Why Reducing Customer Churn is Important

How reducing customer churn can improve profit…

Customer churn occurs when customers or subscribers stop doing business with a company or service It is normally described as the percentage of your total customers who have left you.

So, reducing your customer churn can help your improve your profit by addressing two elements:

  • Costs – the costs of acquiring new customers when is greater than those of retaining customers; and
  • Revenue – retained customers are more likely to buy again from you and spend more than new customers.

Together these combine to provide greater opportunities for improved profit via your retained customers than acquiring new customers.

Customer churn impedes growth.

For example, if you have a customer base of 1500 customers and you lose 300 customers, then you have a 20% churn rate.  If this continues then in five years you will have turned over your whole customer base. To grow you not only have to replace those lost customers, but you have to find additional customers on top of this.

The greater the level of churn the more customers you lose. Higher churn requires you to spend more time and effort in finding more customers. These new customers are more expensive to acquire and spend less as you do not enjoy the same level of trust and familiarity that you have with customers who have been with you for some time.

Monitoring Churn

So you should have a defined method for calculating customer churn in a given period of time. By being aware of and monitoring churn rate, you are better equipped to determine where and how to focus your efforts to retain customers, and to identify strategies for improvement.

A 2013 Bain & Co. study found that a 5% increase in customer retention rates had the potential to yield profit increases from 25% to 95%. So, don’t let customers’ issues eat into your bottom line: solve them swiftly and reap the benefits.

…and there’s more!

According to Gartner, a staggering 80% of a company’s future revenue will come from just 20% of its existing customers. Meanwhile, Marketing Metrics claims that the probability of selling to an existing customer is 60-70%, and only 5-20% to a new prospect. You are more likely to sell to an existing customer by at least three to one!

So, it makes perfect sense that focusing on reducing churn is vital since keeping your customers is profitable!

5 Ways to Reduce Churn

  1. Understand Why Churn Occurs – simply, why do your customers leave you? Really talk to them, ask them for feedback and listen with the intention of learning and improving things from what you have learnt.
  2. Engage with Customers Continuously – most customers who leave you do so because they feel ignored or not appreciated. Once you have acquired a customer it is just the start of the relationship and, like a good marriage, needs to be nurtured to last the unavoidable ups and downs.
  3. Know Who is at Risk – who are your customers who are most likely to leave you? What do you need to do to re-establish contact and re-engage the customer relationship?
  4. Know Who Your Most Valuable Customers Are – customers are not only valuable in terms of revenue and profit, they can also be important in other ways such as their lifetime value, strategic importance, as a source of referrals etcetera.
  5. Go the Extra Mile – look to provide stellar customer service every day, at every touchpoint, via everyone. Prove to them that you value them, and make sure you share with them what you have done for them.

So what else can you do to improve your customer retention rate, where will you focus your efforts, and what can you achieve as a result.  To download the Customer Churn Cheat Sheet click here.

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

Bring Your Customers on the Journey with You

How to make it easy for prospects and customers to buy…..

A customer journey map is a very simple idea: a diagram that illustrates the steps your customer(s) go through in engaging with your company, whether it be a product, an online experience, retail experience, or a service, or any combination. The more touch-points you have, the more complicated – but necessary – such a map becomes.

A customer journey map does three things for you and your customer:

  • It provides direction – customers understand where they are going and how they can get there. It paves the way for them and this makes it easier for them to buy.
  • It highlights decision-points – you can identify where the critical decision-making points are ahead of time. This allows you to architect the choices that the customer can choose from which will progress the sale and/or retain the customer and their engagement with you.
  • It helps you to understand where and why you might be losing customers both before and after the sale – this helps you to determine where this is happening, and what to do to address it.

A customer journey map takes many forms, but there is a common goal: to identify key interactions that a customer has with an organization. It showcases the user’s feelings, goals, questions, and pain points at each touchpoint. This helps bridge the gap to get more intimate with your customer. Each customer journey map should identify a customer persona and the activities within each stage.

6 Steps in Developing Your Customer Journey Map

  1. Identify who your customer persona is – what is the particular customer segment you are addressing. Different customer segments have different needs, this means that although they may be similar their customer journey will be different.

Who is the customer you are creating a customer journey map for?

  1. What are the customer’s personal goals – what are they looking to achieve, and what do they want to experience at each stage of their journey. You need to talk to or survey customers to find this out from the horse’s mouth.
  2. Map the Touchpoints – a touchpoint is any time a potential customer comes in contact with your business—before, during or after they purchase something from you.

