Through our experience working in the local space, we’ve identified four common misconceptions about churn that hinder performance. Understanding the real dynamics behind each of these misconceptions will allow executives to break the corrosive cycle of churn.
1. A Single Event Drives Churn.
When asked why their customers churn, most organizations tie it to a single event. They will state customers defect because of service issues, false expectation setting by sales reps, fulfillment issues, competition, or other factors. They often focus on the last issue the customer had before they canceled. In reality, that issue was most likely the final trigger for that particular customer. The root cause of dissatisfied customers comes from a series of events over time – not one event.
Addressing only the trigger or tipping point issues rarely leads to a complete solution that addresses the customer’s discontent.
2. There is a Silver Bullet.
Most organizations think they can address churn with one initiative. For example, one trend we see happening with local marketing service providers is the creation of an account manager channel to call on small business owners. The thought around adding an account manager channel is to mitigate customer related issues around product performance by proactively reaching out and talking about the value of the products. While this is a step in the right direction, it will not fully resolve the churn issue. As we stated earlier, churn is not driven by a single event, rather a series of events that lead to a trigger event. Implementing a channel to address perceived product performance isn’t a holistic solution.
Instead, it’s more effective to attack multiple fronts after identifying the root causes of the problem. This starts by soliciting customers’ feedback about all of the touchpoints they experience. Below are some common issues we have identified through our extensive work in the local space.
Keep in mind, every company is different and will have unique circumstances. This list should be used as a starting point.
3. You can save them anytime.
Most companies follow the old adage that it’s usually more profitable to retain a current customer than to acquire a new one; thus, they deploy specialized customer service representatives to handle churn calls. This is really an ineffective and outdated way of doing things. First, on average, only 30%-40% actually stay with the organization, and you typically have to give them steep discounts to stay. Second, customers are smart, and they know just the threat of canceling will get them discounts. This compounds the problem. Finally, these customers are at the end of the process. They are completely dissatisfied. You are not addressing the root causes of the problem when they happen.
It’s far more profitable to investigate why customers are leaving. Once the root causes become known, implement fixes that create “wow” moments to engender active advocacy rather than letting the problems fester.
4. Implementing new processes will fix the problem.
Unfortunately, implementing new processes, systems, and tools will not deliver results if they are not addressing the core issues or the organization is not held accountable for ensuring superior customer service. Companies can do everything right on the design side but still, fall short because their employees lack the customer-centric attitude. We’ve found organizations that foster a customer-first culture, from the front-line employees to the executives, typically have lower churn issues than other organizations. This all starts with leadership. These organizations have made it a priority at the top that loyalty is critical to their success. The executive team leads by example showing employees daily that customers come first through their actions, and with company goals of reducing churn and earning loyalty. This empowers front-line employees to adopt the appropriate behaviors.