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8 Steps to Customer Service Recovery (with templates)
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by
Cassie Wilson
October 31, 2023
· Updated on
If you’ve ever worked the customer service desk at any time in your career, you know running into an angry customer is inevitable and can be tricky to navigate—especially if there is no official guidance from management on handling the situation.
Do you just let the customer walk away angry and run the risk of them telling other people about your “bad service”? Or do you do whatever you can to make the customer happy?
In situations like these, it helps to have a service recovery plan in place to help deescalate tensions and make things right with the customer.
If you don’t already have a customer service recovery plan in place (or you’re looking for tips to improve yours), this article is for you.
Table of Contents
Customer service recovery is a company’s steps to solve an unhappy customer’s issue through excellent customer service. When customer service blunders happen, it can feel like a mark against your business, but it doesn’t have to be—you just need the right systems to fix the issue.
In a perfect world, customers would be delighted with the service they receive 100% of the time. Unfortunately, we don’t live in an ideal world, and when customers receive lousy service, nearly 80% of those customers will take their business elsewhere, especially if they feel their complaints are unheard. That’s when customer service recovery should come into play.
Here’s how to handle complaints effectively:
While it may seem that customers with a bad experience will be hesitant to continue doing business with your company, that’s not the case.
According to the Service Recovery Paradox, when your employees go above and beyond to solve an unhappy customer’s issue, they’re helping to increase the customer’s brand loyalty even more than if no issue had arised.
Clearly, service recovery should be a priority for your business and employees. Let’s look at the eight steps to create a service recovery plan to ensure your employees knock it out of the park when issues arise.
As a customer, there is no worse experience than not being heard when you have an issue with a product or service.
Recently, I experienced this with my Internet service provider. After days of trying to get help from customer service and multiple transfers to various departments, my issue was solved with a straightforward click of a button. The entire experience was frustrating, and as a result, I would not recommend their service.
It could have easily been solved if customer service had taken the time to listen to my concerns and identify my problem. The point of this story is simple: take the time to listen to your customers and understand their issue.
Encourage your reps to use specific phrases to show customers that they are heard. Train your employees to use terms like:
“I understand how this is upsetting.”
“I will work to resolve this issue.”
“I understand your concerns.”
Along with listening to the customer’s concerns, the next step in customer service recovery is apologizing for the mishap.
Appropriate apologies never pass the blame on someone else or another department. Instead, they are genuinely heartfelt to help customers understand their needs and issues matter. Usually, a sincere apology helps to calm a customer, too. And when customers are cool and collected, it becomes easier to work with them to resolve the issue.
Part of a good recovery service plan is allowing your employees the authority and resources to resolve customer issues.
The goal is to avoid making customers wait a long time for answers, or make them repeat the issue to multiple people. Bouncing your customers from one department to the next only increases their frustration.
Although a breakdown in service may have happened for various reasons outside your control, it is your customer care team’s responsibility to own and fix the problem.
Research about service recovery through empowerment shows that it’s an effective way to improve service recovery performance and service team’ job satisfaction.
Before your customer service reps attempt to resolve anything, the customer’s issue should be clearly understood. Learning to ask appropriate questions is vital to providing excellent customer service and resolving a problem.
Sometimes, getting to the root of an issue is as easy as asking clarifying questions like, “I understand this is the problem. Is this correct?” Other times, your reps might have to play the role of a detective and ask, “Can you walk me through the steps you took with our product that led you to this issue?
It’s crucial that your customer service representatives do not attempt to solve a problem without understanding it. Attempts to solve an unknown problem will only lead to more frustration for your customers and employees.
Show your customers you care by seeking to understand their issues.
The customer care team members are expert detectives and problem-solvers. Their job is troubleshooting the customer’s problem and finding an appropriate solution. Armed with the knowledge of the issue, your customer service reps can now do what they do best: solve the problem.
At this stage in the customer service recovery process, your reps should be focused on solving the customer’s issue and actively working to maintain the customer relationship. Maintaining customer relationships while solving a problem sometimes involve offering a refund. Other times, it’s fixing a broken product or upgrading a service. It should always include the company covering all costs associated with the fix. Research shows that when companies overcompensate for service failure, customers are more likely to accept the fix as fair and satisfactory.
