Is there a way to keep every customer?
Even in the best market conditions, companies focus too many resources on acquiring new customers and not enough on retaining those they already have.
It is entirely possible to stall profitability if churn wipes out all the gains you realise in sales growth.
Churn can sneak up on you, especially in uncertain markets, forcing you to cut spending in critical areas. Even with highly effective sales and marketing efforts, you can be growing your top line (gaining more customers) while at the same time losing existing customers.
Unfortunately, churn is inevitable. Even if you do not lose customers to competitors, you will eventually lose them to other factors, including changes to the supply chain and technological innovation. Managing churn as a part of a holistic growth strategy is tricky, mainly because it tends to be more of a defensive activity that can be difficult to measure.
However, not having a plan to retain acquired customers will put incredible strain on your sales and marketing efforts. Customer needs will change at some point (even without Covid-19 and a predicted double-dip recession). Your job is to anticipate those needs before the customer even thinks about choosing a competitor.
Long-term customers are less price-sensitive, buy more, spend less time with the company, and bring in new customers. It is said that a 5% increase in customer retention can increase profitability by 75%.
The more you strategically align customer retention methods, the more likely you are to build a dedicated and loyal customer base.
One place to start is calculating the churn rate, i.e., the number of customers who stop using products and services for any defined period. If you prefer to use a percentage, divide this number by the total number of customers regularly buying from you.
Then it is essential to capture net revenue churn, which is the income-value lost from churning customers against the income-value gained from expansion revenue (up-selling and cross-selling to existing customers).
Once you have these calculations, you can develop a plan, which should include:
Adapting processes and products to focusing on customer need
Proactive communication with retained customers, anticipating their needs and predicting when they may need help or want to purchase more from you
Identifying customers who are “at-risk” of switching and develop campaigns to keep them
Seeking feedback from customers who turn away from you
The smarter you are higher up in the funnel, the healthier you will be lower down in driving engagement, retention and ultimately lifetime value. Focusing on retaining existing customers offers the double benefit of lower costs and higher returns.
In addition to monitoring customer loyalty and customer switching, marketing must balance responsibility for monitoring customer vulnerabilities. Find the right customer relationship management processes for your organisation and build relationships with your customers in the right way.
In the new normal, reducing churn can become an offensive growth strategy instead of a defensive one. Over time, successfully navigating churn will open the door to diversifying customer and product lines.
In summary, marketing has a significant role in keeping customers, maintaining opportunities as they move through the pipeline, and top of the funnel lead generation. It isn’t possible to retain every customer for many reasons. Nevertheless, if the fight to reduce churn only occurs downstream, the company will continue to battle churn without much improvement.
Contact us to find out more about how we help marketing broaden impact across the value chain.