What is customer churn and how to deal with it. We're Losing It: How Data Analysis Helps Prevent Customer Churn

How to keep customers in the face of fierce competition? What is customer churn and how to deal with it? Why is this important - and finally, what does data analysis have to do with it? The answers to all these questions are in our today's material.

Theory

We suggest that you first understand the terminology. "Customer churn", that is, the transition of a part customer base to a competitor is a rather general term. Therefore, before moving on to discussing how to analyze and prevent this churn, you need to answer one simple question: "What is customer churn for my company?"

The answers may be different - depending on the scope of the company and the very specifics of the client base. For example, for the operator mobile communications“Outflow of customers” will mean a complete transition of the latter to the “enemy’s camp” - with the termination of the contract and refusal of the company's services. For a restaurant chain, for example, a customer who has reduced the number of visits from 3 times a month to 1 will be considered a "defector".

It should be noted right away that such criteria are quite individual - and should be determined by specialists within the company. By the way, analyzing customer data can help with this. And also to answer other burning questions - for example, how much the company loses due to the churn of customers and who of the latter is a potential "defector", that is, with a high degree of probability will leave in the near future.

In part, we have already answered the question that systematically arises among many managers - "Why, in fact, should this bother me?" However, let's break down the points:

First, it is known for certain that retaining an old client is several times cheaper than acquiring a new one;
Secondly, the loss of the company in the long term (taking into account lifetime value each client who left) reach a decent size;
Thirdly, the churn of clients provokes indirect financial losses - business reputation suffers (and this means additional costs for its restoration), additional opportunities and potentially profitable contracts are missed.

Finally, the analysis of customer churn helps to see the systemic reasons for customer leaving - and it can be anything, from far from ideal business processes to, say, not flexible enough in specific conditions. pricing policy... Well, having found the reason, it is easier to deal with the consequences - or even to stop the outflow in the bud and keep the revenue.

Practice

So, we figured out the phenomenon and its potential consequences - but what can be done to prevent customer churn? Here you need to remember that the sooner the company realizes that the client is going to leave, the sooner you can start influencing him. For example:

Provide discounts on services;
Invite clients to participate in special promotions;
Start providing additional services - ideally those that competitors have not yet thought of;
Let the customers understand that they are valuable to the company and the company is ready to reward them for loyalty - this is where cumulative discounts, various bonuses and gifts, free shipping, etc. come into play.

However, our main question is different: how to identify customer churn? The client's departure can be influenced by a huge number of factors that a person (no matter how unique expertise he possesses) is physically unable to analyze. Plus, these factors - internal and external, social and economic, etc., etc. - at different times can influence the same client in different ways, and this further complicates the analysis process - manual, of course.

Data Mining algorithms, data mining, can analyze such processes as customer churn with high reliability, while taking into account not only company data, but also a lot of external data reflecting factors of influence (from the dollar exchange rate to weather conditions).

Examples from real life a lot - not so long ago we talked about how an Austrian mobile operator manages to manage customer loyalty using data mining methods. And here's another one: independent researchers have set themselves the goal of quickly predicting the departure of the player on the day of the last login to the game - the Korean MMORPG Aion. That is, in fact, they decided to analyze the churn of users in the most general case, regardless of whether they logged in for the first time or in the five hundred and first time. As a result, they managed to teach a model to predict the departure of newcomers based on activity metrics with sufficient accuracy so that they could begin to influence them with the help of various "goodies", thus delaying them in the game.

The second question of interest to researchers is "Why are they leaving?" and remained unanswered (among 60 factors that could potentially affect the churn of players, none proved to be any significant). However, much more important was the fact that the model is capable of giving detailed analysis the individual style of each player - which means that it becomes possible to offer a potential newcomer-"defector" personal recommendations on how to play more efficiently and get more pleasure from the game.

Summary

In conclusion, I would like to note that the analysis of customer data can benefit even a small company - yes, at first glance, not so much information is collected about customers, but do not forget that you can (and should) use external sources of information in the analysis. which, as a rule, are publicly available - weather forecast, exchange rates, demographic data, and so on.

By learning how to predict customer churn, a company will not only be able to manage loyalty more effectively, but also potentially identify bottlenecks in its own activities - and in the aggregate, this will undoubtedly have a positive economic effect.