It’s important to note that a problem is not solved until the customer is completely satisfied. Be sure not to make assumptions about customer satisfaction. Instead, ask them if they are satisfied with the solution and the service they have received.
The service recovery process isn’t over when the customer is satisfied with the solution. Remember, customer service recovery is also about enhancing brand loyalty.
It’s often not enough that an unpleasant situation has been made right. After all, that’s the service or product your customer should have received in the first place.
Instead, show your customers you care and offer them a token of appreciation. If you’re a subscription service, think about offering a free month of service or waiving shipping fees for delivery. Or, offer a 15% discount for the next purchase. Come up with offers that make sense for your company and offer those to your customers in appreciation for sticking with you through their bad experience.
By doing this, you’ll be sure to end the interaction on a positive note and keep a loyal customer.
Want to score extra points in the brand loyalty department? Follow up with the customer to ensure complete satisfaction.
Good customer service recovery continues well after the initial conversation with the customer ends. Ask them if they are still satisfied with the solution and service you provided with a follow-up email, a simple phone call, or take it a step further and mail a handwritten note. Consider asking the customer to respond to a satisfaction survey, too.
It’s also a good idea to keep a record of customer interactions for future reference or analysis.
While service recovery might seem like it only benefits the customer, that couldn’t be farther from the truth. Service recovery is just as much for your team as it is for customers because it helps your team identify lapses in service or defects in your product line. You’re missing out if you’re not using it as a learning opportunity.
With the information your customer service team gathers from troubleshooting with customers and responses from the customer satisfaction survey, you and your team have the tools to ensure a bad customer experience doesn’t happen again.
Continuously improving and tweaking your products or services based on what you learn makes for a better experience for all, including your customers and employees.
Implementing a service recovery plan for your business doesn’t have to be complicated. If your business operates online, you can use these service recovery email templates as a guide to writing your own emails.
Hello [Customer]-
Thank you for emailing us about your concerns with our product line. I’m sorry to hear you are experiencing an issue with our product.
I apologize for the inconvenience, and I appreciate you bringing this to our attention. We stand behind our promise of guaranteeing the best product on the market, and we’ve failed. This one’s on us.
To clarify, you are experiencing [describe the issue in detail]. We want to make this right for you, and we have a couple of options.
We can offer you a full refund of your order or replace the defective product entirely at no extra cost to you.
Please let us know which option you prefer.
On another note, as a valued customer, we are offering you 20% off your next order.
Thank you for being with us!
[Your Company]
Hello [Customer]-
I hope this email finds you well!
I just wanted to follow up with you about your product replacement. I see that it was delivered to your address yesterday.
Please let me know if you experience any issues with your replacement product. Y
If you have a minute, we’d love if you took a second to complete a short survey about your experience. We’d greatly appreciate your responses to help us continue to improve.
Don’t forget to use your 20% discount for being such a valued customer!
Thanks for being awesome!
[Your Company]
If you provide a product or service, encountering an angry or rude customer is bound to happen. It’s almost inevitable. But with the proper service recovery plan in place, your customer service team has the power to calm your customers and do right by them.
When mistakes happen, don’t squander an opportunity. Use it as a chance to show your customers you care and build lifelong business relationships.
February 5, 2024
How to Set Customer Service Goals for Success
Learn how to set customer service goals for success
When I took over the customer service team at my last company, it was during a period of transition.
We’d just gone through an acquisition which, although welcome, meant we needed to reassess our resources, our tools, and our team’s strategy for the foreseeable future. I was also stepping from a senior role into a management role, and while neither management nor the team were new to me, the situation was changing quickly.
This presented a challenge: quickly leading the team through setting new expectations and requirements, while still delivering the same excellent customer service experience for our customers.
It also gave us an opportunity to move from good to great — by understanding where we were, where we wanted to go, and how we might get there.
Maybe you’ve also just taken over a new team, or you’re also going through an acquisition or reorganization. Or maybe you’re just looking to level up your support team.
