According to research conducted by Bain & Company, “Increasing customer retention rates by a mere 5% could increase profits by 25% to 95%. That number seems high, but according to Bain research, the cost of acquiring a new customer can be significantly higher than working to retain a customer. Often, the study says, by as much as an eyebrow-raising 500%.
Those numbers should blow your mind. But even if your reality is half that, it’s still a no-brainer that customer retention is one of the most critical goals for businesses.
Why? Your customers are a known quantity. You know what they buy and when. They are also more likely to be more engaged with you — and therefore open to upselling and cross-selling. Much more so than more suspicious, newer customers tend to be.
All of that makes sense. So why all the interest in customer churn? First of all, customer buying habits are very different today than they were even five years ago. Customers jump ship quite a bit. They are much less loyal than they used to be. Companies have changed as well. They are able to determine much more about their customers and prospective customers than ever before, largely because of social marketing technology and data analytics.
At FocalPoint, we are much more tuned in to what our customer’s customer is looking for. We have the ability to capture data points across multiple attributes of customer engagement. We can use fairly sophisticated artificial intelligence and data analytics techniques further help leverage this data to address churn in a much more effective manner, too.
So what can your business do to address churn?
Engage in churn management. Sounds hokey, admittedly. But don’t dismiss it. The heart of churn management lies in being able to identify the early warning signs from your clients.
If you could determine early enough that a specific customer was likely to leave your business, you would take proactive steps to prevent that from happening, right? Of course. Interestingly, social media analytics can play a big part in figuring this out. Here’s how:
- Using historical data from customers who left, you can map current customers and look for telling signs. Things things like reduction in the number of categories a customer is buying, reduction in the frequency of purchases, reduction in my loyalty points, etc.
- Studying data around negative customer experiences can help, too. Your customers identified as likely to churn are those with multiple negative experiences. Discovering this before a customer “pulls the trigger,” is huge. Those customers can often be redirected – and you’ve saved the high cost of wooing a new customer to take his/her place.
- Marketing analytics can also provide a decision tree model to segment your customer population into different behavior characteristics by segments or clusters, providing you with a way to ascertain a high churn risk. For instance, you could learn that customers that are less than 30 years old and made a late bill payment in more than half of the last 12 months have a churn rate seven times higher than the average. These groups can then be singled out as high-risk groups and you can reach out to them appropriately.
Obviously, the more data that you have on your customers, the more information that can be leveraged. Having a 360-degree view of all facets of a customer’s engagement with you would facillitate a very good understanding of their present – and future — relationship with your business. And in today’s data rich environment, that is entirely possible.
So, what should you do?
It is not enough to use social media and hope to gain your customers’ trust and business. Customers today are fickle. It’s a much better idea to work to identify the customers that are at a high risk of churning. And, in today’s marketplace, that is easier and less expensive to do than you might think.
At FocalPoint, we can help you pinpoint AI and data analytics to increase the ROI of your overall marketing strategy. Depending on the size of your business, your client base, and your social media reach, there are all kinds of external expertise we can intertwine with your business know-how.
Let’s talk about the most efficient proactive way to go about solving your customer retention concerns.Share