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B2B Customer Churn: How to Calculate, Manage, and Reduce

January 5, 2023 | Oro Team

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The vision of customers circling the drain is every company’s bad dream. A shrinking customer base represents trouble, no matter your industry. You can’t grow if you can’t retain existing customers.

Successful companies have a retention strategy that allows them to manage churn. Keep reading to find out how to effectively manage B2B customer churn, through strategies that retain customers and keep them engaged with your brand.

What is B2B Customer Churn Rate?

In business, customer churn is defined as the rate at which customers stop doing buying from a company over a set period. The churn rate indicates how well you are meeting customer needs, offering an acceptable customer journey, and delivering products customers want.

Select a time frame

Before you can calculate churn, you’ve got to determine the time you’re going to measure. The more frequently your customers make purchases, the shorter the time frame you measure. Depending on the length of your sales cycle and frequency of sales, you may calculate churn monthly, quarterly, or yearly.

Count your customers

After you’ve identified the time, calculate the number of customers you lost over the measured time period.
Customers at start of time – customers at end of time = number of customers churned

Calculate churn rate

Take the number of customers churned and divide it by the number of customers at the start of the time period. Then multiply this number by 100 to convert to a percentage.

Calculate B2B Customer Churn Rate

Now that you know your customer churn rate, you can begin to determine if your churn rate is in line.

Benchmarking

Retention rates are the inverse of customer churn.

B2B churn by industry

So, for the median rates shown above, you subtract the retention rate from 100 to see the churn rate. Changing utility providers is difficult, this is an industry with a relatively low churn rate (11%). Changing your legal representation or certified accounting services is a bit easier, so the churn rate is a bit higher (27%).

Wholesaling and manufacturing are much more competitive industries where dissatisfied customers are more likely to shop the competition. Those churn rates are 56% and 35% respectively. So, while utilities must be concerned about their churn, manufacturers and wholesalers need to closely track churn rates and enact strategies to control churn.

How is B2B Customer Retention Different From B2C?

Both B2B companies and B2C companies need to have strategies in place to retain customers. But that doesn’t mean that the strategies will be the same.

In B2C, customer retention focuses on the brand. Loyalty programs promote products more than relationships. That’s because B2C purchases are much more transactional than their B2B counterparts.

With B2B loyalty programs, the focus is on rewarding the relationship. Because the customer base is small, the reward can be tailored to the needs of the customer segment you target.

For example, B2C loyalty programs are generally free and don’t require a purchase to join. The reward may be immediate (for example, 10% off the first order when you join) with a B2C program and is focused on the brand and the product.

On the other hand, B2B loyalty programs look over a longer horizon. The reward may take considerable time to earn (for example, purchases over a year) and may not be related to the product at all. The reward may be entertainment-related (free event tickets) or business-related (free consultancy services).

Both B2B customer churn and B2C customer churn tactics lean heavily into communication. Because the B2C customer base is large, it’s not practical to call every customer. However, the B2B customer base is smaller and personal phone calls are much more practical.

Learn More About B2B Buyer Expectations for Better Retention Strategies

B2B Customer Retention Challenges

Keeping customers happy starts with listening to what they say and responding accordingly. It’s no wonder that the major challenges for B2B customer retention revolve around making sense of customer feedback and getting it into the proper hands.

B2B Customer Retention Challenges

Statista research shows that companies receive input on issues from a variety of channels. While most customers prefer to pick up the phone to resolve a problem, a slightly smaller number reach out via digital channels. The department fielding calls might not be the same as the department responding to social media complaints. This leads to challenge one: getting data together.

Siloed data and teams

Not only must companies contend with data coming in from a variety of sources, but they must also confront fractured internal structures. It’s perfectly normal for B2B sellers to organize around function. This results in sales, marketing, and operations teams operating independently. Each team has its own goals and KPIs. To reduce churn, you must eliminate data and team silos and align everyone around a common KPI for customer retention. Make sure your technology enables data sharing and doesn’t create data bottlenecks.

Identifying reasons for churn

Once you have the data, it’s time for honest B2B churn analysis. In addition to capturing customer complaints, you need to proactively solicit feedback.

Look at the demographics of churned customers for commonality. Did churned customers come from the same industry, geographic location, or other segments?

Did the customer need resources that weren’t readily available? Empower your digital channels with live chat, knowledge bases, and help desks empowered with solutions to common problems or inquiries.

Is onboarding exhausting? If onboarding new customers creates too much friction, the initial poor customer experience may sour the relationship from the start.

Has the competitive landscape changed? New competition or pricing pressures from existing competition lure customers away. Customers that are only lukewarm about your products, company, or customer experience are most apt to be lured away by the competition.

Was the customer a bad fit from the start? Overly aggressive sales teams may force a fit that isn’t good for the customer or the selling company. In this case, churn is inevitable.