Regardless of why you’re here, this article will help you understand what SMART goals are in the context of customer service and how to define SMART customer service goals for your team. It includes some examples of great customer service goals, and it will show you how to measure the success of your goals so your team can continue to grow and adjust your customer service strategy as needed.
Table of Contents
Being on a ship with no destination is unpleasant and nerve-wracking for everyone aboard.
Setting solid customer service goals for your team provides a common purpose and keeps everyone moving in the same direction. It improves your odds of reaching your destination: consistent excellent customer service.
And beyond the psychological benefits of having clear goals, there are plenty of more tangible benefits too.
Clear customer service goals ensure that your team’s efforts align with the broader objectives of the company, so it’s clear how your team is contributing to business growth.
It also means both you and the company can make more informed decisions about budget and resource allocation, using the real data and trends you glean from measuring your progress against your goals.
Goals focused on customer satisfaction directly contribute to improving the overall customer experience. Satisfied customers are more likely to be loyal, to make repeat purchases, and to recommend your business to others.
Consistently meeting and exceeding your customer service goals also builds your company’s reputation for reliability and trustworthiness, which is essential for long-term brand success.
Setting specific goals and measuring how each member works toward these objectives allows customer service teams and managers to identify strengths and weaknesses. It also allows individual team members to understand and direct their own professional development.
Well-defined goals also provide teams with a clear sense of direction and purpose. Team members who understand how their work contributes to larger goals are happier and more committed to the company’s success.
You’ve probably heard of SMART goals before. It’s a handy mnemonic tool that reminds everyone that effective goals are:
But why do the goals you set for your customer service team (or that they set for themselves) need to be SMART?
The point of setting goals is to be as clear as possible about expectations:
There shouldn’t be ambiguity in customer service goals. That’s because while a well-defined goal tells your team members what success looks like, it also acts as a catalyst or guide to help you get there.
This may be from a customer standpoint (satisfaction, response time, self-service, etc.), from an individual perspective (performance or professional development), or from a company perspective (cost per customer, retention rate, expansion rate, etc.).
First, keep in mind that you usually can’t jump right into creating a goal. There’s always an assessment period first.
You need to spend some time figuring out what the current state of your customer service team is.
Some questions you can ask to guide your assessment:
Your assessment will be highly dependent on your team and company, but these questions should give you an idea of the things you should consider as you work to define your goals.
Once you’ve done the foundational work to understand what your team needs to improve on, you can begin using that information to define your goals.
Let’s break it down in the context of a real customer service SMART goal.
Any goal you set should be clear and well-defined. For example, “answer customers faster” is a nice aim, but what are the channels where you want to answer customers faster? What does “faster” mean?
A more specific goal for reducing customer wait times would be to set a target first response time for a specific channel, such as: “Send a first response to customers within 60 seconds of their initial chat message.”
Depending on your needs, you could get even more specific: “Send a response to customers inquiring about their order status in 60 seconds or less.”
Any customer service goal should be measurable, so you can understand whether you’ve achieved the goal (or not) and adjust your strategy appropriately.
Taking our example from above, a measurable target chat response time goal could be: “80% of customers will receive a response to their initial chat message within 60 seconds.”
This is the point at which your initial assessment becomes really important.
“80% of customers will receive a response to their initial chat message within 60 seconds” may sound like an achievable goal. It might be doable if you have a simple product or many agents trained and available to handle chats.
But what if you have only two chat agents and are receiving hundreds of chats each day?
Of course, you still want to strive to improve their first response times, but you’ll have to set reasonable expectations to give your agents a fair shot at success.
An attainable goal in this context might instead involve increasing the initial chat response time or decreasing the percentage of customers you’re targeting, like this:
Your context will determine what makes the most sense for your team. Just remember to aim for a goal that’s stretching, yet realistic.
This is another area in which your foundational assessment is key.
First, are your proposed customer service goals aligned with your customer service values and company’s objectives? If not, they won’t be effective or successful, no matter how well they fit the SMART parameters.
Secondly, are your goals relevant to your team? For instance, a manager with a high chat volume might adapt our example to involve implementing a chatbot in order to hit their desired initial chat response time goal.
But a manager with a low ticket volume probably can’t justify the time and expense of implementing a chatbot because the benefits will never outweigh the costs for their team.