You want to take every touchpoint into account so you don’t miss an interesting moment of intervention or opportunity to improve your persona’s experience with your company. This can seem overwhelming but here is a useful technique.

Put yourself in your persona’s shoes—or in this case—their trackpad. With your persona hat on, ask yourself the following questions:

  • Where do I go and how do I get there when I have [a problem your company solves]?
  • Where do I go and how do I get there when I discover the solution that will solve my problem?
  • Where do I go and how do I get there when I make my solution/purchase decision?
  • Where do I go and how do I get there when I need support or something else from the business after I make the purchase?

It would probably be easiest and most effective to ask these questions to current customers first.

  1. Look at the Big Picture – once you understand your persona’s goals and plot their touchpoints, it’s time to look at the big picture – the totality of their experience with your company. Good questions to ask here include”
  • Is my persona achieving their goal(s) on my website/offline?
  • Where are there points of friction and frustration? What is the impact of these?
  • Where are people dropping off? Why?
  • What is most important to them about their experiences?
  • What are they looking for from you beyond the actual product or service itself?
  • Which information were you looking for during each stage of your decision-making process?
  1. Prioritize – where’s the low-hanging fruit?

At this point, it’s time to prioritize where and how the flows are in the customer journey and how you can leverage and replicate them. Also look out for where the blockages and bottlenecks occur as these will stop your customers from progressing along the customer journey and this results in lost opportunities and lost customers.

  1. Visualize – to make this map easier to understand draw it out

Customer churn occurs when customers or subscribers stop doing business with a company or service It is normally described as the percentage of your total customers who have left you.

So, reducing your customer churn can help your improve your profit by addressing two elements:

  • Costs – the costs of acquiring new customers when is greater than those of retaining customers; and
  • Revenue – retained customers are more likely to buy again from you and spend more than new customers.

Together these combine to provide greater opportunities for improved profit via your retained customers than acquiring new customers.

Customer churn impedes growth.

For example, if you have a customer base of 1500 customers and you lose 300 customers, then you have a 20% churn rate.  If this continues then in five years you will have turned over your whole customer base. To grow you not only have to replace those lost customers, but you have to find additional customers on top of this.

The greater the level of churn the more customers you lose. Higher churn requires you to spend more time and effort in finding more customers. These new customers are more expensive to acquire and spend less as you do not enjoy the same level of trust and familiarity that you have with customers who have been with you for some time.

Monitoring Churn

So you should have a defined method for calculating customer churn in a given period of time. By being aware of and monitoring churn rate, you are better equipped to determine where and how to focus your efforts to retain customers, and to identify strategies for improvement.

A 2013 Bain & Co. study found that a 5% increase in customer retention rates had the potential to yield profit increases from 25% to 95%. So, don’t let customers’ issues eat into your bottom line: solve them swiftly and reap the benefits.

…and there’s more!

According to Gartner, a staggering 80% of a company’s future revenue will come from just 20% of its existing customers. Meanwhile, Marketing Metrics claims that the probability of selling to an existing customer is 60-70%, and only 5-20% to a new prospect. You are more likely to sell to an existing customer by at least three to one!

So, it makes perfect sense that focusing on reducing churn is vital since keeping your customers is profitable!

5 Ways to Reduce Churn

  1. Understand Why Churn Occurs – simply, why do your customers leave you? Really talk to them, ask them for feedback and listen with the intention of learning and improving things from what you have learnt.
  2. Engage with Customers Continuously – most customers who leave you do so because they feel ignored or not appreciated. Once you have acquired a customer it is just the start of the relationship and, like a good marriage, needs to be nurtured to last the unavoidable ups and downs.
  3. Know Who is at Risk – who are your customers who are most likely to leave you? What do you need to do to re-establish contact and re-engage the customer relationship?
  4. Know Who Your Most Valuable Customers Are – customers are not only valuable in terms of revenue and profit, they can also be important in other ways such as their lifetime value, strategic importance, as a source of referrals etcetera.
  5. Go the Extra Mile – look to provide stellar customer service every day, at every touchpoint, via everyone. Prove to them that you value them, and make sure you share with them what you have done for them.

So what else can you do to improve your customer retention rate, where will you focus your efforts, and what can you achieve as a result.  To download the Customer Churn Cheat Sheet click here.

