Both for a young company and for 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 hurt your business, you must understand why customers leave and find the persuasion for them to stay. In this article, we will delve into the causes of customer churn and tell you how to deal with this phenomenon.
The process when customers stop working with you is called customer churn ( churn rate ). Client churn is understood as the unwillingness to give consent to the extension of the contract, the termination of the agreement for services, the closure of one's account. In other words, adverse customer churn can significantly impact a company's earnings.
Churn management starts with its calculation
Focusing on customer churn is essential to minimizing customer loss. Different companies calculate customer churn in different ways:
- Churn can express the number of customers who have stopped doing business with you;
- The outflow can evaluate the value of the loss in terms of money.
Basic method for calculating customer churn
based on the period of time after which the client is considered "inactive", calculated by the formula:
For example, if at the beginning of the month the total number of customers 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 customer churn in terms of the monetary value of the profit that the company could have received if the customer had not stopped using its services. In this case, the outflow will be calculated using the following formula:
That is, if in the last month the number of clients who stopped cooperating 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 customer churn will be as follows:
The money formula instantly opens your eyes to the churn factor, which ruthlessly reduces your income. Therefore, you need to find its causes and fight to retain existing customers.
Causes of customer churn
The level of customer churn depends on many factors. After analyzing each of them, you will better understand the nature of its occurrence and be able to choose the right solutions to combat this factor. Why does a client stop being your client?
- Product quality. This is the most common reason for churn. Remember good quality products is the success of any business. If you offer a bad product, it is simply impossible to earn the trust of the consumer. Therefore, be sure to make sure that the combination of properties of your products is suitable for meeting the customer's need. After all, it is not for nothing that there is even such a science as qualimetry – the science of how to measure and quantify the quality of products and services.
Be prepared that the production of quality products may take more time, expensive equipment, qualified personnel. With a sound approach to the level of quality, you can expect a quick return on investment and a significant increase in revenues.
- Bad service is one of the most common consumer complaints.
When it comes to quality and poor service, these two causes of customer churn are the underpinnings of the most common consumer complaints. In 2015, Rospotrebnadzor received about 500,000 requests of this kind.
- Profitable proposition competitors. Competitors can lure customers to themselves thanks to beautiful advertising, how long? The customer will not stay with them for long unless the quality, product availability, service and special offers are better. Consumers are always comparing, so keep the bar high!
- Change of residence. We attribute this reason to good reason customer churn. But again, it is important to identify it, because if your client moved to another city and stopped using your services, he may simply not know that your company has branches all over the country.
- Changing interests, needs. Everything changes, and this is constancy. A person has the right to change his desires and sphere of interests. Also, fresh fashion trends or recommendations from friends can be a likely influence on care.
We offer several ways to reduce customer churn
- Be active
There is a type of customer who will not express their dissatisfaction in the form of loud words of indignation, they will simply leave in silence. Known that 91% of dissatisfied customers do not express their complaint, but simply stop cooperating. Therefore, show interest in the difficulties of the client, and be interested in how he is doing. Always take the first step!
- Take a poll
The survey will 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 not like about the work of our site?” The survey will help identify the difficulties of customers and correct everything on initial stage cooperation to avoid further outflow.
- Give the opportunity to rate and write comments
The client should be able to leave their feedback. Reviews tell you what your customer thinks and feels. Make the form convenient and quick to fill out for the user. Don't make it too long. It may contain several parting questions and a mandatory field for free feedback.
See how a clothing store does it. After the purchase, the user is sent an email with the opportunity to leave a review and write a comment. In the example, the feedback 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 these problems. The client will feel care and not indifference on your part. A good buying experience will strengthen the partnership and guarantee a lower churn rate.
- Revive 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 interval of inactivity is 3-6 months, after that feel free to send a letter. In the example below, a shoe company sends an email to "inactive" customers with a discount to encourage them to buy.
- Automate your customer retention process
In some cases, you know that the customer will stop using the service. For example, this may happen after the end of the free trial period. You can focus on those churn periods and automate the process of retaining customers for future collaborations.
This is, of course, pre-prepared email newsletters with promo codes, reviews of new products that may interest the client again, messages in in social networks, phone calls. Provide access to exclusive opportunities, stimulate customers with discounts, bonuses, prizes in contests, gifts. 
Instead of doing everything manually, use your CRM database and email automation, so you can start an active customer retention campaign in time. All comments of your users, their feedback, answers to surveys, tests, save to further improve the entire workflow.