“Chief editor of GetGoodRank blog, web analyst, blogger.
What metrics indicate a high likelihood of customer churn, and how can this be prevented? We explain the metrics, make recommendations. "

When the churn of customers becomes noticeable, it is already difficult to rectify the situation, and it is too late to look for the cause. Any disease is easier to prevent than to cure. Here are some simple ways to diagnose early symptoms of user dissatisfaction to prevent customer loss before it's too late.

Decreasing shopping frequency

The churn of customers can be insignificant, but stable, and this is its main danger. And declining shopping frequency is the earliest symptom. The indicator is calculated simply:

Shopping frequency = number of orders / purchases / number of customers

Frequency of purchases shows how often a customer returns for a purchase. If the frequency of purchases remains moderate, it indicates customer satisfaction and their willingness to come back again.

The decreasing frequency of purchases indicates that the customer is looking for alternatives, he is less satisfied, he is ready to go to competitors. A decrease in the frequency of purchases does not directly indicate a churn of customers, but it gives a signal that users are ready to change the supplier of a product / service.

Customers distance themselves from brands that do not meet their requirements.

Shopping frequency - a metric that needs to be monitored regularly. With a stable, albeit insignificant, decline, it is worth taking the following measures:

competitor analysis
user survey to find out the reasons for dissatisfaction
analysis of abandoned carts

Reducing the number of positive assessments

Positive ratings include: likes, reposts, user comments, user requests in the Q&A section, reviews (both on the site itself and on independent sites such as Yandex.Market, irecommend, otzovik). This metric is the least amenable to explanation and measurement. The Net Promoter Score (NPS) most accurately reflects the decline in satisfied, loyal customers, as well as users who are ready to become your customers.

A decrease in customer bias towards your brand is one of the early symptoms that indicates a high likelihood of a quick churn.

All answers are divided into groups:

9-10 - brand advocates- these are clients who will undoubtedly return to your site and recommend it to their friends and acquaintances. They are very active on the site, in in social networks, willingly agree to polls, tests, participation in additional programs
7-8 - indifferent users- these are customers who are already considering alternatives, they are not committed to one brand, and are most likely to make a purchase where the conditions are more convenient and profitable
0-6 - brand opponents are customers leaving the site deeply dissatisfied. Not only will they not return to the site, but they will make an effort to let others know about their dissatisfaction. This can negatively affect the brand's reputation, especially if the company does not respond to the negative in a timely manner.

Recommendations: The likelihood of a recommendation should be polled continuously. It is worth considering that the offer to answer the question must be timely, after the user has made a purchase, and not in the process of choosing a product (and especially 5 seconds after entering the site).

Work out the scenarios of user responses, if the user gives a rating of 9, offer an optional answer to the question, what can be improved on the site to make the client as satisfied as possible. For ratings below 9, add questions that you didn’t like and what could be improved on the site. Make them required. As a rule, disgruntled users are happy to express their negativity.

Reducing the average bill

The size of the average check is easy to calculate. This is one of the metrics that are constantly monitored to determine the health of the business. The average check is calculated using the formula:

Average check = total revenue for the period / number of orders for the period

An increase in the indicator indicates high trust and satisfaction, the user's willingness to spend more. A decrease in the indicator indicates that the buyer is already exploring alternative (competitive) sources.

Decreased CLV (Customer Lifetime Value)

CLV is the company's estimated profit per weight life cycle client. In calculating this metric of business health, many parameters are taken into account and is calculated using the formula:

A decrease in this metric indicates that customers spend less and less often, and their life cycle is shorter, while an increase in this indicator indicates an increase in the size of the average check, the frequency of purchases and the customer life cycle.

A high CLV level means that your company is becoming a part of the client's life.

Recommendations: To lengthen the lifecycle of a customer in a company, you need to create a flawless user experience. GetGoodRank will indicate what users like on the site and what they don't, what causes difficulties, distrust, what is inconvenient to use on the site and should be improved.

You don't invest in customer retention

Businesses constantly invest in new customer acquisition and ignore retention programs. On average, the budget is distributed as follows:

80% of the budget for attraction
20% retention budget

An interesting fact: although regular customers make up an average of 8% of the entire customer base of a business, they are the ones who generate up to 40% of the profits.

This year, activists of the information portal statista.com conducted a survey of small business owners to find out which of the problems they face in the course of their activities, they consider the most important and urgent.

What do you think is the most popular answer?

Customer churn problem

This concern, as they say, is old and young, and it is obvious why: no growth of the company will happen if the process of attracting new customers is not established. But the growth of a company depends not only on new customers, and you will agree with that.

