Churn: Taking out the silent killer Churn can be broadly defined as the number of customers who decide not to continue business with an organisation for a period of time or forever. Many reasons could be adduced to churn which include, but are not limited to bad experiences, unmet expectations, bait and switch tactics; the list could go on and on and it is subject to customers’ grievances. Different companies have different churn levels and ways by which they try to retain their customers, some try to give out freebies and gifts, so don’t be surprised if you get such from the company you had stopped doing business with, it’s not for altruistic purposes. Don’t be flattered, because someone somewhere is under pressure and they want you back, as you were part of those lost relationships reported on a PowerPoint presentation at a board meeting. If all customers who initially patronise a product or service decide to stay on, companies will be able to enjoy the full life time value of the customer and their bottom lines will be better for it, however this is not feasible. Churn rate can be calculated in a number of easy ways like the number of customers or relationships lost, the percentage of customers lost, the amount of regular business lost and the percentage of value lost or income that should have been generated but lost. It is important to track churn rate, as it has a direct impact on how a company is able to grow and lets the company know or get feedback, if its activities are actually contributing to opening the door and letting customers out. A few tips below will guide organisations in curbing and reducing churn levels Manage customers’ expectations In this target driven world, it is not uncommon for a sales person to try every trick in the book to close a deal. When “bait and switch” techniques are used, it backfires on the business, the customer will feel short changed, when he discovers upon parting with cash that he has ended up with the short end of stick, those who may decide not to sue or press charges will express grievances to friends or via social media. It is important also for the sales team to be trained on limits not to be exceeded when they engage customers. They should also be exposed to churn figures to get a feel of its impact on the business. I have had the short term pain of not closing a deal, as the product I canvassed did not fit the customer’s style; I however gained the customer’s trust and referral to a better deal and better paying customer. Only the paranoid survive A book published in the mid-90s with the above title by Andy Grove readily comes to mind. No business can afford to be complacent and not take charge of moments of strategic inflection, which are points in the life of a business when its fundamentals are about to change. This period can be caused by change in technology, competitor activity or even lean and agile start-ups that are about to have an existing company’s customer and market share for breakfast. This is why in developed countries, companies like Google, Facebook and Amazon are always scanning around for companies with traction that could compete for their customers for a takeover or outright buy out. Corporate history is littered with companies that were slow to change and whose cheese were moved right before them like (Research in Motion) RIM, Kodak and Blockbuster. Even successful companies could also be lethargic, Microsoft in particular lost a lot of customers to Apple as its users had issues with virus and malware, the company left its customers who were knowledgeable enough to get MacAfee and Norton for protection, while those who were not that IT savvy had virus attack which crashed their systems. However, Apple came in as a knight in shining armour by selling its products with already installed security functions and sunk their fangs into its Microsoft customer base and had a good fill. Track key performing indicators Just as humans have to undergo health checks to confirm the fitness of their vital organs, so also do businesses have to perform health checks on their customers, who are the heart and soul of the business. No one can survive a second, when the heart stops beating, so also it is when a high level of customers churn. Churn can literally wipe out positions in a business from the CEO to the gateman. A vital tool for checking the state of customers’ heart is through the Net Promoter Score which helps to separate the detractors, neutrals and promoters. A company which is susceptible to a sudden cardiac arrest is one whose customers are unwilling to recommend it to others (detractors and neutrals). A state of emergency may be declared in such an organisation, as the company will have to expend a lot of money on marketing its products, as its “unpaid sales” force is not happy or proud enough to recommend its products. The root cause has to be traced and corrected quickly. Thank your customers This seems an obvious fact but do you show you are actually grateful to the customer for foregoing other vanities and patronising your business? Gratitude can be shown by a little gift that will not cost the business much, a personalised thank you email or text message after every purchase will go a long way to cement you in the customers’ heart. Everyone loves to feel appreciated; you don’t have to wait till special occasions or holidays to appreciate customers’ patronage. You can stay in the mind of a customer just by showing gratitude. Attacking churn, the epidemic contributing to leaking revenues in a business is no mean feat, the above points are steps in the right direction and will help in no small measure in assisting your business get back on the right footing. Credit: Oluwafemi Oyefeso
Posted on: Fri, 31 Oct 2014 16:40:05 +0000