Customer retention is not just a tick in the report, but the retention of company revenues. Gather 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!
This year activists information portal statista.com conducted a survey of small business owners about which of the problems they face in the course of their activities, they consider the most important and relevant.
What do you think is the most popular answer?
Customer churn problem
Both old and young are concerned about this, as they say, and it is obvious why: no growth of the company will occur if the process of attracting new customers is not established. But the growth of the company depends not only on new customers, and you will agree with this.
In pursuit of new customers, we somehow got used to immediately throwing existing customers out of our heads. But this is much more difficult and more important: to retain a client, maintain his loyalty and cultivate loyalty to the brand in him. So it turns out that the main reason for such a phenomenon as the outflow of customers () 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 that shows the correlation between customer churn and profit:
Churn can easily confuse your cards, or even destroy your business in the bud. If you let him.
In this article, we will look at the 4 most common reasons for customer churn and how to deal with them.
1. Clueless customer service
Many companies view the cost of customer service support 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 the life of your business.
The problem is this: if you see an expense item in the customer support center, then it will be so. Judge for yourself: if it is not your priority to provide the best customer service (which you can only afford), then the money that you spend on its support 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 customers.
Poor customer service is one of the most common reasons why people lose all respect for a brand (according to recent research, 9 out of 10 buyers 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 new level. Revenues will rise and customers will be happy to pay more.
2. Ineffective support
In every business, there are, as a rule, two points that are significant for customers:
- when they signed up for your services, became your customers;
- when they achieved success with your product, when your product delivered real value.
Acquisition - the moment of purchase of the service, First Successes - the first success.
The main outflow of customers occurs just in the interval between these two moments, between these two control points. People may not understand something in 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 own interests to not lose touch with your customers and make every effort so that your product turns out to be for the future, so that it helps people achieve the goals for which they bought it. Otherwise, you will get the same churn.
3. Lack of consistent success
If you seriously think that with the achievement of the client's initial success, your communication with him will be limited to sending invoices, you are deeply mistaken. Initial success is certainly important, but it does not mean that the client has figured out everything and can now act without your help.
You updated the functionality, made some changes to the interface, changed the data display format - and the buyer found out about it only from the newsletter. Surely there will be questions. And if you do not give them an answer 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."
Clients should listen to you, and you should talk to them. If you do not work on these relationships, it will be very short.
4. Natural causes
Often, 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 leadership lead to changes in service providers. It happens that they "grow" from the capabilities of your product.
This is happening and it's normal. It is not in your power to change anything. Therefore, you should concentrate your efforts in those areas that we have already described above.
Conclusion
The lower the outflow of customers, the higher the profitability of the enterprise. Customer churn is a metric that is directly related to such a category as profitability. A guaranteed decrease in the percentage of outflow leads to an increase in profits. What to do for this - you already know.
Many top managers of banks will agree with the statement that it is easier to retain an old client than to attract a new one. But how should you act so that the client stays? First, let's look at the causes of churn. There are four of them: death, divorce, moving and dissatisfaction with the bank.
Let's say that customer churn is 10% per year. The distribution of those who left, depending on the above reasons, will look like this:
50% of customers will refuse the services of their financial institution because of dissatisfaction with the quality of service.
As we can see, 50% of clients will refuse the services of their financial institution due to dissatisfaction with the quality of the service. It is with this reason that the bank can and must work. The rest of the reasons are amenable to statistical analysis, which makes it possible to predict their impact on the overall pattern of customer churn.
Death
Not surprisingly, the older a person is, the more likely they are to die. If we proceed from the fact that the distribution of mortality depending on age in the United States as a whole reflects the picture of the mortality of bank customers, then we get that due to the death of customers, the bank annually loses a little less than 1% of its customers.
Statistical data can be used to change the age structure of the customer base in order to minimize Negative influence this factor. For example, if the commercial department attracts older clients to a greater extent, you should think about attracting people younger age. This will require the promotion of youth-oriented banking products. In addition, pooled accounts can be offered to older customers, through which the service will be provided to both the account holder and his relatives-heirs.
Divorce
The situation is reversed in cases of divorce. The older the client, the lower the likelihood of divorce. If we project the data on divorces in the United States to bank customers, we find that approximately 1.95% of them diverge. Considering that about half of divorced people change financial institution, it turns out an outflow of about 1%.