In pursuit of new clients, we somehow got used to immediately throw existing clients out of our heads. But this is much more difficult and more important: to retain a client, maintain his loyalty and cultivate brand loyalty in him. So it turns out that the main reason for such a phenomenon as customer churn () is ourselves.

Meanwhile, experts call this phenomenon a business killer. Even a small increase in churn can cut your profits in half at once.

Take a look at this table showing the correlation between churn and profit:

Churn can easily confuse your cards, or even completely destroy your business. If you let him.

In this article, we'll take a look at 4 of the most common causes of customer churn and how to deal with them.

1. Goofy customer service

Many companies consider the cost of supporting customer service as an expense and try to minimize it, when in fact it is an investment and it is better to maximize it, because it may someday save your business.

The problem is this: if you see an expense item in the customer support center, it will. Judge for yourself: if it's not your priority to provide the best customer service (which you can only afford), then the money you spend on supporting it every month will really be wasted. But the worst thing is that due to such carelessness (negligence) you will lose not only money, but also clients.

Poor customer service is one of the most common reasons people lose all respect for a brand (according to recent research, 9 out of 10 shoppers who abandon a brand cite poor customer service as the main reason).

At the same time, high-quality service can give you the loyalty of 86% of customers who are willing to pay more for such an attitude towards them.

Competent service is not only good as an antidote to customer churn, but it can also take your business to the next level. Revenues will rise and customers will be happy to pay more.

2. Ineffective maintenance

In every business, as a rule, there are two important points for clients:

when they signed up for your services, they became your clients;
when they were successful with your product, when your product was of real value.

Acquisition is the moment of purchasing a service, First Succes is the first success.

The bulk of customer churn occurs between these two points, between these two checkpoints. People may not understand something about the functioning of the product, they may not succeed, they may be prematurely disappointed in it (especially those who expect not just quick, but instant results) or simply lose interest.

To prevent this from happening, it is in your power and in your best interests not to lose touch with your customers and make every effort to ensure that your product is for their future use, so that it helps people achieve the goals for which they bought it. Otherwise, you will get the same churn.

3. Lack of ongoing success

If you seriously think that once your client has achieved initial success, your relationship with him will be limited to sending invoices, you are deeply mistaken. Initial success is undoubtedly important, but it does not mean that the client has figured out everything and can now act without your help.

You have updated the functionality, made any changes to the interface, changed the data display format - and the buyer learned about this only from the newsletter. Surely questions will arise. And if you do not give an answer to them in a format that is convenient for them, the risk of losing customers will be very, very high.

Caption: "Customer Success Doesn't End Here."

Customers should listen to you, and you should talk to them. If you don't work on this relationship, it will be quite short.

4. Natural causes

Often times, customers do not leave you because you made a mistake somewhere. Sometimes they stop doing business altogether, and then they simply don’t need your product. Sometimes, changes in the leadership team lead to a change in service providers. It happens that they "grow" out of the capabilities of your product.

This is happening, and that's okay. It is not in your power to change anything here. Therefore, you should concentrate your efforts in those areas that we have already described above.

Conclusion

The less customer churn, the higher the profitability of the company. Customer churn is a metric that is directly related to such a category as profitability. A guaranteed decrease in the percentage of churn leads to an increase in profits. You already know what to do for this.

For both a young company and an established business, it is important to be able to retain customers for as long as possible. But, unfortunately, some of them stop working with you. In order for this fact not to harm your business, you must understand why customers are leaving and find persuasion for them to stay. In this article, we'll delve deeper into the causes of customer churn and show you how to deal with this phenomenon.

The process when customers stop working with you is called customer churn ( churn rate ). Customer churn is understood as unwillingness to agree to a contract renewal, termination of a service agreement, or closure of your account. In other words, adverse customer churn can have a significant impact on a company's bottom line.

Managing customer churn starts with calculating it

Focusing on customer churn is essential in order to minimize customer loss. Different companies calculate customer churn in different ways:

Churn can be expressed as the number of customers who stopped working with you;
The outflow can measure the amount of the loss in cash.