This parameter is closely tied to being measurable. You won’t be able to determine whether you’ve succeeded unless you know when the goal needs to be achieved.
To make our example time-bound, we could edit it to read: “By the end of Q2 2024, we’ll be responding to 80% of customers within 60 seconds of their initial chat message.”
Customer service goals aren’t just about how your agents interact with your customers. Surveys have shown again and again that customers want the option to solve their own problems.
A goal for developing effective self-service could be:
“By [DATE] we’ll have launched a knowledge base with articles answering our 10 most frequently asked questions about [PRODUCT], resulting in at least a 10% reduction in tickets about those issues.”
Many knowledge base tools will have built-in ticket deflection tracking features, such as giving you the number of views for an article and the number of tickets created after the article was viewed.
You can also measure the success of this goal by tracking ticket volume for a specific category or tag over time.
Implementing a quality assurance program is a great way to improve overall customer satisfaction, response and resolution times, and brand recognition. It’s also a more objective way to measure and track agent performance and to kick-off conversations about professional development with your team.
It might look like this:
“In January 2024, develop a draft QA scorecard based on ticket reviews from the previous 3 months, so that we can begin calibration sessions with the team in February 2024.”
In this case, measuring success is relatively simple: is the draft scorecard available by February 2024 when calibration conversations must begin?
Customer satisfaction (CSAT) is crucial to your support team’s success, but also the overall success of the company. To build a customer-first organization, improving or maintaining your customer satisfaction score should be one of your main goals.
A sample goal for CSAT could be:
“Each month next quarter, maintain an overall CSAT across text channels (chat and email) of 85% or better.”
You can gather CSAT ratings using built-in tools on your customer communication platforms, or through a dedicated CSAT tool to send customer surveys. Most tools will calculate your CSAT score or percentage automatically.
As we’ve already covered, customer service agents are most engaged when they understand what their role is and can see how their contributions matter (both to their entire team and the company).
A goal for improving your customer service team’s overall engagement could be:
“Have a monthly one-on-one with each agent on my team and arrange at least one team social event a quarter, with the aim of reducing employee turnover by 10 percent by the end of the year.”
As you can see, this goal includes multiple conditions for success, and the team turnover rate is a metric that can be directly measured.
As a customer service manager, you get an especially broad view of how customers use and feel about your product. You also have the ability to take that customer feedback and put it in the hands of those who need it: your product team, your engineering team, your marketing team, and so on.
This can be as simple as implementing a public customer feature request tool where your customers can share their feedback and vote on what they want to see, or as complicated as setting up an internal, cross-functional customer feedback process.
The goal for becoming the voice of your customer could be:
“Have a bi-weekly Voice of the Customer meeting with the product development team, leading to at least one product bug fix and one new customer-requested feature release every quarter.”
You could measure this goal in a number of ways, depending on your strategy. If you have implemented a dedicated customer feedback tool, you can track customer usage against the rate of product releases and bug fixes. You could also track ticket volume in a specific category as well as any impact on CSAT ratings.
Everyone has their specialties and their weaknesses, and your customer service agents are no different. Quality assurance programs are a great way to identify areas for improvement, but you may also uncover opportunities during performance and career development conversations.
Your customer service reps can improve by seeking training in special topics, professional development courses, and peer support. Working with each team member to set and achieve goals for improvement fosters a culture of continuous learning and improvement.
A good example of goal for your agent could be:
“Get training on my weakest skills as identified by our QA reviews during the next month so that my average handle time goes down to [TARGET] by the end of the quarter.”
They can measure the success of this goal through attendance and completion of training, as well as by looking for improved QA scores and handle times.
The more customer service agents take ownership of their customers’ experience, the happier both they and the customer will be.
Owning the customer’s experience will mean something different for every team. It may look like being the customer’s one point of contact for an issue, or it may mean acting as the customer’s guide as they move through the escalation process.
It may look like answering every CSAT rating, good and bad, to thank the customer for their thoughts and solicit more feedback. Or it may mean reviewing their own customer interactions, identifying missed opportunities for exceeding customer expectations or anticipating customer needs, and devising strategies for doing so in the future.