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

5 Keys for Recovering from a Technology Failure

…how to accelerate your recovery and get results faster!

technologyBusinesses are increasingly reliant on technology to do large amounts of business-critical work; and when it goes wrong it can have a disastrous impact in terms of cost, time, people and effort. Not only have you ‘sunk’ considerable investments into something that has not delivered, but you now must recover from the situation and then play catch-up.

So, what can you do to accelerate this?

Five Tools for Accelerating Your Technology Recovery

  1. Do a Pre-Mortem

We are all familiar with post-mortems and forensic examinations from all the TV crime series. Post-mortems are good for telling you what went wrong, why it went wrong, and the consequences of things going wrong (death in this instance) – but it doesn’t change the fact that the individual is still dead.  It is case of being wise after the event, but being wise after the event doesn’t stop or prevent things happening.

Pre-mortems are different.  Pre-mortems are a great way to assess and think through a potential strategy or a negotiation. It is about being wise before the event.  Gather your team together and take them through the following exercise:

Andrew’s Five Steps in Carrying Out a Premortem

Step 1: Select a prospective strategy. Make sure you have a clear description of the strategic initiative.

Step 2: Set the scene.  You are a year in the future after you have implemented the strategy. Everything that could go wrong has gone wrong. To call it an unmitigated disaster would be kind. It is a total catastrophe and it has very serious consequences on the organization. People are not talking to each other. It has gone beyond being embarrassing. You know what has happened, but not why.

Step 3: Generate reasons for failure. Give everybody in the room three minutes to write down on post-it notes all the reasons why they think this strategic initiative failed. Do this without talking or discussing, this allows everyone to contribute their ideas and intuition. This allows you to capture and utilize the unique blend of experiences, mental models and insights that each person has.

Step 4: Share the reasons. Go around the group and get everybody, in turn, to share and explain one reason at a time.  Stick all the notes on the wall or whiteboard. As a group get them to group any common or shared reasons.  This helps you to identify the key reasons why the strategic initiative might fail.

Step 5: Reassess the strategic initiative. In the light of what has been uncovered, identify what will need to be changed about the strategy to improve it How will this impact other strategic initiatives, and what are the consequences? Remember, good strategy consists of strategic initiatives that interlink and leverage each other, they do not stand alone.

  1. Focus on the Outcomes

Where many people go wrong is they focus on the tasks they want done, not the outcomes they want to achieve.  Technology is a tool to help you achieve business results, don’t let it the project become driven by technology, that is a case of putting the cart in front of the horse. When looking at your outcomes ask these questions:

  • Are the outcomes suitable and realistic?
  • What are the risks and benefits associated with achieving or not achieving the various outcomes? How will they deliver real value to the business?
  • How do the various outcomes interact? Often outcomes can be at cross-purposes to each other. For example, a call centre having a key goal of improving customer satisfaction by having the same person manage the call from start to finish, but then also having a goal for people to handle a high volume of calls every day.
  1. Chunk It – Go for Simplicity

Technology projects can become very complex, and technology vendors often thrive on this as the perception is that the power in the relationship is with them as they have the technical expertise. Look to make it simple, this doesn’t make it easy but it provides clarity and focus. Break the project in to meaningful and manageable chunks by starting with the end result and working back to the present – this helps you to identify which chunk(s) to start with, and how they build on and leverage each other.

  1. Start with the End in Mind

A good approach is to start with the end in mind. Build a detailed picture of what you want the end-result from the technology implementation to look like. In doing this, don’t just focus on the technology but look at it in situ.  Consider the environment, the people involved, your senses. How will it look like, sound like, feel, touch or taste? Some of the questions you might ask could include: How will people be interacting with it? What will it mean for them? How will they feel and why?  What will the atmosphere be like when people use it? How will people be interacting with each other? How will they integrate this into their jobs, their roles, and personal growth? How will their job change and how will they feel about it?

  1. Build Alignment and Engagement

Technology in itself is of no value. A bit like a spade, technology has no use or value until someone picks it up and uses it. The benefit you have in using the spade is in how you use it, your desire to use it, and to do so in a way that helps the business achieve the outcomes it seeks. So how will you look to ensure your people want to use it, know how to use it, and do so in the way that drives alignment and results?