Basic method for calculating customer churn based on the period of time after which the customer is considered "inactive", calculated by the formula:

For example, if at the beginning of the month the total number of clients was 1000, and at the end of the month 200 of them decided to stop cooperating, then the following result will be obtained:

Another waygives an idea of the customer churn in the form of the monetary equivalent of the profit that the company could have received if the customer had not stopped using its services. In this case, the churn will be calculated using the following formula:

That is, if in the last month the number of customers who stopped working is 200 people, average check is 2,000 rubles and the number of payments made is 6, then we will see that the damage from client churn will be as follows:

The monetary formula instantly opens your eyes to the customer churn factor that is ruthlessly diminishing your bottom line. Therefore, you need to find its reasons and fight to retain existing customers.

Reasons for customer churn

The churn rate depends on many factors. After analyzing each of them, you will better understand the nature of its occurrence and will be able to find the right solutions in the fight against this factor. Why does a client stop being your client?

Product quality... This is the most common cause of churn. Remember good quality products are the success of any business. If you offer a bad product, it is simply impossible to earn the consumer's trust. Therefore, be sure to ensure that the combination of properties in your product is suitable to meet the customer's needs. After all, it is not without reason that there is even such a science as qualimetry – the science of measuring methods and quantify quality of products and services.

Be prepared that the manufacture of quality products may require more time, expensive equipment, qualified personnel. With a sound approach to quality, you can expect quick cost recovery and significant revenue growth.

Bad service Is one of the most common consumer complaints.

When it comes to quality and poor service, these two reasons for churn are the overtones of some of the most common consumer complaints. In 2015, Rospotrebnadzor received about 500,000 calls of this kind.

Competitive offer... Competitors can lure a client to themselves thanks to beautiful advertising, for how long? The customer will not be with them for long if the quality, product availability, service and special offers are not better. Consumers are always comparing, so keep the bar high!

Change of residence... Let's attribute this reason to good reason customer churn. But again, it is important to identify it, because if your client has moved to another city and stopped using your services, perhaps he simply does not know that your company's branches are located throughout the country.

Changing interests, needs... Everything changes, and this is constancy. A person has the right to change his desires and sphere of interests. Fresh fashion trends or recommendations from friends are also likely to influence leaving.

We will offer several ways to reduce customer churn

Be active

There is a type of customer who will not show their dissatisfaction in the form of loud words of indignation, they will simply leave in silence. It is known that 91% of dissatisfied buyers do not express their complaint, but simply stop cooperating. So take an interest in the client's complexities and ask how they are doing. Always take the first step!

Conduct a survey

A survey can help you identify the challenges your customers face. After all, you can always improve something.

In the example below, the ad portal in its email takes the first step in the form of an email survey of its subscribers: "What do you dislike about our site?" The survey will help to identify the difficulties of customers and fix everything at the initial stage of cooperation in order to avoid further churn.

Give an opportunity to rate and write comments

The client should be able to leave a review. From the reviews, you will find out what your customer thinks and feels. Make a user-friendly and quick-to-fill form for the user. Don't make it too long. It may contain several accompanying questions and a field for free feedback is required.

See how a clothing store does it. After the purchase, an email is sent to the user with the opportunity to leave a review and write a comment. For example, the revocation form does not look short, but it is very easy to read and easy to fill out.

Thus, the client can voice problems and shortcomings, and you have a chance to instantly solve the named problems. The client will feel cared for and not indifferent on your part. A good shopping experience will strengthen partnerships and guarantee lower churn rates.

Reanimate dormant accounts

After some time of "inactivity" of the client, send him a reactivation email. If the client responds to the email, you will know that it is too early to consider him passive.

Determine the period when to "sound the alarm". The average statistical inactivity interval is 3-6 months, then feel free to send a letter. In the example below, a shoe company is sending discounted email to “inactive” customers to encourage them to buy.

Automate the customer retention process

In some cases, you know that the customer will stop using the service. For example, this can happen after the end of the free trial period. You can focus on those periods that threaten customer churn and automate the process of retaining customers for future collaboration.

These are, of course, prepared in advance. email newsletters with promo codes, reviews of new products that may interest the client again, messages on social networks, phone calls. Provide access to exclusive opportunities, stimulate customers with discounts, bonuses, prizes in contests, gifts.

In order not to do everything manually, use your CRM base and email automation, so you can start an active customer retention campaign on time. All comments of your users, their reviews, responses to polls, tests, save for further improvement of the entire workflow.

Customer retention is not just a tick in the report, but retention of the company's earnings. Collect information for feedback, analyze customers, be open to communication, and then you will be able to identify customers prone to churn in time and take action. We hope our tips can help you with this!

