How to Ethically Reduce Churn Rate, Minimize Refunds and Increase Customer LTV

By Nate McCallister


Chasing more new customers can ruin your business. It's wildly inefficient to flood your pipeline full of new leads and customers if you aren't doing a good job to retain them after the sale. 

This includes...

  • Reducing refunds
  • Minimizing cancellations and chargebacks
  • Increasing loyalty 

So, it's critical to prioritize your existing customers. Failing to do this is like filling up a bucket of water with holes in it. 

Did you know that it's estimated to cost 5x more to acquire a new customer than it is to keep an existing one? Or how about that it's estimated 80% of future sales come from 20% of your current customers?

Great business owners understand this. Here are some of the ways you can join them in the pursuit of reducing churn, minimizing refunds and increasing average customer LTV (lifetime value). 

#1 Have a Great Product

You might be thinking, "Really? You're going to start with something as dumbed down as that?!?"

Yes, yes I am.

Unfortunately, quality sales and marketing can get people to buy subpar products, but it does a poor job of getting them to keep them. 

No other methods of retention are as important as having a truly great product that matches the quality of the product you promise in your advertising.

#2 Run Testimonial Contests

Ok, now we're getting to some real juicy stuff.

Testimonials can be tremendously powerful when it comes to building brand loyalty and reducing churn rate. 

GNC Testimonial Contest

There are a ton of different ways to run these contests, but the psychology behind them is what matters. 

When customers vocalize (or in this case write down) their positive opinions of something, they are more likely to stick to that impression. They will subconsciously favor your product going forward thanks to something called "consistency bias." I'm not going to delve deeper into that in this article, but if you're interested in learning more about consistency and human psychology in general, I recommend checking out the book Influence by Robert D. Caldini

Even if these testimonial contests don't boost retention and increase LTV, they are great to have for marketing and advertising in the future. 

#3 Get customers invested in the product and it's success

One of the advantages of being a small business is you can make your customers feel like they're a big part of it. 

You've likely experienced this before. Have you ever been one of the first subscribers to a YouTube channel that ended up getting millions of subscribers? Or how about going to see a band in a hole in the wall bar before they made it big?

Making your customers feel like they're a part of your business will dramatically increase their loyalty to the brand. 

So, how do you do this? 

There are many ways, but I feel like examples are the best way to explain.

  • The popular sales funnel software Clickfunnels has created a culture among their users and they call them "funnel hackers." Labeling yourself in this way will dramatically increase loyalty and preference towards the brand in the future. 
  • The WordPress plugin Lasso regularly asks their users for suggestions and creates a list of features submitted by users to improve the software. When they make these changes, the users felt like they were a part of the business (and they are). 
  • I'm in a membership group that is hosted in an app called Circle. Users have badges that let people know more about them. One of the badges is "founding member." As silly as that seems, I'm proud of that badge. 

Get creative and find ways to involve your users with the direction and growth of your business. 

#4 Continually improve (for free)

I'm not going to say which one, but there is a software that I've paid for for about 5 years. I recently quit even though it is just as good as when I bought it. 

That is exactly why I quit. It hasn't gotten any better!

Things have changed and they haven't. Other alternatives made updates while this company just focused on selling more of the same thing. 

Continually improving your product will make people feel like they're getting more than they originally paid for and that will reduce cancellations and refunds. 

#5 Grandfather pricing

The fear of loss is greater than the desire to gain. If you ever raise your prices on a recurring payment program, if possible, offer existing members the same rate for life. These are your core customers and giving them another reason to stay (not losing their low pricing) will help reduce churn. 

#6 Exit Surveys

Don't let a cancellation go to waste.

Find out what you could have done better with exit surveys for cancelled members. 

Yes, most people won't complete them, but you can find amazing insights into what is causing people to cancel simply by asking. 

#7 Offer World class Support

Customer support is more of an investment than a business cost. Admit it, you've cancelled something because their customer support stunk, right? We all have...

#8 Provide Deep Training

If the product you sell has a learning curve, create content that shrinks it. Having sold a lot of subscription B2B software products, I've learned that not understanding how to fully utilize a product is the biggest reason that people cancel their accounts. 

Screenflow Training

Screenflow offers an amazing training series and regularly runs webinars and hosts replays to get their users up to speed fast.

This training should be free but not low quality. Put in the work to make the training clear and concise. 

Regular webinars are also a fantastic way to get members engaged and to get them up to speed with your product fast. 

Also, work hard to make sure that your training offers "quick wins," for customers. Help them find a way to quickly justify their purchase. 

About the author

Nate is the founder and main contributor of EntreResource.com. He is a lifestyle entrepreneur who spends his time building businesses and raising his four kids Sawyer, Brooks, Van and Lua with his beautiful wife Emily. His main interests include copywriting, economics and piano.

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