Service Snapshot: Customer Retention

Reducing the haemorrhaging of profit caused by churn, by earning the loyalty of customers, can be an attractive way to grow market value.

Challenge

Many organisations find themselves running fast, yet standing still, when it comes to retaining customers.  Customers were always meant to be king, but now they are.  Technology has given them real power.  Information is readily available in 0.2 seconds thanks to Google. 

Customers now expect to make their purchases through a variety of channels, at a time to suit them.  They also expect to get what they want for a good price, and obtaining a comparison is increasingly simple through price comparison sites.  They also expect a great purchasing experience every time.

Meeting these expectations is difficult and the testament to this is the high churn rate that many organisations face.  Customer churn is frequently viewed by management as a burden that has to be borne.  To overcome it they redouble their sales effort to drive up acquisition rates and, hopefully, balance out the profit. 

It is generally thought, however, that it is more cost effective to retain customers than to acquire them. 
To become a customer-centric organisation and break out of the cycle of high churn rates and frenetic sales activity in order to compensate for the lost revenue, requires organisations to adopt approaches that attract and retain the right customers.

Here we outline some of the challenges of customer retention and how to overcome them in order to increase market value.

Solution

Unravelling the reasons why customers abandon one organisation in favour of another requires a holistic approach, encompassing both attitudinal and behavioural analysis, to enable a balanced and more profound understanding of what drives churn.  Key elements of these analyses then need to be benchmarked with the competitor peer group. 

Primary research

Relying on an annual satisfaction survey is rarely going to be enough to drive tactical responses to stem churn and provide robust strategic insights into the degree of customer loyalty. Organisations need a range of sounding boards that take their customers’ pulse effectively, but unobtrusively.

An organisation needs to start listening at the point a customer joins the organisation and finish when they leave.  As most people try to avoid confrontation and causing offence, it is vital that the listening programme is carried out by a professional firm, which is seen to be independent, otherwise the answers given could be guarded and bland. 

Our programmes provide a mix of quantitative questions that are brought to life by verbatim answers from qualitative questions.  They also identify key drivers of satisfaction, a competitive comparison and a guide to future behaviour.

Data analysis

Organisations hold a wealth of data about the account holder, such as usage patterns and billing details.  This information can be combined with other information from call monitoring and primary research to form a more comprehensive databank.

This, in turn, enables an analysis to be made which can identify relationships between customer characteristics, customer lifetime value and the propensity for churn and create a picture of what drives customer behaviour.

Cost effectiveness

Research shows that loyal customers return more, buy more, introduce new customers and are less expensive to service. 

There are, however, significant barriers to overcome if organisations are to use customer loyalty strategies successfully.  A study by IBM identified that some 75 per cent of business leaders prefer to focus on business efficiency, rather than trying to understand what customers want.

Benefits

• A holistic approach which captures what people think as well as what they do

• Comprehensive assessment of the extent of churn and its causes

• Identifies what is done well and not so well and what action is needed to improve further

• Delivers analyses that “C” level managers understand and can act on

• Drives sustainable, continuous performance improvement