To retain divorced clients, it is worth offering financial products that help secure the future of children. For example, savings accounts, which make it possible to save for college education, or irrevocable deposits for children, withdrawn upon the occurrence of certain conditions.
moving
As with divorces, the older the client, the less likely they are to move. Statistics show that during the year approximately 11% of clients will change their place of residence. Of these, 20% will move and stay within their state, 15% will move to another state. Given that many of them will not change their bank, the outflow will be about 3% per year.
If those customers who are used to interacting with the bank exclusively in branches move to a new state, and your branches are not there, then you are powerless. The client is lost. Those who use mobile and online banking can remain a client even outside the presence of your offices. The main thing is to provide them with convenient functional digital channels.
The factors of mortality, divorce, and relocation combine to produce a 5 percent annual churn.
The factors of mortality, divorce, and relocation combine to produce a 5 percent annual churn. Another 5% is a churn triggered by customer dissatisfaction. Let's look at it in detail.
Dissatisfaction
Every year you will have 5% dissatisfied. It may not sound too tactful, but you will only be glad to leave some. So let's call the exit of "bad" customers "good churn" and the exit of "good" customers "bad churn".
"Good outflow"
Every month, banks write off debts arising from unpaid overdrafts and service charges from customer accounts and close these accounts. In fact, about 40% of accounts are closed precisely because of debt. This usually (but not always) results in the loss of a customer. "Good churn" is estimated at around 3% per year.
"Bad churn"
"Bad churn" is approximately 2% per year. According to customer surveys, there are five reasons to change banks:
1. Poor quality of service.
2. High maintenance cost.
3. Unattractive interest rates.
4. Products with insufficient features.
5. Inconvenience.
Let's look at them in more detail.
- Service quality.
IT costs will always be high. In addition, IT modernization is a lengthy process.
Improving management processes, staff training, support programs, system reliability - all this affects the quality of service. Process optimization and employee training do not necessarily require large budgets. But IT costs will always be high. In addition, IT modernization is a lengthy process. You need to develop, then implement. In this case, the positive effect will be noticeable far from immediately. However, we note that the high quality of service should be the goal of any bank, so you should pay maximum attention to the details that annoy customers and correct the shortcomings.
The result will not be noticeable immediately, but you still need to continuously work to improve the quality of service.
- Payments.
Reducing the overdraft fee from $35 to $30 or $25 is not enough to please a client, especially if they have multiple overdrafts. The entire banking industry needs to be consistent about the cost of overdrafts and educate clients on how to manage their balance sheet so they don't use the service. Regulators are carefully studying the possibilities for changing the terms of the overdraft, so sooner or later this service will be upgraded. In the meantime, banks will continue to earn a lot of money on this service.
What customers really don't like is that "their" bank also charges a fee for withdrawing money from a third-party ATM.
Now let's look at the fees for using an ATM. Every customer knows that using a third-party ATM is likely to result in a fee being charged by the ATM's owning bank. But what customers really don't like is that "their" bank also charges a fee for withdrawing money from a third-party ATM. Even if customers don't leave the banks en masse because of these payments, it is still obvious that this is an irritating factor.
In addition, there are monthly service charges. Of course, they are not as big as the fees for overdraft and for using an ATM of a third-party bank. But banks are not ready to give up this source of income.
One way or another, the size of payments is a serious reason for a client to leave. If banks reduce the amount of the above payments, this will slightly reduce their income, but at the same time it will positively affect customer loyalty and reduce churn.
- Interest rates.
Rate management should become an element of the bank's overall pricing strategy. This will keep customers and maximize profits. In practice, few do it.
The solution may be to lower rates to a level at which the consumer finds them attractive. To determine the value of the rate, there are special models. However, it takes time to change rates. This step should be carefully calculated, as it has a very strong impact on the bank's financial performance.
Reducing rates will reduce customer churn, but will not stop it. In addition, this step will cost the bank very dearly. When raising rates, you should carefully monitor the offers of competitors and the reaction of consumers. Rates should be raised only when it is really necessary to do so.
- banking products.
Depending on the complexity, it takes 6-18 months for a bank to launch a new product. The development of new products and services should always be driven by customer needs. If new offerings are functional, reliable, and effective, you will be able to attract more customers and, very importantly, retain old ones.
Good products will allow you to successfully compete in a rapidly changing market. Therefore, if you want to stay in business, then you have no choice: either you do good offer or you die.
- Convenience.
More branches? More ATMs? Or a more convenient online banking? Or maybe the best mobile bank? Everything matters. However, it is probably impossible to make all channels of interaction with the client convenient. Because it's very expensive. Therefore, you need to prioritize and purposefully improve the convenience of customers so that they do not run away.
