Let’s be clear about this, potential customer churn or attrition begins when they were first sold that product or service.
At some stage after the initial purchase, a ‘churn event’ happened and it was not identified and addressed by your team. This may be a delivery, fulfilment, installation, technical issue, service management or billing, there are numerous ‘events’ that can contribute to actual churn and unaddressed event combinations could result in mass churn, lost customers and quite often, bad debt, regardless of any smart dunning collection process.
But why would your customers churn?
Well, If you believe that you have the best product/service on the market, the best brand, the best pricing and the best customer service, why indeed would any customer churn, this is a reasonable question to ask. It is therefore also a perfectly reasonable response for me to say “ if you really believe that, then you are a fool”.
Reasons could relate to how the product was ambitiously sold, creating an expectation level that was never going to be reached. A classic case of over promising and under delivering, causing serious customer disappointment and negativity from day one. Other reasons include a) it did not stack up against its competition, b) it was not user friendly enough, c) the cost versus quality was perceived as unbalanced, etc.
There are many more questions than answers; people are people and they are often open to persuasion, the grass may appear to be greener on the other side, or their friends are using other suppliers, the competitor has given them a better price and so on, so its inevitable that there will always be a certain degree of attrition that is out of your span of control.
Churn events can happen several times throughout the customer lifecycle and need careful handling by trained, qualified service operators. (personally a robot does not cut it for me)
Is customer churn good for business?
One must also ask the not so dumb question, “ Are there some customers we actually want to churn? (the terrorists, mercenaries, low arpu) If we agree that some percentage of customer churn is inevitable, then do we know what customers are really worth saving? Does your customer segmentation, clustering and profiling enable this?
The high value customers should certainly be flagged on the system, but that may apply to current value. What about potential value? How can you lock in your key customers that will provide your best revenue potential over the next 3 years? How can you identify them?
There are many retention strategies that are based around revenue and usage churn, which generally happens before the actual customer churn. Corporations with millions of customers to monitor do not have real-time view dashboards of customer activity, or monthly usage analysis, retention reaction can often be too little, too late.
Worst case scenarios that I have personally come across was an organisation that only undertook retention campaigns on those customers that have ‘threatened’ to leave or have simply not paid their bill on time. :-(
This is not retention, this is desperation as this badly designed process puts the ‘save desk’ team in a weak negotiating situation from the outset. And if they indeed did manage to successfully retain the customer, (which at this stage will only be done by offering the maximum allowed discount/retention offer), it may then lead to masses of customers threatening to leave /not paying their bills in order to get a better deal.
The company has unwittingly pushed many customers into the mercenary / terrorist category, never again to become a loyal apostle. So what’s the solution?
Churn Management - the solution
The solution is a churn management process that uses industry standard metrics to identify and manage potential churners from day one across the entire customer lifecycle. The entire process stage manages the entire ‘risk base’ across weekly, monthly, quarterly timeframes via sales campaign management techniques that can be automated.
This does involve segmenting the entire customer base to the ‘potential value’ based segmentation model, which not only categorises who are the best customers to save but also who are the best to upsell, cross sell, migrate and retain with ease.
Acknowledging this, it is obvious then that all customers really need to be quickly turned into ‘apostles’ or ‘raving fans’ that spread the good word and a clear process inserted to help make this happen across the Product or contract lifecycle. Far better than trying to placate mercenaries and terrorists!
Reducing Customer Churn by 72%
Using this clearly defined, stage managed process, we managed to achieve a massive 72% churn reduction in Y1. (which I believe is still the benchmark throughout the industry) in addition to a substantial increase in sales. The churn reduction performance translated to immediate savings of millions of Euros and potentially 10’s of millions of extra revenue across the customer lifecycle.
If you would like to find out how this can be achieved, I would be happy to share with you when we meet, as we believe we have refined the process further to move towards 80% churn reduction targets.