Churn impacts revenue. So why don’t more companies make churn management a top priority? Here are some insights.
When I think of customer churn, I can’t help but think of that song by KC & The Sunshine Band (later covered by several artists). You remember Please Don’t Go, right?
The lyrics begin with:
Babe, I love you so
I want you to know
That I’m going to miss your love
The minute you walk out that door
Much like this song, customer churn is about a relationship that’s gone sour.
Why search for hamburger when you have filet mignon at home?
So many companies are focused on acquiring new customers that they forget to cultivate and retain their existing customers. Far too often sales and marketing teams pour all their resources and efforts into growing their customer base when they should pay attention to customer retention. Managing churn will pay off in the long term. Plus, it takes less effort and money compared to acquiring new customers. In fact, a recent Invesp blog posting cited that it costs five times as much to attract a new customer than to keep an existing one.* Also, increasing customer retention rates by 5% increases profits by 25% to 95%.*
Customers, Please Stay
For whatever reason a customer has one foot out the door—lack of engagement, price-point changes, product changes, life changes—it doesn’t take much to increase customer loyalty. It’s the little things that matter. For example, Amazon are e-commerce masters at keeping their customers happy.
You Had Me at Hello
Years ago I ordered a book on Amazon.com. To make a long story short, it hadn’t arrived. I filled out the “Where’s my stuff?” form and received an email from Amazon one hour later. They apologized and let me know that my account had been credited. Here’s the kicker—they said, “Hello Rafael, if you do receive the book eventually, keep it at no charge.”
That small gesture converted me into an Amazonian. They rewarded me for being a loyal customer for all these years. And of course, since then, I’ve spent a thousand times the amount of that book.
Customer Retention is 90% Business Intelligence and the Other Half is Engagement
Obviously, I just paraphrased the great Yogi Berra. I did this to emphasis why understanding your customers’ past purchase habits can give you key insight for predicting churn. Find out which customers you’re going to lose before you lose them. Once you identify which customers will potentially leave, you’ll know who and where to direct your marketing efforts.