Let’s all be clear about this, potential customer churn or attrition begins when they were first sold that product or service. From that day onwards, from when the packaging was opened, service activated, first mobile call made or stated 100GB internet connection tested, a small trace of customer disappointment can quickly become a ‘churn event’. (I have to relate to the telecoms/CPG market here as the FMCG market follows a totally different set of rules)
Why do customers churn?
If we clearly 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? 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 providers, the competitor may have offered 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.
One must also ask the not so dumb question, “ Are there some customers we actually want to churn? If we agree that some percentage of customer churn is inevitable, then do we know what customers are really worth saving? 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?
Span of Control
Elements within your span of control that may cause a customer to churn are numerous, we classify them as ‘churn events’. 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, fulfillment, 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 dunning process.
There are many retention strategies that are based around revenue and usage churn, which generally happens before the actual customer churn. Due to the fact that most Telco’s have millions of customers to monitor and do not have real-time view dashboards of customer activity, monthly usage analysis from billing, finance, IT can often be too little, too late.
Worst case scenarios that I have come across was an org 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’ retention 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, as this virals. The Telco has then unwittingly pushed many customers into the mercenary / terrorist category, never again to become a loyal apostle. So what’s the solution?
The solution is a churn management process that uses an industry standard set of metrics to identify and manage potential churners from day one. In addition, there is the actual data issue that needs to be understood. The entire customer base needs to segmented using 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. There is little point in spending untold millions of marketing budget acquiring new low value customers in the front door, when the high value customers are exiting out the back door. To make matters worse these ex-customers may then become the terrorists of your organisation, quickly spreading negative info across social media and their network.
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!
I must re-iterate, churn begins at the start when the product /service has just been sold. Retention begins the following day with an established tried and tested churn management process throughout the contract term or product lifecycle.
Reducing Customer Churn by 72%
Using this process in a large Telco, 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 lifecycle.
If you would like to find out how this can be achieved, I would be happy to share with you....