Good service affects profits in many ways. One of them is that customers place orders for large amounts. Let's say a customer orders a ton of raw materials over the phone, and an employee answering the call tells him: “You know, if you buy one and a half ton from us, you will get a 10% discount”. The buyer says: "I take it." This is a more expensive order. This is an increase in sales and, probably, profit from the quality of service.

Is there a direct relationship between a company's bottom line and customer satisfaction? I am sure that yes. When you do something for a client, even something as small as a refund or a discount, the return will be much greater than the cost, since he will have a warm feeling for the company thanks to your action.

COMPANY GATEWAY

Gateway, a major computer manufacturer, is built on quality and service. In January 2000, its founder, Ted Waite, resigned and chose his successor, Jeff Weitzer.

A year after his resignation, Waite personally fired Weitzer and nearly his entire management team. In 2001 net profit The company declined 59% to $ 241 million. Sales were down 37% to $ 6.079 billion from $ 9.600 billion in 2000.

Weitzer began by instituting hateful rules and procedures that dictated everything from what posters employees could hang in their workplaces to the exact time when they could go to lunch.

Many of these innovations not only spoiled the atmosphere in the team, but also damaged the business. For example, one of the rules limited the length of telephone calls to customer service: if employees spent more than 13 minutes on a conversation with a customer, they were deprived of their monthly bonus. As a result, people began to dodge, just to get rid of calls - they said that their phones did not work, hung up the phone, or - often - sent expensive computer parts to customers. Unsurprisingly, Gateway's customer satisfaction scores, once the best in the industry, have dropped to below average.

Worse, many customers stopped recommending Gateway to their family and friends; the share of referral sales, which accounted for 50% of total sales, dropped to 30%. Upon his return, Waite immediately canceled 14 “wacky rules,” as he called them, including a 13-minute time limit on phone calls with customers. By May 2001, the customer satisfaction rate had grown to 73%.

How much does a good service cost?

Yes, implementing a service strategy costs money. Unfortunately for some companies, upfront costs overshadow the long term; so they are in no rush to launch new service improvement programs.

But is it really a stumbling block for a company to invest in something that will bring profit? After all, most executives of various companies do not reject good ideas just because those are roads. Neither should price be a factor when it comes to developing or maintaining good customer relationships.

“Want to know the worst secret of the global economy? So, if you have an exceptional, amazing service, then you will get rich enough that you only have time to buy bags to carry money home, ”writes Tom Peters in his book“ Prosperity in Chaos ”.

To name a few well-known companies with amazing service: Disney, Federal Express, Wal-Mart, Commerce Bank, Nordstrom, GE, Dell, Home Depot, and Amazon. British Airways recently announced that it had $ 189 million in net profit on $ 7 billion in revenues — one of the most impressive numbers in international airline history. But six years earlier, the company was one of the leading airlines in losses.

What's the matter? It's all about the service. Simultaneously with a sharp increase in profitability, the company has reached unprecedented heights in the level of customer satisfaction.

Successful carriers satisfy disgruntled customers by “explaining in detail why they can't meet their demand,” said Dan Smith, director of consumer affairs for the International Airline Passengers Association (Dallas).

New evidence confirms that customer satisfaction has a direct impact on bottom line. This is one reason why companies - GE, Whirlpool, Coca-Cola and British Airways - are spending millions of dollars to improve their claims handling.

Marianne Rasmussen, Former VP of Quality international operations at American Express, says, "I use the following formula - better complaints handling equals higher customer satisfaction, which equals higher brand loyalty, which equals higher profits."

SERVICE AS A MEANS OF SAVING

If customers are satisfied with the service, it helps not only to make money, it helps to save them. After all, retaining customers means reducing marketing costs. And the money saved on marketing is your profit.

A competent customer service program allows a company to reduce marketing costs as fewer customers leave. And fewer former customers need to be replaced.

Club Industry, a magazine for executives of club organizations (such as fitness clubs), has calculated that with a total membership of 2,000 and a 40% annual decline in membership, a club must attract up to 800 new members a year to stay afloat. The cost of acquiring 800 new members is a huge budget gap, the magazine continues. “Good service costs money, but the annual recruiting campaigns cost immeasurably more,” the magazine notes. "If the same club were able to reduce customer losses by at least half due to the quality of service, it would have to attract only 400 new members a year."

Multiply by five

Here's another important formula: how much you spend on customer service, you will retain as many customers. And because customer service issues change suppliers five times more often than price or product dissatisfaction, good service- the most important component of the success of any company.