It is better to focus on the fact that customers are increasingly using digital channels.
Here we will not consider the issues of changing the economy of the branch network. This is a strategic issue. Its solution does not give a positive effect in the short term. It is better to focus on the fact that customers are increasingly using digital channels.
Invest in mobile technology, call centers, online customer support (chat and video). As for the branch network, work with it based on the sales strategy and customer retention goals. At the same time, keep in mind: you should not expect a quick positive effect from these actions. This is a long distance.
Conclusion
Approximately half of the outflow of bank customers occurs due to death, divorce or relocation. The bank can partially manage the situation by offering special products, examples of which we have given above.
The other half leaves the bank due to dissatisfaction with the service. We figuratively divided these customers into “good churn” and “bad churn.” A “good churn” is about 3% per year. These clients either leave on their own or at the initiative of the bank. In general, we are not upset by these losses. "Bad churn" is estimated at around 2% - a small but very important group of customers for us that we would like to retain.
- There is evidence to suggest that lower fees help keep these customers.
- Careful rate management can mitigate bad churn, but in the event of a mistake, the losses can be significant.
- Good products are the first step to customer retention. Developing quality products and services is a matter of your survival.
- The sales strategy and customer retention goals determine the features of the functioning of branch networks.
- The only reason for a customer to leave that we can directly influence and control is dissatisfaction. The quality of service must be constantly improved. This requires significant investments in mobile banking, digital channels of communication with the client, call center and support chat.
About the author: Alpine Jennings (Alpine Jennings) - partner of a consulting company StratAgree , developer of marketing planning system COMPASS. Engaged in the study of customer interactions with markets, brand management, issues of defining marketing approaches and goals.
Customer acquisition and retention is priority areas activity of enterprises of any industry, but these issues are especially relevant for telecommunications, where the level of competition is extremely high.
Annual churn rates of 25-30% are the norm. Operators that have a value this indicator approaching the upper bar, will not be able to get a return on investment in new subscribers: it takes about three years to recover the funds spent on replacing each lost customer.
Customer churn is a common problem in the global telecommunications industry.
Previously, the severity of the situation was offset by attracting new customers, but the pace of market development is accelerating, average profit from the client is decreasing, and, most likely, competition in this market will only become tougher.
The intensive development of the telecommunications industry in Russia has led to the fact that at the moment the market cellular communication in Russia is in the saturation stage, competition between the main market players is intensifying.
In this regard, the process of attracting new subscribers becomes more costly and laborious, which in turn enhances the importance of measures to maintain the existing customer base.
Relatively stable growth and higher revenue margins are expected due to reduced churn of existing subscribers and use of value-added services.
How to do it effectively?
In most cases, customer retention methods used by operating companies are not effective enough. This is primarily due to the lack of coherent customer retention systems and the lack of consistency in the actions taken in this direction.
At the same time, the main share of the activities carried out is of a reactive nature, i.e. events are directed to customers who apply to the company, faced with technical or technological problems when using services or with unsatisfactory quality of service.
This method of retaining customers is ineffective, both from an economic and psychological point of view.
More effective are proactive measures aimed at customers prone to churn for a number of characteristics (churn predictors).
When creating an integral system of retention and loyalty of subscribers, it is advisable to comprehensively introduce two directions - reactive and proactive retention of subscribers - with a single goal: to establish mutually beneficial long-term relationships with existing customers by providing them latest products High Quality and providing a service tailored to the needs and value of each customer, while maintaining a balance between churn rates, retention costs and excessive customer loyalty.”
When carrying out reactive preservation measures, it is not a group of customers that is considered, but each individually, with its individual subscriber value indicator.
As an example of tasks that can be solved when implementing a reactive client persistence subsystem, the following can be indicated:
optimization of the processes of interaction between departments when processing customer requests with a claim, any negative feedback about the company's activities or the intention to terminate the service;
increasing the efficiency of technological processes (reducing the time for considering claims, minimizing the number of written claims, optimizing the processes of on-line processing of customer requests, expanding the methods of communication with customers, optimizing cross-functional interactions);
To evaluate the effectiveness of reactive customer retention measures, the following parameters can be used:
change in the level of customer churn;
the level and promptness of identifying deficiencies in the provision of services and maintenance;
promptness in the implementation of corrective measures;
a shift in the dominant level of receipt of client requests to cheaper channels of communication with clients;
change in the quantity and quality of customer claims;
change in the ratio of justified and unjustified claims;
changes in process performance indicators, for example, the company's response time - time to resolve complaints.