A goal for owning the customer experience could be:
“I’ll reduce my ticket escalation rate by X percent in Q2 by being the primary agent on tickets about Y topic.”
Measuring your growth at owning the customer experience will depend a lot on what specifically that means for your company. For the example above, you’d measure the achievement by looking at the percentage of tickets you’re still escalating on the specific topic.
As you’re building out goals for yourself or your customer service team, remember to take a step back occasionally and look at the big picture.
Are these goals aligned with your company and your team’s vision? Are they clear or confusing? Are they too inter-dependent, so that if you fail at one, you fail at them all?
There’s nothing magical about setting SMART goals. They’re a fantastic tool for customer service teams, but the real key is in making goal-setting a discipline and a habit you’re regularly engaging in. Setting goals is not a one-time task — it’s an ongoing process of adaptation and growth.
The landscape of customer service is always changing, and your goals will need to evolve with it.
February 5, 2024
4 Customer Satisfaction Metrics (NPS, CSAT, CES, & More)
Learn about the most popular customer satisfaction metrics and how to calculate, interpret, and leverage them to delight customers.
Ah, unhappy customers. The not-so-silent killer of business.
Our teams may deliver, innovate, and grow... but if customers aren't happy, we won't be doing it for long. Can't improve what you don't measure, so...
How do you actually measure customer happiness?
With customer satisfaction metrics.
There are dozens of them, but fret not, we've highlighted four key metrics easy to understand, track, and improve upon.
All right, let's get you the measuring tools you need to improve customer satisfaction.
But first, a definition
Table of Contents
Customer satisfaction metrics are what companies use to understand how happy customers are with their product, customer service, and overall experience. These metrics provide insights into how well your organization does at delighting customers.
Customer satisfaction metrics also play a crucial role in developing your customer experience strategy. They’re a critical feedback loop that allows you to understand how your customers perceive your business and customer support, then to make course corrections where needed to keep improving.
Some customer satisfaction metrics shed light on the performance of specific employees and departments, while others serve as indicators of the overall customer experience, reflecting the efforts of the entire organization.
Let’s dig into the key customer satisfaction metrics and explore benchmarks, examples, and situations where each of them is particularly useful.
NPS score is a customer satisfaction metric that attempts to gauge your customers’ satisfaction based on their likelihood to refer others to your product or service. If a customer will enthusiastically tell their friends about your product, it’s a good indicator that they’re happy with what you’ve created.
Net Promoter Score is based on a single survey question:
How likely would you be to recommend X to your friend or colleague?
Respondents rate the likelihood of recommending your product or service on a scale from 1 to 10. Based on their rating, they fall into one of three groups:
First, determine the percentage of promoters and detractors from the total ratings pool.
Then, subtract the percentage of detractors from the percentage of promoters. That gives you your Net Promoter Score:
NPS = % of promoters - % of detractors
Let's say you received 100 responses to your NPS survey. Out of these:
In this case, your NPS would be 30, calculated as 50% promoters - 20% detractors.
The good news is you don’t have to calculate your NPS score manually. Popular survey and user analytics tools like Survicate, Qualtrics, or SurveyMonkey can automate the process and handle the job for you.
NPS can range from -100 (if all customers are detractors) to 100 (when all customers are promoters). But both of those are unlikely — you’ll usually land somewhere between those two extremes.
Any score above 0 is considered a good sign, as it indicates that you have more promoters than detractors. And generally speaking, the higher the number, the better. Benchmarking data varies across industries and company sizes, but according to recent research by Survicate, the overall NPS benchmark is defined at 32.
While benchmarking is helpful, paying attention to your NPS trend is just as important. An increasing NPS trend means that your efforts to improve customer satisfaction are paying off.
But if NPS drops despite your efforts, it’s probably the right time to revisit your customer service strategy and employ more comprehensive customer satisfaction analysis tools – such as customer interviews or analyzing support tickets to better understand the source of customer dissatisfaction.
Theoretically, you can use NPS to track customer satisfaction with any product, service, or even documentation materials and specific touchpoints in the customer journey. While that’s possible, practically speaking, NPS is usually used to assess overall customer satisfaction with a product.