The discovery that customers are five times more likely to switch suppliers due to service issues than price dissatisfaction made Forum company Corporation. She interviewed 2,374 clients and employees from various companies.

Interestingly, dissatisfied customers also go to competitors five times (again, the same coefficient!) More often than satisfied ones.

The 5: 1 ratio reappears when we compare the cost of acquiring a new customer with the cost of retaining an existing one. This rule has been in effect in the service sector for many years. The difference in the cost of “acquisition” and “retention” is especially clearly visible if we compare the costs of acquiring a new client by means of marketing (advertising, direct mail, presentations at the point of sale, etc.) with the costs of providing quality service to an existing client.

How does the service save money?

This is how quality service saves money: Your employees serve your customers better and thereby prevent complaints and complaints. This reduces and even completely eliminates the costs associated with solving problems, including the need to maintain a large customer service department. In addition, good service saves on marketing, because selling to existing satisfied customers is much easier and cheaper than to potential customers.

It is difficult for many executives to realize that quality service reduces marketing costs. Moreover, high-quality work (when everything is done the first time) as an integral part of high-quality service leads to a decrease in other costs - for alterations, for repairs and replacement, as well as for working with claims - they simply do not exist if the company provides quality service.

Finally, quality service significantly reduces the number of lost customers requiring replacement. According to the results of the 1990 consulting firm Booz, Allen & Hamilton research poor customer service 40% of the time.

Some managers believe that quality service is expensive, says Ronald L. Vaughan, president of the University of Tampa. However, he notes, the hallmarks of quality service such as courtesy, friendliness and a positive attitude in dealing with internal and external customers are completely free!

Service is income, not expenses

On the initial costs needed to implement a service strategy can be viewed from the other side. A disgruntled customer will cost you much more than a quality customer service, says Ronald Vaughn.

Service is not a cost. This is income. If you make your customers happy, you make it easier to sell, thereby saving on marketing.

In most cases, choosing a brand, product or company is not so much a conscious act as a subconscious act. And the subconscious pushes the client towards the company to which he has warm feelings caused by good service.

Any businessman should understand that service should be set as high as marketing, no lower than any other development programs after a customer base has been created.

My prediction: in the not too distant future, the service will be seen as one of the aspects of marketing, and not as an overkill or an undeserved bonus, as is often the case today.

BE THE SECOND TO BECOME THE FIRST

Despite the obvious advantages of quality service, experienced managers sometimes do not want to launch a service level improvement program just because a competitor launched such a program before them. No matter how they explain and justify their inaction, the reason is the same - pride.

Undoubtedly, pride is an important component of any. But sometimes pride can be a hindrance, for example, when it makes you wrinkle your nose and wrinkle your mouth when talking about a service just because a rival company was the first to tackle this problem. The syndrome "not invented by us" deprives managers of the ability to think sensibly (someone else's idea, they argue, cannot be good). And they proudly declare: "We don't want to be imitators!"

Middle managers fear they will look bad in the eyes of management and competitors if they try to adopt their strategy.

A department may spend several months developing a service strategy simply because the company’s management is afraid to tell its employees about the successful strategy of a competitor. Management believes this could be demoralizing to staff. These emotional reactions are the main reason why the first company to launch a customer service program is spared any attempt by competitors to compete in this area for at least the next year or two. Other companies simply won't want to tell their employees that they've been outstripped. However, companies in the air transportation and the automotive industry do not experience such complexes: as soon as someone announces a special offer, all companies in the industry do the same within a day or two.

Stanley Marcus, emeritus chairman of the board of directors of Neiman-Marcus, a chain of stores selling products from leading designers, believes that only a competitor can prove the value of service. But in half of the cases, the company will lose such a competition in the service without meeting support and understanding. However, the service is too important to allow its inner self to prevent such a program from being launched promptly.

Here are a few more examples of how intellectual and emotional stereotypes can interfere with service strategy implementation.

A manager accustomed to sophisticated management and financial tools can sometimes find it difficult to understand how something as simple as customer service can increase profits.
Management is afraid of offending the people in charge of the service by asking them to develop a new customer service strategy based on a competitor's program.
If a company operates in an industry dominated by a single player whose service is admired by everyone, management often cannot believe that something as inexpensive and basic as customer service can be the reason for success and a 20% increase in ROI.
A service aimed at establishing strong trusting relationships with clients - hard work, and for some companies it is completely unbearable. Perhaps it main reason why so many firms don't pay attention to customer service.
A service is something intangible, intangible and abstract. Since the service does not require fixed assets, such as million dollar computer systems, park trucks, industrial robots, CNC machines or new buildings, which means it may not be important. Some managers find it difficult to convince them to invest time and effort in a customer service program.