Knowing when to let go

Sometimes saying goodbye is best for the customer and the company. Customers may not know what they need, or sales may steer them in the wrong direction.

If keeping a customer means continual friction or lost profit, then letting the customer go makes sense. Review the relationship from a profit standpoint.

How to Tackle B2B Customer Churn

You know churn is an important metric to monitor, but how can you stop the inevitable? First, you must be confident in your product and service. Then you implement internal processes to address customer issues, get everyone involved in customer retention, identify signs you might be losing a customer, and create follow-up systems to keep in touch. Tackling B2B customer churn requires a company-wide effort.

Strategies that Reduce B2B Churn

Implement internal processes

Create internal processes to implement corrections to customer problems. Devise workflows that bring internal teams together to analyze reported problems and develop solutions. The feedback and fixing processes should happen automatically. Most problems aren’t one-offs. When there are formal processes, trends can be identified early, and fixes implemented quickly.

Align data and teams around retention

Smash down data silos and get actionable information into the hands of all team members. The goals, metrics, and KPIs that teams use internally are great for their own performance, but they need to be enhanced with churn goals. All teams should share customer retention goals and work together to achieve them. This keeps all players aligned around a shared purpose – customer retention.

Identify leading indicators

Dig into your churned customer data and look for consistent behavior or demographic information. Look at team member interactions to see if a pattern has developed. Perform follow-up surveys and phone calls to determine the reason for the churn. Was the product no longer needed or was the customer dissatisfied?

When you can identify leading indicators of churn, you can act preemptively to stop churn before it happens. Complaints are like icebergs; they show the tip of a problem. Dig in and determine underlying causes. Then when existing customers show signs they are about to churn, assign your best sales and service team members to their account.

Smooth onboarding processes and order follow-up

First impressions are lasting, and you want all customer experiences to start smoothly. You may never recover from a rocky start. In the first few months of the relationship, focus on customer adoption. Ensure new customers are familiar with your product and various usages. Keep a close eye on open tickets and the time it takes to resolve any problems in these early stages. The first few months are make or break, so ensure sales and support teams check in regularly. After the customer is familiar with the product, then you can pivot your messaging to the perceived value of your product.

Stay in touch

Customers expect to hear from you after they place an order. But what about one month or six months later? Use technology to track customer interactions and to regularly reach out. When customers see you care, even when they aren’t buying, they value the relationship because you value the relationship. Use phone calls, video chats, emails, and social media messaging to periodically check in on customers. You’ll better understand where they are in their business and this information comes in handy when they are ready to buy again.

Automate workflows to bring teams together for problem analysis and solution

Digital Tools to Manage B2B Customer Churn Effectively

Digital tools are key to managing B2B customer churn. The right digital tools create easy-to-use interfaces that provide a frictionless customer experience, smooth the onboarding process, make interacting with customer service and support effortless, and eliminate data silos so teams can align around customer retention.

CRM

The most natural tool to manage customer relationships is a customer relationship management (CRM) tool. The best-in-class solutions provide a 360-degree view of every customer and every transaction.

Your CRM should provide tools to store and retrieve information about every customer and lead, including past interactions and purchases. And, like OroCRM, it should automatically sync and update information from across multiple channels, so you always have one source of truth for your customer interactions. Automate onboarding and follow-up workflows such as sending emails and scheduling calls, so you always have a finger on the pulse of customer sentiment.

Customer service support software

Customers look for self-service opportunities before reaching out to customer service. McKinsey & Company finds that 70% to 80% of B2B decision-makers prefer digital self-service. Look for tools that let customers interact with agents via live chat or offer a robust chatbot. SaaS solutions such as TeamSupport or HubSpot allow you to stand up a knowledge base for self-diagnosis and an online ticketing service when more support is necessary. Select tools that will turn interactions into data to aid your internal B2B churn analysis efforts.

B2B eCommerce platform

One of the most effective digital tools you can deploy is a fully functional B2B eCommerce website. Make sure the platform you select is purpose created for the needs of B2B customer retention. Avoid B2C eCommerce platforms extended to serve B2B.

A feature-rich B2B eCommerce platform like OroCommerce will allow you to customize the customer experience with personalized product catalogs and price lists, automate workflows to stay abreast of customer satisfaction, and even includes OroCRM as part of the package. As a hub for your customer’s digital experience, select a platform that integrates seamlessly with your PIM, ERP, and WMS solutions for a flawless customer experience.

No matter what digital tools you employ, make sure they offer the flexibility to personalize and localize customer interactions. Look for segmentation functionality that allows you to personalize as granular as the account level. Customers who feel valued are less likely to churn.

Nothing makes a customer feel more valued than personalized and localized communications and interactions. And finally, look for solutions such as OroCRM and OroCommerce that are purpose-driven for B2B customer retention. Highly complex transactions are the rule and not the exception in B2B sales, make sure your solutions tame complexity – not add to it.

