Reducing Customer Churn

Transcription

1 Reducing Customer Churn A Love Story smarter customer contact

2 Breaking up is hard to do The old adage that it s cheaper (and better) to hold onto an existing customer than to acquire a new one isn t just a nice saying recent research backs it up. In a 2013 study by Econsultancy, 70% of companies agreed that retaining customers was cheaper than converting new ones, and 49% said they saw better ROI from marketing to existing customers. Yet many organisations look at churn rate retrospectively, when customers are already long gone. Average Churn Rate 70% 49% 20% Software as a Service Say it s cheaper to retain customers than acquire them See better ROI from marketing to existing customers 40% Telecommunications So how can you tell when a customer is beginning to fall out of love with your brand and save the relationship in time? This short guide will help you identify customers who are likely to churn before it s too late. It will also give you strategies for using your data more effectively to personalise each customer s experience and make them fall in love again.

3 Defining customer churn Before you start building a strategy to reduce customer churn, it s important to define exactly what you mean. At its most basic, customer churn rate is a measure of how frequently your customers are leaving you. This alone doesn t tell you much though churn rate can vary based on a number of factors. TIME PERIOD: What time period are you using to measure customer churn? Losing 5% of customers per month versus 5% per quarter is a big difference. REPLACEMENT: Are you factoring in new customers as well as those that have lapsed? TYPE: What kind of churn should you really measure? Depending on your business, it may be more relevant to look at revenue churn or user churn. Whatever your approach, customer data is key to understanding why customers leave and what you can do about it. To create a solid strategy, you ll need to answer three questions: 1. When are customers likely to churn? 2. Why are they likely to churn? 3. How valuable are they to your business?

4 Spotting an at-risk customer 1) When are they likely to churn? If customers don t feel they re getting good value from your product or service, they ll look for something else. A change in what your customers are doing (or not doing) may be a sign that they aren t getting what they need. CHANGES IN ACTIVITY A slowdown in use (or activity) can indicate an unsatisfied customer, and should be a relatively easy metric to track, especially if your service is online. If a customer who was logging in to your service 5 times a week is now signing in only once a month, take note you may be looking at a potential churn risk. Average log-ins per week Spotting Activity Churn At-risk customer January February March April May June CHANGES IN PURCHASE BEHAVIOUR RFM (recency, frequency, monetary) analysis is traditionally used to determine which customers are the most valuable, but it can be a good churn indicator as well. It examines how recently a customer has purchased, how often they purchase and how much they usually spend. A drop-off in a customer s purchases or average spend could be a signal that something s not right. CHANGES IN SENTIMENT/ENGAGEMENT Customer experience is key to reducing churn. According to a 2011 survey by RightNow Technologies, 89% of customers said they left a company due to poor customer service. With marketing software that monitors customer sentiment, you can get an idea of which customers might be dissatisfied with your product or service, based on social media activity, engagement with your company s marketing comms, and more. For example, frequent calls or log-ins to your help centre, or decreased engagement with your marketing s may indicate a frustrated customer.

5 Spotting an at-risk customer 2) Why are they likely to churn? One of the most important steps in identifying at-risk customers and retaining them is understanding what makes them want to leave. ANALYSE THE DATA Your data can provide excellent insight into what makes a customer likely to churn. Take a look at the data you hold on customers who have cancelled their subscription or become inactive in the past few months. Do they have anything in common? Perhaps they all work in the same industry, indicating that your product isn t meeting that sector s needs. Maybe they ve all registered the same support request, or dealt with the same customer service agent. Of course, you probably won t be able to draw any concrete conclusions, but you can make a few educated guesses that will serve as a starting point for your retention strategy and help you spot potential churn risks sooner. 3) How valuable are they to your business? The way you choose to react when a customer shows signs of possible churn can depend upon how valuable they are to your business. Studies suggest that around 80% of your business may come from just 20% of your customers. Depending on your business, this may not be exactly 20%, but you will want to know who your most valuable customers are, so you can intervene right away if they begin showing signs that they re about to lapse. RFM analysis, as discussed earlier, can help you determine which at-risk customers are the most valuable and therefore a priority. Social influence is also key these days. Even a customer who isn t your biggest spender can be extremely valuable if they re a good brand advocate on social media.