Impact of conservation measures on life cycle and customer value
Impact of conservation measures on life cycles and subscriber value
Customer Value Calculation
Proactive measures include built-in processes to prevent the outflow of customer groups (personalized campaigns for small target segments).
In this case, the basis for determining the "propensity to outflow" can be:
- the results of the analytical model, for example, using the methods of Churn Prediction, Data Mining Technology;
Intuitive churn predictors (competitor stocks, network outages, etc.)
certain moments of the "life cycle" of the subscriber (completion of the contract, etc.).
To implement proactive customer retention measures, it is necessary to:
adapt the solution for business use by improving the efficiency of models (adding missing data);
develop a methodology for determining the causes of the predicted churn for the development of campaigns;
develop a list of intuitive churn predictors with their impact on churn propensity;
develop and implement external databases (market monitoring, network operation, etc.);
develop a list of key points of the "life cycle";
develop and implement transport to use the system.
Also, when developing a system for retaining and loyalty of subscribers, it is necessary to provide for the implementation of control systems that allow tracking the qualitative and quantitative indicators of the effectiveness of the changes being made. For example, such controls can be:
Creation and implementation of the KPI's (Key Performance Indicators) system, including operational and project indicators;
implementation of the Customer Satisfaction system to understand the impact of ongoing changes on subscribers' feelings;
implementation of Mystery Shopper programs to control the quality of business processes performed by the Company's employees.
As case study implementation of a customer retention system, I would like to note OJSC Mobile TeleSystems, whose activities in this direction were launched in the middle
2004 . and was caused by the negative dynamics of increasing the outflow of existing customers during 2001-2003. The development and implementation of technologies and mechanisms for retaining existing customers, which was carried out at MTS, gave its positive reflection in a change in the direction of the trend (decrease in the level of outflow).
MTS subscriber churn rate
This result was achieved through the implementation of full-scale unified reactive storage processes, including measures to deal with complaints, work with clients who intend to voluntarily terminate the contract, etc., implement a discount system, optimize service procedures, and introduce additional services to optimize the solution of subscriber problems. Also, the introduction of proactive customer retention measures based on intuitive churn predictors contributed to the effectiveness of the measures taken, which made it possible to more effectively retain existing customers, increase their loyalty and stimulate them to increase the intensity of using services.
Requires centralized action
For executives of companies seeking to gain a leading position in the market and at the same time aimed at increasing profitability, the most important and necessary direction in development should be maintaining and increasing the loyalty of existing subscribers.
Creation and implementation of a system of retention and loyalty of subscribers for telecommunications companies, as well as for companies in other industries, is a project with both short-term and long-term goals, objectives and results.
The final decision on the creation and implementation of a subscriber retention and loyalty system remains with the managers and owners of companies.
Analyzing the world experience in the creation and implementation of such systems, we can confidently say that without the support of the management, these systems for implementation are not viable and practically unrealizable. This is mainly due to the fact that these systems, during development and implementation, require a single leadership, a single concept and a significant change not only in the strategy of working with subscribers and service processes, but also a change in the ideology of working with their customers.
An integrated approach to the implementation of these systems is the most appropriate approach to the implementation of this direction of development. This is primarily due to the fact that the company's customers are influenced by the activities of almost all of its divisions, even those that do not directly interact with them.
In this regard, in order to obtain a tangible result and improve the qualitative and quantitative indicators of the effectiveness of working with existing customers, it is necessary to centrally influence most of the company's divisions and change the principles of their work from the principles of a narrow profile to principles that take into account and understand their role in the service process, and therefore and optimize its activities, taking into account the principles and strategies
customer orientation.
* * *
The implementation of systems for maintaining and ensuring customer loyalty is quite new, innovative and inactively implementedactivity on Russian market. But now many leaders large companies think about the feasibility of creating a unified centralized systems. This aspect can be safely noted as a positive movement towards more productive interaction with its customers, which, in turn, will affect the stability of the company's development, its financial indicators and market position.The article was prepared based on the materials of the attestation workMBA-TELECOM program of the Moscow International high school business "MIRBIS"
With the development of any business, not only its profitability and influence in the market increases, but also the number of users who refuse its services. Even a stable retention of the customer churn rate (Churn) at an acceptable level of 2% can mean large financial losses, because if the client base of the platform is in the thousands of users, leaving even 2% of them means losing a significant share of the profit.