The benefits of a quality service program sweep aside all empty speculation.

It is sad that many companies are not even trying to rise to the challenge presented by the service leaders in their industries. It takes years and even decades before they lift the glove in the customer service ring.

An unspoken non-aggression pact was signed by the "service stars" - Delta Dental Plan, Neiman-Marcus, Allied Van Lines, 3M, Ritz Carlton, Dow Chemical, Lands "End, General Electric, Eastman-Kodak, Home Depot, K-VA- T Food Stores, Federal Express, Disney, Nordstrom, etc.

Year after year, companies with first-class service are head-to-head in everything they do. Perhaps your competitors have already figured this out.

HOW TO CALCULATE PROFIT FROM A SERVICE

Frederick Reichkheld, director of customer retention at Bain & Company, and W. Earl Sasser, professor at Harvard Business School, argue that “the longer a customer’s relationship with the company, the more profit they’ll generate. Leaving a client has an extremely negative impact on the company's bottom line. Usually companies lose 15-20% of their customers a year. When churn is halved, average growth more than doubles. An increase in customer retention rates of only 5% increases the company's profits by 25-100%. " In my opinion, this is the most compelling customer service research conducted in the past two decades.

Despite the positive impact that reduced churn has on profits, current accounting systems fail to show what a company's profits will be if it prevents a customer from leaving or returning a customer. Companies don't even count how many customers have left. As a result, executives seriously underestimate the cost of losing customers.

Most accounting systems focus exclusively on current costs and income, ignoring the estimated cash flows during the entire period of cooperation with the client. A more or less formalized churn control program could be of great help in the work.

CLIENT CHANNEL CONTROL

Create a special purpose group

Include in this group your most professional staff... Their job is to connect with departing customers and convince them to give your company another chance.

List Customer Churn Prevention Measures

Make such lists for individual employees, departments, and the company as a whole.

Education

Train your employees on quality service (changing the format or content of the program) every six months, because training alone cannot radically change attitudes and habits. Train all staff. Training costs are low compared to possible growth sales and profits.

If you want to know how serious the churn situation is in your company and if you should take steps to retain customers, you need to do the following. First, determine the churn rate and establish the reasons. Secondly, determine the average duration of cooperation with a loyal client and how much he spends per year during the entire period of cooperation with the company.

Create focus groups from front-line, low and mid-level managers and challenge them to list the reasons for churn. If regular customers leave you, call them and ask why. Interview ordinary employees: they are in direct contact with customers and usually know exactly why they leave.

You can send out questionnaires to former clients, but remember to offer some incentive for them to respond. It is extremely helpful to speak with the outgoing client in person or over the phone.

Determine the COST of zero customer churn

What is the churn rate for your company?

What is the duration of a loyal client's cooperation with the company? how many loyal customer spends annually during the entire period of cooperation with the company? This figure should increase annually.

You need to find out the amount of profit that a loyal customer brings to the company. Profits should increase every year thanks to lower marketing costs and higher revenues.

The data obtained allows us to determine:

Overall decline in sales ____________________________

Total lost profit ____________________________

Total: All losses ____________________________

After calculating the total loss, you may have a heart attack. For most companies, these losses will be measured in the millions. Your plan to prevent churn should take into account:

the cost of acquiring a new loyal customer;
annual budget for marketing and advertising;
the average purchase amount made by a loyal customer;
the number of customer complaints per year;
a system for monitoring and measuring customer churn.

Now you have everything the necessary information to analyze how much customer churn costs you each year, i.e. how much profit you lose each year. Plug in the numbers you want into the formula below:

Customer loss cost

X

=
____________ Total annual income lost as a result of customer leaving

Total number of departures per year
X
____________ Total profit for the time of cooperation with the client
=
____________ Total annual profit lost as a result of customer leaving

Track the progress of your churn control program by issuing monthly reports showing how much the churn rate has dropped and how much money the company has saved as a result. Communicate this information to all your employees.

Make sure to thank, praise, and reward those who deliver zero churn.

Recognition is essential if you want your software to work and you want it, because the benefits of reducing churn are enormous.