6 Bringing back the love Let s take a look at a customer who s been logging into your product less and less over the past several weeks. What do you know about him? Your database shows that he has been a customer for about 6 months and has a lot of social influence. Depending on your sector, you may also know he s a retailer in a management role, or that he s a parent and is interested in sports. How can you use this data to win him back? As with any relationship, once you ve realised that something is wrong, you can t sit back and hope everything works out on its own. You ll need to show your customer you still care and can provide good value for his money. By using what you know about him, you can respond at the right time and make him feel valued again. Marketing automation is a great tool here. When you ve got a large customer base, keeping up with every subscriber that s at-risk is time-consuming and difficult to manage, especially when they re all at different stages in the customer lifecycle. Automated retention and re-engagement campaigns help you interact with each customer at exactly the right time and with the right information. Of course, when a particularly valuable customer is at risk, you may choose to intervene with more than just an automated . Whatever your approach, customer data is key. The more accurate and in-depth data you have, the better you ll be at engaging at-risk customers. So, back to the customer what can you do to make him fall in love again?

7 ASK QUESTIONS People love being asked for their opinion. Show an at-risk customer you care by sending out a survey to find out why they re engaging with your product or service less frequently. You ll learn what causes customers to lapse and what you can change to hold on to them (and prevent future subscribers from having the same experience). A case study by Scout Analytics saw a 55% reactivation rate among lapsed users following a simple, three question re-engagement survey. Keep surveys or feedback forms fairly short and don t force customers to fill in rows and rows of required fields you don t want to add to an irritated customer s frustration by making it difficult for them to tell you what s wrong. Ideally, you ll want software that allows you to create surveys and pull the data into your customer database, so you can easily use it to drive future communications. AND FOLLOW UP Once you ve asked for feedback from customers, don t leave them hanging. A study by Nielsen-McKinsey found that customers were more likely to recommend a brand that responded to an issue quickly with a solution that didn t work, rather than a brand that found an effective solution but took a long time to respond. Recommendations based on... Quick response 33% Effective solution 17%

8 For example, if you ve received negative feedback about a customer service experience, follow up with an (or call) to get more information and find out how to make things right. This is where marketing automation comes in handy. If your marketing software can send different responses (or alert your team) based on the customer s feedback, you ll save time and be able to get back to customers more quickly. MAKE IT PERSONAL Hi! A great way to get your subscribers to re-engage and make them feel valued again is to personalise your communications. This goes beyond using their name in the subject line of your use other data you hold such as their location, industry, interests, etc. Let s go back to the at-risk customer we looked at earlier. If you re B2B, you ll know he s a retailer, so to re-engage him you might send an that highlights a new, retail-specific product feature. If you re B2C, you might share some content related to sports or parenting to motivate him to log back in. With a little marketing automation, you can make this relatively simple. Create two or three re-engagement s targeted to different groups of customers based on your data analysis and set them to send automatically whenever someone from the target sector falls into the at-risk category. GIVE A GIFT Everyone likes to be surprised with a well-thought out gift. Send at-risk subscribers a special offer just for them. Use your data to target offers so that each person gets the most relevant deal. Remember to show your active subscribers a little love, too. Whether it s a discount on their next subscription renewal or the chance to trial a new feature for free, a gift now and then can help maintain customer satisfaction and reduce churn.

9 KNOW WHEN TO MOVE ON Sometimes things just don t work out. If you ve tried a couple of different tactics to re-engage a subscriber and they re not responding, it may be time to remove them from your contact list. There s no point using resources to try to engage customers who simply aren t interested anymore. This can be helpful for cleaning up your list as well. Removing inactive subscribers keeps your list healthy and minimises the risk of spam complaints. HAPPILY EVER AFTER Once you ve re-engaged an at-risk customer, don t let things go back to the way they were before. Make sure you continue to serve relevant content, reward their loyalty and keep the conversation going. And if you do the same for your new and active customers as well, they ll be less likely to become a churn risk in the first place. With smart use of data and a little marketing automation, maintaining a good relationship with your customers can be relatively simple. If only all relationships were that easy... Sources:

10 HTK can help Retaining and re-engaging customers is easier when all of your data and marketing tools are in one place. Our HTK Horizon software platform has a powerful database to manage all of your information in a single-customer view. And with Horizon s advanced behavioural insight and multichannel automation, you can connect with the right customers at the right time to improve loyalty and reduce customer churn. Get in touch we d love to chat! hello@htk.co.uk htk.co.uk +44 (0)