Churn, or customer attrition, is a critical metric for any marketer. The easiest way to define churn is a customer opting out of renewing and/or leaving a subscription. It’s important to measure the intricacies of churn before it happens, focusing on buyer intent and propensity to purchase more of your products or services.
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“When you look at churn as an end result to the total customer experience—from the first interaction with your brand/product to cancellation—you can really start to measure and positively impact the behavior of your total customer base,” Matt Reid, CMO of mobile marketing platform EZ Texting, noted.
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“Just as we as marketers segment verticals and buyer personas at the top of the funnel, we must do so after initial product trial or purchase to really understand reasons for churn across various attributes, such as customer use case, seasonality, competition, and subscription package,” he said.
EZ Texting profiles its customers within the first 90 days and uses its own churn prediction model that includes factors like adoption of best practices, usage of certain features, and subscription plan changes over time.
“In the end, marketers want customer advocates, but customer behavior is different, so we have to focus on ensuring that the best type of customers stay with us and are successful in the long term,” Reid said. “For instance, we notice that a user who leverages our MMS functionality in a campaign within the first week not only has a higher lifetime value, but is also more successful as a business, relative to their peer group.”
Keep it Positive
To understand customer churn, it’s critical to analyze the customer journey. Did they experience poor service? Was delivery not as expected? Were there shortcomings in the value proposition? Issues related to proprietary products and services not catering to their challenges?
Shakun Bansal, head of marketing at Mercer-Mettl, noted that the whole experience, from the lead generation to the post-purchase services, must be flawless and positive, and customers have to be offered personalized services that resonate with their expectations and matches their challenges.
“The entire communication and engagement between clients and our product sale should be a positive experience,” he said. “If something is keeping the customers feeling a little less than positive in their journey, that can be a reason for churn.”
A Possible Solution
In the study, “Target the Ego or Target the Group: Evidence from a Randomized Experiment in Proactive Churn Management,” Pedro Ferreira at Carnegie Mellon University’s Heinz College looked at whether contacting friends of customers could help reduce customers’ churn rates.
When focusing on churn rate, or the rate at which subscribers discontinue subscriptions, researchers found that consumers base decisions about telecommunications contracts off of conversations with friends. The most influential conversations focus on the company’s value and the customer’s overall satisfaction. The study, published in Marketing Science, found that marketing to customers’ friends (making them customers in a sense) could reduce the company’s churn rate.
More than a Metric
It’s often important to analyze churn in the context of a specific organization, not just the surface metric itself.
SmartBug Media’s senior marketing strategist, Drew Cohen, calls churn “the big bad wolf” for marketers—the metric they typically fear most, and the one that makes boardrooms gasp.
“On the surface, customer churn can certainly paint a picture of an organization’s ability to retain and engage with their client base. However, defining churn requires a deeper understanding of the relationship the customer had with an organization, and not just looking at a churn metric on a spreadsheet or dashboard,” he said.
Marketers should explore: how did that customer first engage? Was it through a partner? Limited time promotion? Website conversion?
“This is critical data to fully understand the complete client lifecycle and how the end result was ultimately reached,” Cohen said. “It is quite possible that the recent churn was expected if for example, the customer originated from a limited time promotion and the organization has data that says that this specific lead source typically results in a 6-month churn or less. So, while the macro view of churn is negative, the micro view of this specific 2-year client churn shows a positive trend that this lead source’s overall client retention length is increasing.”
