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.

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.

Build Your Tribe

Do you want to get more clients?

Are you finding it hard? Are you meeting lots of people and generating lots of leads through your online and offline networks? Are you meeting with people who are expressing an interest in what you do? And are you then finding that very few of them are converting, and those that do are taking a long time to do so?

If so, the fault is not with them – it is with you!

Don’t try to appeal to a massive audience and hope that a few will fall out when you need them, it won’t provide you with a sustainable and growing business.

Much better to build a tribe.

Know who the people you want to attract, the ones that share your beliefs, ideas and perspectives. These are the ones who “get” you, and are already on the same journey as you.

So be clear on what you stand for, and what you don’t, and make your messages strong, clear and appealing to those who want to stand along you. Make them part of your tribe!

What are you going to do to build your tribe and your business? Tell me in the comments section below.

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.

6 Reasons Why to Emotionally Connect with Your Customers

Here are six reasons why you want your customers to connect with you emotionally. Logic may make people think, but emotions make them act! Even more, emotions underpin good, strong relationships which are essential for good, lasting business.

Reasons Which Means….
1.    They buy more You make more money
2.    They visit you more often You have more repeat business
3.    They care less about price You make better margins and profit
4.    They pay more attention to you You have more raving fans
5.    They follow your advice more closely You are seen as a thought-leader
6.    They spread the word about you to more people You have customers who act as your salesforce!

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 Ways to Build Emotional Connection with your Customers

 

If you want to reap the benefits of having a strong emotional connection with your customers here are the feelings you need to generate in them, and the questions you can ask to help you do this.

Generate the following feelings in your customers: Do this by asking the following questions:
1.    Stand out from the crowd ·         How do they want to feel in being special and apart from others?

·         How will you help them achieve this?

2.    Have a sense of belonging ·         How will you build their sense of “tribe” and relatedness to you and your offerings?
3.    Have confidence in the future ·         What do they want to feel confident about?

·         What is important for them in the future?

·         How will you provide this for them via your offerings?

4.    Feel a sense of security ·         What is the sense of security they are seeking and why?

·         How will it manifest itself for them?

·         How will you provide it for them?

5.    Are successful ·         What will make them feel more successful and what does success mean to them?

·         How will make them feel more successful?

Try this for each of your customer segments. Remember, try to get in and understand from their perspective and not yours. Write down your thoughts, share them with others – and see how it compares with your customers actually think!

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.

Better Customers – How to Find Gold Mines & Avoid Land Mines

How to ask customers for feedback to build better relationships and drive sales

Too often businesses adopt pessimistic mindsets when using customer surveys, with the surveys being focused on problems and what has gone wrong – your “land mines”. This is so the business can identify what has gone wrong, focus on what can be improved (or avoided), and allow customers to vent. However, this does not help businesses to build a long-term, positive relationship with customers as it focuses on the negative.

Rather, think about using your customer surveys as opportunities to not only listen to your customers, but to subtly influence your customers’ perceptions.  So how can you do this?

Instead of asking people what has gone wrong, ask them what has gone right – your “gold mines”. For example, asking a compliment question such as “What went well during your visit?” or “What did you enjoy about the purchase experience?” creates tangible benefits for the business. Research has shown that when businesses do this several things happen:

  1. Customers who are surveyed using a compliment question are more likely to spend more in the following year than customers who are surveyed without a compliment question.
  2. Satisfaction measures are increased.
  3. Being asked to give positive feedback boosted spending even among customers who reported having had poor experiences.

Why is this?

There are two key reasons. Firstly, memory is malleable, so asking customers to recount positive experiences may make the memories of those experiences more salient and accessible in the future, enhancing customers’ overall perceptions.  Secondly, people tend to compliment what they like and to like what they compliment – so if a customer answers positively they will also be likely to act in a way that reflects this so that they are self-consistent in how they think and act.

This is not to say that you should use this to try to manipulate people. You can only affect how they perceive things in the short-run, but you cannot change the reality. However, this approach helps you to just focus on your “land mines” (your weaknesses), but to focus on your “gold mines” (your strengths). What customer questions will you use and how will you use them with your customers?

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 Make It Easier to Retain & Attract Customers

How to make it easier to retain and attract customers

In the world of accelerating change and increasing competition, how can you keep existing customers, and attract new ones?

Clearly, your value proposition needs to be relevant and superior compared to those of your competitors or potential substitute offerings. However, just because your value proposition has attracted customers, it does not mean it will continue to do so in a changing world.

You need to help your customers to continue to choose you over anyone or anything else. To do this you want to make it easy for them to have to choose between your offering and that of someone else. And this is where the cumulative advantage comes into play.