As we can see on the graph, regular (Regular User) and new users (New Signup) cloud service regularly use the platform (Avg Logins/Day) and work with it for a long time (Time). As for unsubscribed clients (Lost Customer), their activity indicators gradually decreased until they stopped working with the service at all.
One of today's top Internet marketers put it this way: "As a company grows, working to reduce user churn is very much like getting into quicksand - the harder you try to get out of it, the faster you sink even deeper."
This comparison aptly describes the state of affairs of many companies trying to build strong long-term relationships with customers and meet all their needs, thereby reducing the bounce rate.
Fortunately, there are many effective ways to significantly reduce the loss of users.
Make the most of your current opportunities
The task of any entrepreneur is not only to reduce the churn rate, but also to increase the profitability of the business. To do this, you can apply a number of effective practices.
Bounce rate analysis
Before you solve any problem, you need to understand why it arose. That is why the analysis of lost customers and determining the reasons that forced them to unsubscribe from the service is key factor bounce rate reduction.
The most effective tool for obtaining such information is a survey about the reasons for refusing the services of the company, which can either be included in the process of unsubscribing from the service, or send an email to the user asking them to tell about the reasons for leaving the company.
Studies have shown that such a survey was completed by a large number of respondents, but using this format requires much more effort from the marketer than simply asking to complete the survey sent by e-mail.
The key to using analytics to determine the reasons for customer churn and calculate your monthly income is to analyze the right metrics.
Numerical and strictly verified parameters that most accurately reflect the effectiveness of your business:
- monthly income (Monthly Recurring Revenue, MRR);
- the already mentioned churn indicator (Churn);
- Customer Acquisition Cost (CAC);
- average income per client (Average Revenue Per Customer);
- the maximum profit brought by the client for the life cycle (Lifetime Value of the Customer, LVC).
The analysis of customer reviews and the above 5 indicators is enough to reduce churn and increase MRR.
User segmentation
Dividing the customer base into loyal users and those who are most likely to leave gives the marketer the opportunity to more clearly see the differences between regular and temporary customers and determine their basic needs.
With this information, it is much easier to influence the decisions of exit-prone clients. For example, you can contact them and offer some help or service, whether it's training on how to use the service or a discount coupon. The most important thing is to contact the client directly, since it is possible to reliably find out his specific needs and wishes only through direct communication.
Segmentation is possible when developing the Lead Scoring system inside CRM.
Educational materials
Providing useful training materials to a failure-prone segment of users can significantly reduce that segment. It is quite possible that some customers do not get the best results from using your solution simply because they themselves do not use all its technological capabilities without realizing it.
A segmented mailing list with helpful tutorials (manuals), tips and answers to frequently asked questions (F.A.Q.) would be very useful for such subscribers, and having a section with educational content on your blog is a must.
Most of the top companies are popular with their target audience and have many loyal customers precisely because they provide free and useful educational materials.
There are several ways to train users:
- e-mailing - training materials go directly to the subscriber's mailbox;
- email coaching - this format (by the way, very appreciated by users) is more like direct communication with the client, during which he is taught to use the service to the maximum and get all the possible benefits from it;
- a series of blog articles about the features and benefits of your offer that subscribers may not be aware of;
- trainings on the most efficient use of your platform;
- trainings on near-target topics in the field of activity of your subscribers;
- webinars;
- creating a learning center or YouTube channel.
Active User Rewards
Rewarding customers with bonuses and discounts for their loyalty and positive results of working with the service not only encourages business, but also makes them more inclined to switch to advanced tariff plan for which they received a discount.
You can reward customers for loyalty from the very beginning of their buying life - during the registration process - by setting the subscription price for 1 year less than the total annual cost of the monthly plan.
Sell additional services
The idea of this practice is very simple: to persuade a person to switch to a more expensive and efficient tariff or to purchase related services and services.
The incentive to make an expensive transaction is more natural for buyers: if a person needs something, he will be ready to pay the required amount for it. This implementation of the cross-selling technique will not only bring you additional profit, but will also have a positive effect on reducing the outflow rate.
The main thing is to correctly display all the key differences and advantages of more expensive offers, convenience and profit for the buyer.
It’s worth mentioning right away that people often use the term “Up-selling”, meaning “Cross-selling”. In order to avoid confusion, we will denote the difference between these concepts.
If the store/website/platform offers the buyer additional options or a more expensive version of the product that he is going to buy (or has already bought) - this is Up-selling.