For technology to be effective you need people to be engaged with the technological adoption and implementation. For this you want people to commit, not to comply. Commitment comes from within and lasts in the long-term, compliance comes from external forces and as soon as they are removed then people revert to how they were behaving before – thus it only works in the short-run.

For people to engage themselves (because you can’t engage them, only they can do that), you need to ask them questions where they have to come up with an answer for themselves. For example, “How are you going to use this technology in your work?”  or “What do you need to do to manage the transition from the old way or working to the new way?” or “How can you improve the way you work?”  These questions help to create buy-in, commitment and engagement whilst getting people to align themselves with the business objectives. It also helps to leverage your change management plans.

Using these tools will help you to not only recover from a technology failure, but help you to accelerate your recovery and allow you to start future technological projects on a stronger, firmer foundation to deliver better results more quickly.

Share your thoughts and experiences.  What has worked for you? What tool are you going to try for yourself? Good luck and let me know how you go!

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

How to Find Your Best Clients

And it’s not necessarily those who spend the most….

The squeaky wheel is the one that gets the oil. We all know that. And the customers that complain are the ones we listen to, and with good cause. But when we do so we often forget to pay sufficient attention to our other customers. Because these “wheels” aren’t “squeaking” we don’t give them enough attention (or oil)!

So, if you don’t listen to your customers how do you know what they really think about you? And how does what they think translate into lost or gained dollars and business?

There is a simple question that you can ask. This is often called the Customer Loyalty Question, and it underpins the Net Promoter Score approach (developed by Bain & Co.) used by many businesses to gauge the loyalty of their customer base. The question is this:

“On a scale of 1 to 10, how likely would you be to recommend our company to a friend or colleague?”

Based on the response, you can classify your customers as:

Score Interpretation
0 – 6 Detractors: unhappy, potentially damaging your brand with negative word-of-mouth
7 – 8 Passives: satisfied but indifferent, could be lured away
9 – 10 Promoters: loyal customers who are also ripe for referrals

 

The value of doing this is that you can identify where and how your customers sit on the ‘loyalty continuum’, and you can determine what to do with your resources, where to focus them, and what to do with them when you do.

For example, for your detractors you could engage them in a conversation and ask them for ideas on what you could do to improve things; or it might be as simple as apologizing for a perceived or actual slight. By engaging with them and listening to them people feel validated, and they are likely to become somewhat warmer in their attitude and behaviour towards to you, and less likely to spread a negative word-of-mouth about you.

For your passives, you can ask them a similar question and thank them for being a customer. They feel wanted and respected, and you are building up a stronger and closer relationship with them – this moves them closer to becoming advocates for you.

For your advocates, share your appreciation, give them insights and ideas that make them feel special and even more engaged with. Ask them how they would share their experience of being a customer of yours with someone else, this helps them to actually do so when they have the opportunity. Or share with them ways that they can share their enthusiasm and passion with other advocates, and with other people who they feel would benefit from being a customer of yours.

Address all three of the areas – don’t just look after your advocates, don’t forget that the costs of replacing a lost customer are significant; that your advocates can bring in a lot of other new clients by acting as a ‘trusted sales force’; and your passives can be better retained against the poaching efforts of competitors.

To find out more about how you can use this question to retain more clients, improve customer spending and attract new customers click here to download the Customer Loyalty Cheat Sheet.

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

Using the Value-Price Seesaw to Make More Money

Price is what you pay, the value is what you get! – Warren Buffett

Are your prices too low? Are you not getting paid enough? Do your customers do not appreciate what you do for them?

Why is this? Whose fault is it? I can tell you the answer – and you probably won’t like it! If your prices are too low then it is your fault.  Yes, yours and no-one else’s. So, you need to do something about it!

I know this is not a “cool” thing to say, but let’s not waste time making excuses for ourselves or our lack of effective action.  You may be in a difficult and competitive market, but that does not mean you try to compete with everyone on price.  It is easy to find people who cave-in to external pressure, but there are plenty of companies out there who are doing a roaring trade in exactly the same environment. Don’t look for reasons not to act or to act half-heartedly, but look for reasons to act boldly and decisively.

