Retention & Renewals: 6 Simple and Actionable Steps to Crush Customer Churn
Customer retention (part 2 of 2)
“What gets measured, improves.”
- Peter Drucker, management theorist
This is the second and final part of the Customer Retention series. To recap the first part, we previously discussed the need to put in place basic measurement and tracking elements first to ensure your retention programme will have legs to stand on.
1. Data foundations
Measurement: Define your KPI metrics for customer churn, closure volumes, cancellations, unsubscribes or similar.
Analysis: Identify the root causes (main reason) of why customers are leaving or cancelling.
Data capture: Capture the different reasons for leaving and track the data over time to gauge volumes and trends.
Customer feedback: Seek additional feedback from customers to improve understanding of customer needs, wants and expressions of dissatisfaction.
To build up an effective retention programme from here onwards, follow my step-by-step guide below and I will discuss the main ideas and key considerations for each in more detail.
2. Client segmentation
One thing to be aware of in your churn numbers is the distribution of data, specifically across different client types and sizes.
For example, your churn data might show that out of 100 clients that closed their accounts, 90 clients quoted “did not use product” as the main reason for closure, 9 clients quoted that “features lacking in the product” as the main reason, but only 1 client said that the customer service was dissatisfactory.
What conclusions would you draw from this?
The data would supports that there might be an issue with the product, so it would be a good idea to spend some time reviewing this in more detail and try to improve the product if there are aspects of the product that customers are concerned or dissatisfied with.
However, would your plan of action change if further analysis revealed that the 99 of these clients were tiny one-man companies and only casual users of the product, whereas that last client was a large corporate client that is bringing in more revenue than all the other clients added together?
This is a deliberate example to illustrate the importance and dynamics of volume vs. value within the attrition numbers.
Looking at attrition data and retention effectiveness across customer segments adds another interesting dimension and is an opportunity to unlock further customer and company value. For this reason, you want to make sure that your data tracking has sufficient granularity from the start to reflect the different segments or client personas within it.
3. Start before you’re ready, don’t overthink it
This one probably sounds obvious, except for that some companies don’t focus on retention at all. As with any other activity in life, businesses can have other priorities (e.g. sales growth of new customers) or procrastinate and wait for the right time to start retention activities.
“When there is more budget,
when there is more resources,
when we have delivered X, Y, Z project etc.”
The problem with this wait-and-see approach is that there is never a perfect time to start. The sooner you move from thinking about it to actually doing it, the better off you’ll be.
When customers request to close their accounts, chances are that such closure requests are either handled either by Operations or Customer Services (whose objectives are likely to be to deliver a great service, whilst trying to spend the least time possible on the phone). Account cancellation requests might go through an automatic or digital funnel without any human intervention — so be aware of this.
In other words, as a client, your request to cancel the account will simply be actioned as a service or routine request, with often very little background and insight provided about why the customer is closing. This might be operationally effective and a job-well-done from a servicing perspective, but it’s a lost opportunity for at least three different reasons.
Commercially: Loss of future client revenue - monthly fees, opportunities to upsell and cross-sell etc.
Customer insight: Missed opportunity to gather detailed client insight, feedback and listen to client suggestions on how the organisation could have done better and improve going forward.
Brand: always ensure a good customer experience even at the end of the customer lifecycle to protect your brand. Showing that you care and wanting your loyal customers to stay is a good thing. Just letting the customer walk out the door without any questions is not going to reflect well on your brand, because when a customer has a negative experience with a company, word can spread fast and this negative momentum can fuelled by comments made on social media.
You may be tempted to start developing a range of different retention tools and offers from the start, which certainly makes logical sense. However, this sort of stuff can potentially take a long time (planning, business cases, funding, concept development, build, testing, implementation and so on).
My suggestion is to just start before you are ready, for the simple reason that behind the client names and corporate logos, there will be another human being to interface with. This is true whether you are dealing with a large corporate account, a small business or a consumer client. You will be surprised how much can be achieved by just picking up the phone and speak to another person, or even better — go and speak to them in person. Your first retention tool and offer is human-to-human communication.