Simplify eCommerce evaluation with a ready-made RFP Template

B2B Customer Retention and Churn Management with OroCommerce

OroCommerce offers extensive B2B eCommerce features that empower you to create exceptional customer experiences.
From a customizable workflow engine makes it possible to define the steps for any business process to the ability to handle an infinite number of products, price lists, and catalogs, OroCommerce conforms to the way your customers want to do business and not the other way around.

With an integrated CRM, you not only track your sales pipeline and funnel, but you can automate routine follow-up to stop B2B customer churn before it starts.

You also get the flexibility to create the exact experience your customers demand.

Azelis replicates the feel of B2C while handling the complexity of B2B

Azelis, a global leader in specialty chemicals and food ingredients and additives, was faced with a change in the demographic of their customers. Like all B2B sellers, their buyers were increasingly digital natives looking for a B2C-type experience in their B2B buying. To retain customers, they needed to provide a digital experience that covered the entire journey.

Customers wanted to self-serve support from informational articles, formulation guides, technical information, and detailed catalogs. Assets had to be easy-to-download and localized to the user. Users needed to request samples in their own language. Because Azelis operates in 57 countries with customers speaking over 45 different languages, catering to each unique customer group was vital to reduce churn.

Azelis partnered with Smile to implement OroCommerce, as it not only offered extensive out-of-the-box features but also converts into any local language and currency.

According to Matt Nancekivell, Digital Solutions Director at Azelis:

When it comes to improving customer experience to reduce churn, Azelis “is leveraging innovative digital solutions to better serve our customers and suppliers” with “OroCommerce as the foundation of our customer experience portal”.

Braskem gives customers what they ask for

To keep customers happy and on-board, its important to listen carefully to their wants and needs and then deliver. That’s exactly the approach used by Braskem to revolutionize how they interact with their customers.

Braskem, the world’s leading biopolymer producer knew that moving their traditional off-line business into a digital marketplace was key to modernizing their business. But they weren’t sure how customers would respond. So, they took a minimum viable product (MVP) approach, and created a beta marketplace using OroCommerce. Then they had a small group of customers try it out. They tested for bugs, workflows, and adoption rates. New specific features were added because customers requested them. As a new group of customers onboarded, they tested and released even more features.

Jason Vagnozzi, Director North American Ventures, sees OroCommerce and the MVP approach as tools to delivering the experience customers want.

The flexibility of the platform has allowed us to listen to the voice of our customers and improve the functionality as user adoption grows.
Jason Vagnozzi, Braskem

Want to know more about Jason’s journey to connect with customers? Watch this episode of B2B eCommerce UnCut

Managing Customer Churn Is Serious Business

Managing B2B customer churn is much different than managing B2C customer churn. Focus your efforts on the entire customer journey and customize the experience to the expectations of the customer. Modern digital tools make capturing data for B2B churn analysis easier than ever. Align teams around customer retention and identify leading indicators. Personalize and localize your marketing and sales efforts and reduce friction in the onboarding process with a B2B eCommerce platform designed with customer retention in mind.

Reduce Churn and Increase Retention with OroCommerce and OroCRM

See how Oro can increase the stickiness of your customers.

FAQs on Customer Churn and Customer Retention

How can you reduce B2B client churn?

Reducing churn starts with a churn analysis. It’s important to understand what customers are leaving and for what reasons. Then, you must develop strategies to reduce customer churn.

What are some strategies for reducing customer churn?

Strategies to reduce customer churn include:

  • identifying leading indicators that customers are about to churn. This can be found by analyzing customers and gathering follow-up data about the reason for buying elsewhere.
  • smoothing the onboarding process and aligning teams around the goal of customer retention. You may use digital tools like CRM and B2B eCommerce to automate processes and marketing to keep customers engaged and enjoying a great customer experience.

How do you calculate customer churn?

Divide the number of customers lost during the tracking period by the number of customers at the beginning of the period and multiply the result by 100 to determine customer churn percentage. The tracking time period will vary from company to company.

What is B2B customer experience and how does it relate to customer churn?

The B2B customer experience encompasses all interactions a lead has with your company and continues through the purchasing process until after the sale. In short, the customer experience is every interaction a person has with your brand on every channel you support. The more you align the customer experience with customer expectations, the lower your churn and the higher your retention rate and revenue.

What is good B2B churn rate?

In B2B, the churn rate varies by the industry. For example, changing electrical or natural gas providers is fairly difficult and these industries enjoy low customer churn rates. On the other hand, distributors vying for the same pool of customers may experience much higher rates as the same product may be readily available elsewhere.

What OroCommerce features improve retention rate?

OroCommerce provides an integrated version of OroCRM to get a 360-view of every customer and every interaction. In addition, you get a powerful out-of-the box features necessary to create the customer experience clients want. Create personalized catalogs and price lists, automate follow-up, enable content rich product information or seamlessly integrate with the PIM of your choice.

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