The implementation of NPS can look different depending on the type of business:
Product and marketing teams often rely on NPS as a key performance indicator (KPI) to gain insights into customer satisfaction and track it over time. However, other departments can also benefit from NPS.
Freich Reichheld, the developer of NPS, suggests that it can be a tool to predict customer loyalty. Customer success teams often leverage NPS as a data point for churn prediction models and within customer health score formulas to identify at-risk accounts.
The CSAT score is a customer satisfaction metric widely used by customer-facing teams to gauge “in-the-moment” customer satisfaction at specific customer touchpoints.
The score is calculated based on a CSAT survey asking customers to rate their recent experience with your company. It’s like a snapshot of the customer’s satisfaction level at that particular moment.
Your CSAT score is the percentage of customers who rated their experience positively.
To calculate it, categorize your customer satisfaction survey responses into ‘satisfied’ and ‘unsatisfied’ categories. If you’re using the typical 5-grade scale, you’ll define ratings from 1 to 3 as ‘unsatisfied’ and assume that ratings 4 and 5 indicate satisfied customers.
The next step is to determine the percentage of customers who provided satisfied ratings. This percentage becomes your CSAT score.
CSAT score = (number of ‘satisfied’ ratings / total number of ratings) * 100%
For example, let’s say you have 100 customers complete your survey and 80 of them indicate a satisfaction level of 4 or 5. In that case, your CSAT score would be 80% (80 satisfactory ratings / 100 total number of ratings * 100%).
A CSAT score can range from 0% to 100%. A score under 50% is concerning, because it means you have more unsatisfied customers completing your survey than satisfied customers.
In highly-competitive industries, like SaaS or ecommerce, the benchmark hovers around 80%.
The higher your CSAT score, the better. Just know that achieving a perfect 100% in the long run is unrealistic, even with top-notch service. There will always be some random scores or customers having a bad day. In my experience, a 95% CSAT score is an attainable goal for a high-performing customer service team.
You should also expect a 5%-20% CSAT survey response rate, to get enough data for a reliable score. If you receive fewer ratings, revisit your survey settings, including the timing of your surveys, the messaging you use, and the communication channel.
While some companies use CSAT surveys to gauge customer satisfaction with help articles or specific product features, the most common use is to assess the performance of customer-facing teams.
Although you can send a CSAT survey after every customer interaction, I strongly recommend against it. It can be annoying, especially since many of us are bombarded with various surveys on a daily, and sometimes hourly, basis.
Instead, send CSAT surveys as follow-ups after key touchpoints with your team to measure how happy customers are with the service provided. Here are some common touchpoints to consider:
Many companies use CSAT score as a KPI for their customer-facing team, reviewing scores of both individual contributors and teams to evaluate performance.
Customer effort score indicates how easily customers find it to use your product or get assistance from your team. Unlike traditional satisfaction metrics, CES focuses on measuring the ease of the customer experience.
The score is based on a survey where instead of questions about satisfaction, customers are prompted to assess how easy or difficult it was to complete a task, such as navigating the product or getting the answers they needed.
Customer effort score has been gaining in popularity, often replacing CSAT scores in support teams’ performance management.
The main benefit of using CES is that it helps differentiate between overall product satisfaction and customer satisfaction with the support experience, focusing on how easy it is for customers to receive assistance. If customers consistently find something difficult, you have a clear area you can work on improving.
Customer effort score is measured with a 7-point scale. To determine your CES, divide the number of 5, 6, and 7 ratings — customers who rated an experience as easy — by the total number of ratings, then multiply the result by 100%.
CES score = (number of 5, 6, 7 ratings / total number of ratings) * 100%
For example, if 100 customers submit responses and 60 of them give ratings of 5 or higher, your CES score would be 60% (60 ratings of 5 or higher / 100 total number of ratings * 100%).
Your CES score can range from 0% to 100%. The higher your CES score, the better.
But since CES is a relatively new metric (invented by Gartner in 2010), benchmarking data is still limited. And even with more data, there probably won’t ever be a one-size-fits-all number, as products and services can vary in ease of use even within the same industry or across different touchpoints within the same company.
