In a business setting, the simple mention of the word “churn” is enough to make most people’s stomachs…well…churn. With very few exceptions, the prospect of losing a customer (or customers) is no cause for celebration.
While the immediate loss of sales and revenue post churn is most noticeable, the effects of losing a customer are much more far-reaching:
For one thing, the process of acquiring a customer is a rather expensive and resource-consuming venture. While such an investment can certainly pay off in dividends the longer a customer remains aboard, if a customer leaves before their lifetime value meets and exceeds the cost of acquiring them, the company experiences a net loss.
On that same token, the cost of replacing a customer and bringing the newly-acquired client up to the same level of profitability is 1600% more than the cost of retaining the original customer.
And, of course, any customer that jumps ship on your end is likely to end up being pulled aboard by one of your competitors. So, not only does churn mean a loss of revenue on your end – it also means your competition gets stronger.
There are certainly times losing a customer is all but inevitable (customer relocation, for example), these instances are few and far between. For the most part, there is always something you could have done better or different to avoid losing an at-risk customer.
But let’s not get ahead of ourselves.
Before we can talk about what can be done to keep at-risk customers onboard, we first need to discuss how to actually identify these at-risk individuals.
We’ll look at some of the things customers do (or don’t do) that may be an early indication of intention to churn. By paying attention to the following early warning signs, you have a much better chance of keeping your at-risk customers from turning their backs on your company for good.
Let’s get started.
Three Early Predictors of Potential Customer Churn
Though customers churn for any number of reasons, the way in which it manifests tends to fall into one of three categories:
- Inaction on the customer’s part
- A change in customer behavior
- Overt action taken by the customer
We’ll start with what is perhaps the toughest to track: inaction.
Customer Inaction
Customer inaction isn’t exactly easy to recognize for the simple reason that, by definition, it’s not an overt occurrence.
Unfortunately, customer inaction is something that generally flies under the radar until multiple instances of inaction begin to pile up. In hindsight, it’s easy to look back to the first time a customer skipped their daily coffee and identify it as the first sign of potential churn; at the time, though, that initial missed engagement probably didn’t seem like a big deal. It’s only after that customer misses an entire week – and you see them walking into the coffee shop across the street – that you realize how important that first day of inaction really was.
Inaction not only refers to a customer’s failure to make an expected purchase, but it also refers to their failure to engage with the company at all. While the two often go hand-in-hand, identifying a customer as ‘at-risk of churn’ requires a lack of only one of these engagements.
Consider the following examples:
- Mike pays for a monthly subscription to Netflix. Despite having paid his monthly fee, Mike doesn’t log into his Netflix account at all throughout the following month.
- Sarah is an avid online shopper who makes a large percentage of her purchases through Amazon. The last ten times she has logged into her Amazon account, however, she has navigated away from the site without making a single purchase.
In the first instance, the customer paid for a service, but never ended up using it. In the second instance, the customer engaged with Amazon multiple times, but didn’t end up making any purchases at all. Both cases show a potential for churn.
Inaction can also manifest in an individual’s failure to “keep up” his customer profile within a company.
If a customer’s billing address or credit card information changes and they fail to update one of their subscription profiles, they might simply let their subscription expire for the time being (especially if they hadn’t been using the service all that much to begin with). While not a surefire sign that a customer plans on churning, their failure to keep their account information current is a sign that the company isn’t exactly on the top of their mind – and that certainly is a potential warning sign.
While it might not be necessary to reach out to a customer after a single instance of inaction, it certainly should raise some red flags and prepare you to reach out if such inactions continue in the near future.
Fluctuations in Customer Behavior
We illustrated how a customer’s complete neglect of a service could be identified as at-risk behavior.
But these scenarios aren’t exactly typical: it’s not likely that a previously-satisfied customer is just going to completely stop engaging with your brand out of the blue.
A much more realistic scenario is where a customer slowly drifts away from your company, engaging less and less with your product or service until they realize they might as well leave it behind completely.
Let’s go back to our hypothetical customers from the previous section:
- Sarah spends an average of $200 monthly on orders via Amazon. Two months ago, however, she only spent $100, and last month she barely spent $75. Throughout these two months, despite having spent less, her instances of logging on to her Amazon account remained steady.
- In previous months, Mike had spent an average of eight hours per week watching movies and shows on Netflix, logging in almost every day. Last month, he spent an average of three hours each week watching shows on Netflix, and only logged in on four separate occasions.
In the first instance, the fluctuation in activity is quite evident in the fact that Sarah didn’t spend nearly as much as she usually does. In the second instance, though Mike had still paid the full amount for his Netflix subscription each month, he’s slowly but surely losing interest in the service altogether.
In both cases, the companies are at a serious risk of losing out.
Now, these examples were rather straightforward, but things get a little tricky when we’re talking about support engagements.
It’s easy to fall into the trap of thinking that a decrease in the amount of times a customer contacts customer support means things are going well, and that an increase in such is a sign of trouble. In fact, it may very well be that the opposite is true.
Think about it:
A customer who has contacted support multiple times, and all of a sudden stops doing so (even though their problem was never really solved), is much more likely to have stopped caring altogether, and may cancel their service in the near future.
On the other hand, a customer who maintains a steady average number of engagements with customer support is essentially saying, “I want to keep giving you my business, as long as you’re willing and able to help me.”
So, while it may sound counterintuitive, having a full support ticket queue is a much greater sign for your business than an empty one.
Overt Actions
The last at-risk behavior we’ll discuss is also the most clear-cut of the three, but it’s definitely worth discussing.
While customers might not always be so overt in their churn intention, there certainly are times in which they make it crystal clear: if they don’t get what they want, they’re leaving.
A customer opening a support ticket isn’t necessarily a warning sign of churn, however, a customer opening a complaint ticket is a different story. Obviously, if a customer is so unhappy with the service a company provides that they actively make their dissatisfaction known, there’s a pretty good chance they’ll end up leaving the company behind in the future (unless the business does something incredible to make them want to stay)
Unfortunately, even the most dissatisfied customers aren’t likely to complain at all; they’ll just leave without a second thought.
Companies can be proactive in their search for unhappy customers by periodically soliciting feedback through surveys and similar methods. By surveying their customers, companies can determine:
- Their customers’ overall satisfaction with the company’s services
- The amount of effort their customers feel they exert while engaging with the company
- Their customers’ propensity to refer others in their network to the company
While it’s important to dig into the “why” behind the information customers provide through such surveys, the “on-paper” results can be sufficient enough to identify specific customers who are currently at risk of churning.
And though there are a number of less-obvious ways in which customers show they’re prepared to leave your company behind, sometimes they’ll simply tell you. Unfortunately, once they’ve reached this point, it may be too late to keep them aboard.
Whether your customers drop subtle (or not-so-subtle) hints that they’re thinking of defecting, or if they simply tell you straight out, inaction on your end will almost always result in churn.
The good news? There’s a reason the phrase “at-risk customer” is a phrase at all: they’re not gone just yet – and there’s a lot you can do to change their minds.
Check back next week, as we’ll discuss strategies and tactics you can use in order to keep your at-risk customer satisfied with your service and engaged with your brand.