The problems when you compete on price are multi-fold and include:

  1. You position yourself as a commodity – you become something that is easily replaced for something else or something similar. This just makes you part of the herd and you end up following the herd blindly.
  2. You lack leadership – if you are following others on their pricing then you are abdicating responsibility for your pricing, and you deserve everything you get. You may have competitors who price very low, but that does not mean that they are winning good business, that they are profitable or that the business is sustainable. Follow them and you could be one of the lemmings that follow them over the cliff!
  3. You are on a race to the bottom – as a commodity, all that distinguished you from your competition is your price. Everything else, in the perception of the customer (and that is what matters) is the same or irrelevant. Competing on price works in a downward spiral, and it is a race to the bottom where the bodies of all those who have not survived await you.

So how do you get over the problem of competing on price? The answer is don’t compete on price!

Creating Value

Value is what your customer will pay you for that they value (not what you think your customer will value). What customers value are those things that you do for them, not what you do. That is those things within your offering which address their pains and helps them achieve the gains they seek.

What you want to do is create lots and lots of value. In short, there is a clear relationship between the price you can realize and the value you create for your customer. This is shown in the Value-Price Seesaw DiagramTM

 

 

 

 

 

 

 

Figure 1: The Price-Value SeesawTM

From this diagram you can see there is a clear and simple relationship between price and value. Low value will result in your only being able to achieve a low price. To quote, “Price is only an issue when there is an absence of value”.

If you want to charge a high price then you need to stack on the value as much as you can to push the seesaw in the right direction. Stack it up with as much value as you can, and then add more. Remember, value is perceived by the customer. So, make sure what you do for your customer is addressing their needs in a strong manner and that they perceive you are doing this, this way you position yourself strongly and you also differentiate yourself.

Creating high value separates you from the herd and makes you more visible and attractive to existing and prospective customers. It makes it easier for them to choose you, and harder for your competitors to take customers from you.

What is of value for you from this article?  What is the one action you will take, today, as a result of this to address your pricing?

If you would be interested in a 15-minute Pricing Improvement Strategy Session to identify your 3 key actions to address then click here, or if you would like a copy of the free  Pricing Improvement Cheat Sheet then email me at andrew.cooke@business-gps.com.au with “Pricing Improvement Strategy Session” or “Pricing Improvement Cheat Sheet” in the subject line and I’ll send you the details by return.

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

The Power of Words

How you say what you say can make you more powerful!

How you say what you say matters! It matters in two ways: firstly, it reflects how you perceive things and yourself; and secondly, it affects how others perceive you!

If you sometimes feel that you are not expressing yourself strongly enough, or are not coming across in the way that you intend, then let me share a few tips which you can use – right now – for yourself! If you want to be more persuasive, influential and assertive when communicating with others then read on!

When you assess or discuss a situation the first question you are likely to ask is, “What will I/we do if it goes wrong?” Instead of that ask, “What will do when it goes right?” Or you may ask “What if he/she says no?” Instead as “What if he/she says yes?”

Can you hear and feel the differences between the two questions? Changing the language, results in your changing your approach – so use what you say to lead how you think. Once you change how you think you change how you act, and when you change how you act you change the results you get and the opportunities you create!

Now imagine you are an outsider who is listening to what you are saying. Remember, they can only infer things about you from what you say and what you do. Don’t fall into the trap of assuming some form of magical osmosis occurs where they intuitively understand what you are trying to say and what you intend.

As an outsider, how would you “hear” the difference between the two questions? What kind of attributes and insights might it evoke within you? What are the differences? And what is the impact of these differences? There is a significant and powerful difference.

Words have power. So be powerful and use the right words!

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

Busy-ness and Productivity

We are all working in an environment where we are expected to do more, with less, more quickly. So, we look to work faster and quicker in what we do. But this has led to a problem.

The problem is this.

Busy-ness = Good

From this the belief has developed that the busier we are the better. This is wrong and leads to two key problems – people feel over-whelmed and over-scheduled. When this happens to you, or your staff, how do you feel? And what are the consequences? Not good!

Being busy does not make you productive. So, what does make you productive?

Here are 3 guidelines to be more productive:

  1. Know the results and outcomes you are looking to achieve – start with the end in mind, and allow this to guide how you spend your time, effort and resources and on what.
  2. Establish clear KPIs – have a few key performance indicators (KPIs) that allow you to measure how well you are progressing (or not). This allows you to track how you have performed to what you have achieved.
  3. Review and revise regularly – look at what you have achieved and determine what you need to do in order to realize the results and outcomes you seek.

Being busy does not make you more productive, it distracts you. Use these three guidelines to help you and your teams become less busy and more productive!

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.