Imagine the situation: you came to the store for a 27-inch TV, and you are offered to pay attention to a model with a diagonal of 32 inches or, for example, purchase an additional warranty. AT this case, a business uses an upsell strategy in an effort to increase its profits.
An offer to purchase an additional guarantee is a classic example of using an upselling strategy.
The essence of cross-selling is to offer the buyer a product that complements his purchase. In addition to the TV, are you recommended to purchase a game console or media player? This is a typical example of using the Cross-sell strategy.
Both methods are designed to help your client get everything he needs, and you, accordingly, to extract the maximum profit.
Let's take a look at the top three benefits of these customer experiences.
1. A well-built upsell system allows you to establish closer contact with customers
Sales guru Jeffrey Gitomer believes that upselling is a way to "help the customer win."
When Jeffrey was asked how he himself could be forced, for example, to change his credit card to a more expensive one, he replied: “Explain what my winnings will be. If I win, you win too."
Let's take an example. Husband and wife decided to spend the weekend outside the city. When checking into the hotel, they were offered breakfast for two for $29 instead of the usual $49.
Of course, they gladly accepted the offer, which allowed them to receive a benefit of $20. The hotel, however, also did not lose money, because in addition to $ 29, it received the opportunity to establish closer relationships with its customers. There is a win for both sides.
Summary: Up-selling is more than just a sales strategy. This tool will allow you to get closer to your customers and build mutually beneficial relationships with them.
2. Up-selling is easier than finding new customers
The book Marketing Metrics provides an extremely interesting statistic: “The probability of selling a product to a new buyer is 5-10%. The probability of selling a product to a person who has bought from you before is 60-70%.
The left column is the probability of selling the product to a new buyer. The right column is the probability of selling the product to a person who has made purchases from you before.
The difference is simply huge. However, this is not surprising. People tend to be wary of everything new and are not too willing to apply to companies about which they know practically nothing.
Among other things, upselling allows your business to grow faster. Entrepreneur Joel York explains, "The low cost of up-selling gives SaaS companies the ability to reduce the time it takes to make a profit."
The graph above shows how Up-sell affects the time it takes for a company to make its first profit.
The point of intersection of the blue and light red lines shows the moment of making the first profit if the company increases sales only by attracting new customers.
The intersection point of the green and light red lines shows the moment of receiving the first profit if, in addition to attracting new customers, the company uses an upsell.
Many companies focus all their efforts on finding new customers, losing sight of the opportunity to work with the existing customer base.
3. Using an upsell strategy increases customer lifetime value
Customer Lifetime Value (CLV) is an indicator that characterizes the amount of profit that a company can receive from a client for the entire time of cooperation with him. Investor, entrepreneur, and VP of marketing at PBWiki, Chris Yeh, provides an example of how a company can use Up-sell to increase CLV.
“Once I had to call a tow truck. After I informed the dispatcher of my location, he suggested that I take out insurance at a discount. After 15 minutes, after listening to all the details, I agreed to increase the insurance premium for my house and car by about $100. The sum insured thus increased by $1,000,000.
I have been a customer of GEICO for 16 years and there is no reason to believe that I will not be a customer for the next 20 years. Thus, GEICO has transformed a costly challenge technical assistance$2,000 CLV addition."
Summary: Each upsell can significantly increase the lifetime value of a customer.
4 Use Cases for an Up-Sell Ecommerce Strategy
Up-selling must be applied taking into account the specifics of the industry in which you work. Below are 4 good examples how SaaS and e-commerce companies are successfully using this tool.
1. Upsell and applications
If your Dropbox personal storage is full, the app will prompt you to get more storage:
Top caption: Your personal data storage on Dropbox is full. Get more space.
Promptly offering the user a solution to his problem, the company thereby establishes a trusting relationship with him.
2. Up-sell and shopping cart
This is perhaps the most popular way to use an upsell strategy in eCommerce. Some people are good at using this tool, some are not.
When you order flowers on the 1-800-Flowers website, you will be offered several products that can really enhance your gift. So, for example, you can additionally buy balloons, a box of chocolates or a teddy bear:
Top caption: Would you like to add something to the gift? (optional)
Compare this to what GoDaddy offers you when you purchase Domain name. Neil Patel, an expert in conversion optimization, comments:
“They could significantly increase conversion rates by offering up-sells to users that really complement their purchase. For example, I added a domain name to the cart, and received the following offer:
"Build trust with your site visitors. People want to be sure your site is trustworthy. Give them proof."
Why offer a domain certification service to a user if they probably don't have hosting or a website? I don't know about you, but I've never built a website before purchasing a domain name for it."