Why is it necessary to control customer churn?

Service Quality Institute conducted a study at a major donor center Plasma Group to determine how customer churn affects bottom line. This organization has 17 branches and 300 employees. The company's annual income from each donor is $ 5,035.88.The calculations were based on the following initial data:

Churn rate 6% / 40,600 donors per year
Average term of cooperation with a loyal donor 41 months / 3.4 years
The total volume of material submitted by a loyal donor for the entire period of 164 liters of cooperation
Plasma Average Market Price $ 11.48
Average profit per liter of plasma after processing $ 40
Profit brought by a loyal donor for an average period of $ 6,560 of cooperation

The total loss from customer abandonment (USD) was calculated:

lost income for the year 103 320 000
lost income for the entire period of cooperation 351 288 000
lost profit for the year 59,040,000
lost profit for the entire period of cooperation 200 736 000
total loss for the year 162 360 000
total amount of losses for the entire period of cooperation 552,024,000

If one donor leaves, Plasma Group loses $ 18,040, which it could have earned over the entire period of cooperation with him. On one donor!

TARP, a Washington, D.C.-based service research and consulting company, has developed economic models that allow you to predict the return on investment in working with claims and customer requests. The models take into account the nature of customer behavior, profit margins, and many other factors.

Another TARP model allows you to evaluate the effectiveness of the existing customer service system, as well as determine how you can improve the service at minimal cost.

"Model economic effect service "makes it possible to calculate what the results will be if you establish contact with unhappy customers and solve their problems. It shows managers the real monetary return on the existing level of service and service improvement; quantifies different levels of service; specifically indicates what needs to be changed in the existing system service to maximize profit growth. In addition, this model allows management to determine how profit and return on investment (ROI) increase as the level of latent dissatisfaction decreases, i.e. the number of unspoken claims. Finally, it identifies how lower customer contact costs and higher satisfied customers affect profitability and ROI.

This model is a lifesaver for service and customer support departments. It allows you to show on specific numbers that they play the role of profit centers and sales stimulators in the company.

This model assumes that the return on investment in services can take the following forms.

Increased sales and improved ROI as a result of improved service. Service is improving thanks to measures aimed at preventing customer dissatisfaction.
Reduced service costs by preventing customer dissatisfaction.
Growth in market share, the result of an increase in the number of satisfied customers due to good service.

Using this model, TARP provides the company with specific information, for example, on the relationship between incremental costs and incremental profits.

An increase in this case is an increase in personnel costs in a given office in order to achieve, for example, a 3% increase in customer loyalty. Then the impact of this increase in loyalty on the final profit is calculated.

The model uses data provided by the company and obtained from a sample of customers to assess the growth in sales and the return on investment in the service. As a result, the following parameters can be estimated:

the net volume of purchases by customers whose complaints were satisfied;
net purchases from word of mouth;
profit from sales as a result of the resolution of complaints and positive feedback about company;
return on investment in service improvement.

HOW TO MAINTAIN A HIGH LEVEL OF SERVICE

Imagine that you have found employees with the necessary makings to provide excellent service and have trained them in your customer service system. Your main concern should now be to maintain a consistently high level of service.

Pride is your best helper in this endeavor. People are proud to work for a company where the president and top managers constantly talk about the need to provide quality customer service and back up their words with deeds. They pride themselves on a company that demonstrates their commitment to excellent service by educating their employees and creating the right atmosphere, and proving this commitment with concrete financial support.

Poor service increases employee turnover

According to a study by Forum Corporation, employee turnover directly depends on how employees assess the level of service in their company. If employees consider the service to be of high quality, then they are more loyal to the company. And vice versa: if the service in the company is poor, then it loses not only customers, but also employees.

The Forum Corporation's report states: “The highest rates of employee turnover are found in companies where employees rate the quality of service provided as very low ... Factors such as length of service, job duties and the frequency of contact with clients do not actually affect this indicator. "

Since the decline in staff turnover is a proven consequence of the motivation of staff created by quality service programs, the opposite phenomenon - an increase in staff turnover - should be viewed as an alarming fact, warning of serious problems with the service.

This is one of the main findings that Forum Corporation made in a survey of more than 700 companies around the world. Staff turnover directly depends on the opinion of the staff on the quality of the service provided.

An epidemic of lack of pride in our work is rampant these days, and the Forum's findings only confirm its danger. Companies must take this into account if they want to build a solid reputation as a leader in the quality of service they provide.