Having lots of fancy tech or retention offers is certainly no harm, but don’t use it an excuse or a must-have before getting started. Sometimes, account closure scenarios is more about emotions and wanting to be heard, rather than the client trying to gain maximum financial benefit from a situation.
In a world where automation, digitisation and AI is quickly becoming the norm; human-to-human interaction becomes a distinctive selling point.
4. Develop retention solutions by looking at reasons for leaving and work your way backwards
If you have done your homework right from part 1 of this series, you will now have a wealth of information about the customer churn situation in your company — you’ll know exactly how many customers are leaving and why.
What needs to happen next is that you develop potential retention offers and solutions that map back to and target the customers’ reason for leaving.
Important to note is that price is only one of many different closure reasons. Take great care in how you design your retention approach with regards to this to ensure that your customer solutions map back to the underlying root cause and customer reason for leaving.
Here are some hypothetical examples of what this could look like:
Reason for leaving Customer offer
I use another service for this → Match or exceed competitor offering
Product doesn’t meet my needs → Different product: downgrade or upgrade
I signed up, but never used it → Re-sell product and assist with onboarding
Be aware - customer retention is often associated with giving out a price discount when the customer is about to close. If the primary reason for closure is related to price, this can be highly effective.
However, if the reason for closure looks anything like in the above table — handing out price discounts at this point would be like sticking band-aid on a broken leg.
Proper identification of the reason for leaving and then taking appropriate remediate action is the best way to retain customers and ensuring they stay on long-term.
5. Operations-Product feedback loop
At this point you should have systems and processes in place that captures data to measure and understand why customers churn, as well as a couple of different ways to retain customers and tailored retention offers that are designed with customer needs and reasons for leaving in mind.
Take note that everything we’ve discussed so far is quite reactive, which might leave you with manual and ad-hoc processes.
Ideally what we want to be doing is think about how we can make an impact at scale and making retention as effortless as possible. A great way to approach this is to develop a direct feedback loop into your key stakeholders - such as the Product team.
Assuming that “Retention” is carried out in an operational centre, we want to establish a virtuous circle of feedback: from Customers to Operations to the Product team.
Guided by what the data and insights are telling us, we could extend this feedback loop to include other departments as well, such as the Sales team, Pricing team etc - whatever the data points us to basically. The thinking behind this is to channel the customer feedback to stakeholders and decision-makers in your organisations to help influence and shape the current and future decision-making to be aligned to customer needs, which ultimately will translate into stronger commercial outcomes.
Also, I like to think of this feedback loop in terms of the following dimensions and it could be relevant to look at whether any specific area is overrepresented as a contributory factor to why a customer leaves.
Product
Policies
Processes
People
Typically, I’d say that people assume that customers are leaving because they’re not happy with the price or the product itself. However, it’s worth taking a closer look at this and determine how things look like in your own industry and organisation.
6. Continuous improvement
With all of the above in place, you have a solid foundation for future retention success in place, and now you just need to keep going with it and try to maximize the benefit from it across all the dimensions we’ve discussed so far.
Depending on what kind of business you are operating, you can decide on an appropriate level of investment in new technology, systems, innovation and so on to implement ways to enhance your retention effectiveness.
Although, I do think there is a case for keeping things simple. At the end of the customer life-cycle, retention is certainly important, but it’s not a money-spinning activity.
This is why I am a big fan of continuous improvement activity to control costs. Focus on doing the basics really well. Look at all the inputs into your retention process (people, training, equipment, systems) and your throughputs (processes, quality of interactions etc) and the end-result (retention rates, NPS, customer feedback etc).
Keep improving over time, and even if it’s just a 1% improvement at the time, it will really start to add up over time once you take a long-term perspective on it.
Client retention is about playing the long game. It’s a marathon, not a sprint. Over time, those small incremental improvements will result in transformational change if you just stick with it and stay consistent.
I hope this was helpful and good luck with your retention programme! Feel free to leave a comment and if you have any questions about retention, I’d love to hear them.
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Jens