourself. You might not like the receptionist at your dentist’s office. However, the dentist is wonderful, so you put up with it. 

If the dentist is bad, though—that’s another story entirely. 

Customers leave when the pest control, HVAC consult, or cleaning service isn’t up to their expectations. Failure to meet expectations may include: 

• Lack of punctuality 
• Leaving a mess after a job 
• Rudeness to the client 
• Property damage or theft 
• Not safeguarding pets’ space 

It could be constant employee turnover. Clients don’t want to explain how they like their lawn mowed over and over to new gardeners, for example. 

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Price Sensitivity 

How you price your services can have some clients hitting the bricks. Sudden price increases are one reason they leave. This is especially true if a key competitor can undercut your price. 

However, not recognizing economic difficulties is another factor. Recently, people have been struggling with inflation for housing, food, fuel, and utilities. They may not be able to afford your regular prices. 

Sure, you have to deal with inflation too. But is there a way you can offer discounts or give customers a little more for their hard-earned cash right now? 

Failure to Align with Values 

Customers can abandon you if they think your company’s values don’t line up with theirs. Some places where you might see this include: 

• Attitudes toward sustainability and eco-friendly services 
• Overtly advocating for certain politics
• Failure to support local organizations in a small town 
• Not respecting religious or cultural norms in someone’s home 

Buying is often an emotional decision for customers. If they think your business violates their beliefs, they’ll go elsewhere.

Using Analytics to Determine Client Churn Triggers 

You can’t do anything about client churn until you get a handle on its numbers. You need data to find out why customers are leaving your business. 

KPIs: Key Performance Indicators 

Ideally, you want a numerical churn rate, which is: 

Total number of customers lost in a given period / Total number of original customers in that time × 100 = % churn rate.

Say you lost 10 customers out of 100 for your handyman business over the last month. That means your churn rate is 10%. 

Is that good or bad? You want to compare it to churn rates in your specific industry to see. 

Churn rate is what’s known as a KPI, or key performance indicator, for service businesses. It’s a marker of how well you’re keeping clients satisfied. 

Customer Segmentation 

You can also segment your customers and break down churn rate by category. For instance, you might want to know how many customers churn after their first appointment. Compare this to how many churn after one year, three years, etc. 

You could perform customer segmentation by value, too. Break down clients by how much they spend with your business. What is the churn rate for big spenders versus those who don’t give you much business? 

Other ways to segment customers include: 

• Customer demographics like geography, age, income, etc. 
• Customers who made a complaint 
• Clients who requested refunds, credits, or chargebacks 
• Customers who made claims against a warranty 

Customer data software is available today that lets you automate and track this information. 

Discovering Why Clients Churn 

As well as numbers on churn rate, you need reasons. Without knowing why customers leave, you can’t fix the situation. 

How you determine this will vary depending on your industry and business model. For instance, if customers have a subscription for a service, you can require them to give a reason when they unsubscribe. 

Otherwise, you may have to resort to emailing or calling former customers to find out why they left. This has the benefit of allowing you to woo them back if you reach them in person. 

Cost Comparisons 

We mentioned above that it’s more expensive to bring in new clients than it is to keep your old ones. As part of your churn analysis, you may also want to attach numbers to this. 

First, calculate what it costs to attract new customers. That includes your marketing and advertising costs, free estimates, etc. 

Now, calculate what you spend in those categories to retain clients. That might be a free fourth pest control visit after the purchase of three visits previously. 

Chances are, the second figure is a lot less than the first one. You can use this to incentivize yourself to reduce customer churn. 

FROM ONE OF OUR PARTNERS: Connect with Your Customers and Grow Your Business 

7 Strategies to Lower Your Client Churn 

So, how do you minimize client churn anyway? Here are seven expert tips for reducing turnover in a service business that you can start using today: 

1. Make Your Service as Impeccable as Possible.  

This starts with training staff in two areas. First, they must be tops at their job. Second, they must also be ambassadors for your company. 

Uncover Client Pain Points.  

If you’re in the service industry, you’re solving problems for your customers. Find out what their pain points are and become a solution they can’t live without. 

Develop a Reputation for Stellar Customer Service.  

This should not just include dealing with clients who have complaints. Routine customer service begins with onboarding. It ends with a follow-up call or email to make sure everything went well. 

Understand Cost Barriers for Consumers.  

In addition to client churn, you can also have revenue churn, where customers don’t leave but they purchase less. Consider tracking revenue churn during down economies in particular. 

Keep an Eye on the Competition.  

This relates to the previous point. What are your competitors charging? Is there someone new in town? How do your services compare? 

Build Engaging Customer Relationships.  

Try to personalize communication as much as possible. Think about hiring an account manager or customer relationship manager if necessary. Talk with, not at, people on social media. 

Continuously Monitor Client Feedback.  

Follow up after every job and conduct regular customer surveys. Encourage online reviews and respond to them with thanks or a promise to fix problems. 

Bonus Tip:  

Chart your churn rate over time. That will tell you if the steps above are working or not. If your churn rate goes down, celebrate your success! 

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