Having a higher CES score than your competitors doesn't necessarily imply that your customers are less satisfied or unhappy (although reducing customer effort is almost always a good idea). A high score can simply indicate that your product is more feature-rich and advanced, or that you need to invest more in customer onboarding.
To gauge the effectiveness of your customer experience efforts, monitor how your CES changes over time and look for trends.
CES is becoming increasingly popular as a KPI for customer-facing teams aiming to provide more effortless service. According to some research, creating experiences that are consistently easy is a more reliable predictor of customer loyalty than other metrics.
Common touchpoints to send CES survey include:
Survey timing is crucial for CES. Aim to send it immediately after the measured experience, while the memory is still fresh in your customer’s mind. Significant delays can lead to inaccurate scores as customers will struggle to recall all the details.
Churn rate is the ultimate customer satisfaction metric, because it measures the rate at which you lose customers. When customers cancel their service with you, it’s usually a clear indicator that they’re unhappy or that they found an option they prefer more.
Satisfied customers are less likely to leave – as long as your product isn’t seasonal and there’s a strong product-market fit, of course.
Although it’s a broad-reaching metric that’s impacted by way more than just your customer support team, churn rate can help you find connections between your customer experience efforts and business success.
Calculating customer churn rate is quite straight-forward and can be done on a weekly, monthly, quarterly, or annual basis.
First, divide the number of customers lost during a given period of time by the number of customers you had at the beginning of that period. Then, multiply the result by 100%.
Churn rate = (number of customers lost / number of customers at the beginning of time period) * 100%
For example, if you start a month with 100 customers and lose 20 customers by the end of the month, your monthly churn rate would be 20% (20 customers lost / 100 customers at the beginning of the month * 100%).
Tools like Profitwell or Baremetrics can seamlessly integrate with your payment systems and retrieve the real-time churn rate with a button click. Both tools offer churn rate forecasts, help identify correlations, and can even reduce churn.
For example, by automating follow-ups on overdue invoices when churn is primarily attributed to failed charges rather than intentional cancellations.
The lower your churn rate, the better. It should be lower than your growth rate and ideally below 7% annually.
A high churn rate undermines business growth, because it means all of the effort and money you’re spending to attract new customers is worth less. Even if your sales team is doing their jobs well, your business may not grow. A high churn rate can signal issues with customer experience and potential misalignment with your ideal customer profile (ICP).
Churn rate is crucial for all subscription businesses, especially when it comes to financial reporting and forecasting. The lower your churn rate, the more valuable each customer is and the more revenue you’ll see from them over time.
Despite your efforts, some customers will churn and it’s normal. Churn rate doesn’t always indicate dissatisfaction — a customer might love your product, but find they no longer have a need for it, so they cancel. Or perhaps their budget got cut and they were forced to make a tough decision.
If your churn rate is higher than expected, make time to dig into the triggers leading to churn. Churn rate is a lagging metric — you can’t measure it until after you’ve lost those customers. So when you see churn rate increasing, you need to move quickly to get ahead of it and find ways to improve your product and your customer experience.
Understanding the reasons customers churn is a critical first step in identifying ways to address issues and improve customer retention.
While metrics and quantified data are excellent for setting KPIs and identifying trends, it's crucial to delve deeper than a simple rating to truly understand your customers. Creating opportunities for them to share open-ended feedback openly and frequently is key.
In my experience, adding a free-text field to our CSAT survey proved invaluable. We discovered that, despite poor metrics, customers were quite content, and all the low ratings stemmed from a few easily fixable product issues. They were happy with our customer service, but their dissatisfaction with the product was showing up in our CSAT surveys.
The opposite is possible, too. You may find that while customers are happy with the specific experiences you measure, they may not be satisfied with your overall product.
These examples highlight why customer feedback is so crucial. The more you can make people feel heard and valued, the more open and honest feedback you’ll receive. With tools like Missive, you can automate follow-ups with customers, giving them opportunities to feel heard, appreciated, and motivated to share more. This ultimately helps you improve your customer experience and boosts your bottom line.
If you're keen on taking control of your team communications & customer support, give Missive a try for free!