3. Up-sell and technical support
The quality of support work has a huge impact on customer loyalty. Let's take a concrete example. Groove offered its Live Chat to users as an alternative to email. This gave any client of the company the opportunity to reduce the flow of letters coming to his email. Naturally, people were happy with the fact that their problem had been solved.
Hello. I understand you very well: getting a bunch of extra letters is very unpleasant. Would you like to add our Live Chat to the site? So you could quickly answer incoming questions without using email.
If you are interested, I will be happy to send you a free 14-day trial. I'm sure Live Chat will help reduce the flow of emails coming to your email. Of course, if the results do not satisfy you, you can refuse the purchase.
Do you want to try Live Chat?
Summary: Offering a client an upsell that allows you to establish a dialogue with him, you certainly strengthen the foundation of your relationship. However, if you can solve the problem technical support user without using upsell, do this.
4. Up-sell and customer achievement
Ramit Sethi sells online courses for people looking to build a successful career, achieve business success, or simply increase their productivity. A large number of courses offered allows Ramit to use Cross-selling effectively.
When a client completes one of the courses, thus achieving the set goal, he feels uplifted. At this moment, an email is sent to his inbox that looks like this:
Hello, today I want to offer you a special bonus. You can access the Ramit's Brain Trust program completely free of charge. This is my gift to you.
Read it, it's worth it.
In this letter, the user is invited to receive a free 30-day trial as part of the loyalty program.
Summary: The moment when the client has reached the goal is ideal for offering him an up-sell.
Connect with your clients
As we said earlier, only by contacting users directly can you absolutely know their specific needs and preferences. The classic online surveys that only a few take are not suitable for this, and it is unlikely that it will be possible to personally contact each client. But there are several effective ways to effectively communicate with customers, successfully applied in practice by many large brands.
Customer Opinion Research
The results of such surveys are very valuable information, on the basis of which you can both retain current customers and develop your business in the future. But in order to get this data, it is important not to alienate subscribers with the complexity and length of the survey - 10 key questions are enough to get important information about the needs of buyers.
Help us help you survey
This format is very similar to the previous survey, but is presented as beneficial primarily for the user himself. Your goal: to convey to the client that, based on his answers, you will create a better and more valuable product, from which he will receive the benefits.
Social media survey with rewards for participation
Social media surveys are a great way to build a more personal connection with your former and current customers, and the various bonuses, coupons, and discounts that respondents will receive for completing a survey will greatly increase their incentive to share their opinion with you.
Social media branding campaign
Once the causes of customer churn are identified, the marketer can resort to very effective way mitigating the problem by running a social media branding campaign, as social media communication is more personal than email.
In addition, the loyalty that a person develops when communicating with a brand on social networks makes him less susceptible to the prices of the products of the business he follows, and also significantly reduces the likelihood of a client leaving for competitors.
Reward users at specific lifecycle stages
In trying to win back lost customers, marketers sometimes completely lose sight of caring for their current users. But it is important not only to understand the reasons for leaving, but also to keep regular customers- bonuses for long-term use of your product or a small financial compensation can be very helpful in this regard.
There are many incentive options:
- provide customers with a discount coupon for upgrading to an advanced plan;
- open access to download useful to the user software;
- reward a year's use of the service with one month of free subscription.
Increase loyalty with high-quality support service
Your attitude towards users plays a huge role in building strong partnerships: serve your customers at the highest level, do not make promises that you cannot bear, and always keep the commitments you make.
Listen to your users and thank them for their help and helpful tips:
- thank the person for good idea on his page in the social network;
- indicate on the site page about the technical properties of your platform the names of companies, software which you use;
- mention the name of the user who gave you useful advice, in one of the blog posts.
Evaluation through the eyes of buyers
Look at your service through the eyes of your customers: what is the most important feature for you as a user, what would you like to add or change?
For a more objective assessment, try to analyze your closest competitor:
- Is your offer more attractive than his USP?
- what are the main advantages of your competitor, and do you have them?
- what modifications could you make to stand out from the competition and gain a significant advantage?
Customers are the most important part of any business. By looking at your solution through the eyes of your users, you may be able to understand what they lack or what they would like to improve.
Do not forget also about pleasant little things that can have a very positive effect on the attitude of the target audience towards the brand:
- congratulate your users on their birthday and all holidays;
- do not forget to respond to customer reviews, while paying attention to what they write;
- communicate with your target audience in various groups on social media, establishing direct personal contact.