Competitive Advantage

When businesses create and use competitive advantage they pick a position, target a set of consumers, and configure activities to serve them better. The goal is to make customers repeat their purchases by matching the value proposition to their needs. By doing this the business is uniquely different and suitable for its target customers, allowing it to see off competitors and achieve sustainable competitive advantage.

But in a changing world, this is difficult to maintain as customer needs, competition and potential substitutes change quickly. With people having to make so many decisions and to distinguish between so many competing choices, it is important to make it easy for your customers to choose you.  This is where the cumulative advantage comes to effect.

Cumulative Advantage 

Cumulative advantage is the layer that a company builds on its initial competitive advantage by making its product or service an ever more instinctively comfortable choice for the customer.

Cumulative advantage is about creating process fluency – this term used by psychologists refers to how we make decisions, often filling in the gaps on the basis of our past experience – think of the thoughts, opinions, and preferences that come to mind quickly and without reflection but are strong enough to act on.

Our brains like to work automatically and find it easier to work with that which is familiar (just think of the times you have driven to work but have no or little recall of the drive itself). So once you have bought something you have experience on which to draw and which, automatically, your brain can draw on and fill in the gaps. The more you repeat this, the greater the experience, the easier the purchase decision and the greater the willingness to act on it. It is a bit like walking from your home across a field to get to a stile on the other side.  As you do this again and again, so the path becomes more well-established and broader making it easier to take each time.  This reflects what happens in our brains and in the neural pathways, we create and strengthen every time we make the same decision.

So what we need to do is to convert our offering and value proposition from a decision into a habit. In doing this here are four rules you can use:

  1. Become popular early – gain market share early. This requires more people to buy your offering and to do on a repetitive basis.  This creates a relevant experience which people can draw on which makes it easier to make future decisions to buy again. Also, with many people buying you’re offering your create social legitimacy – people perceive your offering as less risky and more acceptable if others are also using it.
  2. Design for habit – design your offering so that it is easy for others to choose it.  Facebook is a good example of this where people continually check for updates on their Facebook account, this is also compounded by the huge network effects that Facebook enjoys. At the same time, this also creates a strong barrier to stop people switching from Facebook.
  3. Innovate inside the brand – this allows you to continue to leverage the brand equity you have built up; at the same time you need to introduce changes in technology or other features that allow the new version of a product or service to retain the cumulative advantage of the old.
  4. Keep communication simple – the mind is lazy. It doesn’t want to ramp up attention to absorb a complex message. This helps to make decisions and choices easier.

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 Paradox of the Familiar and the New

Customers are a fickle lot. You produce what your research tells you will sell, and you end up with a lemon, or it fails to produce the results you seek. Why is this?

If customers are going to buy a new offering it has to appeal to them, not just in terms of the needs it satisfies, but in how it gets over the initial barrier of being attractive to them.

Customers are torn between a curiosity about new things and a fear of anything too new. So people tend to be attracted to offerings that are bold, but instantly comprehensible. Raymond Loewy, the industrial designer, who came up with this idea called it MAYA – ““Most Advanced Yet Acceptable”. He said to sell something surprising, make it familiar; and to sell something familiar, make it surprising.

Think of Apple and the iPad.  The technology was not new – it combined different technologies in a clever way, but what made it stand out was its design and the user experience that it created for the iPad’s users.

People like what is familiar, but if they are over-exposed to it then it becomes overfamiliar and they tire of it.  How many times could you listen to your favorite song before you get tired of it, or stop listening properly to it? It is probably fewer than you think. Similarly, although people may like surprises if the surprise is too much then it becomes counter-productive.

To get the best of both worlds – that which is familiar to people, and that which represents a surprise – requires a balance. The power of familiarity seems to be strongest when a person isn’t expecting it; and a surprise seems to work best when it contains some element of familiarity. This has been described as having a level of “optimal newness”.

Internet companies provide a good example of this where many new ideas are promoted as a fresh spin on familiar successes..  For example, Airbnb was once called “eBay for homes.”; Uber was described as “Airbnb for cars”; and with Uber’s success may start-ups have begun describing themselves as “Uber for [anything].” In the movies, the film “Alien” eventually found the financial backing it required when it described the plot as “Jaws in space” – the film and plot of “Jaws” being very familiar, and the locating the story in space providing the surprise.

So when you look to bring new offerings to market ask yourself these three questions:

  1. How will I make it familiar?
  2. How will I make it surprising:
  3. How will I make it familiar when a person least expects it, and make it surprising yet still somewhat familiar?

Answering these questions will help you generate ideas and approaches to try with your customers and make your new offerings more successful.

What is your key takeaway from this?

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.

3 Reasons Why the Customer is NOT Always Right!

3 reasons why the customer is not always right

One of the oldest adages for customer experience and customer service is “The customer is always right!”.

Sorry, I don’t hold with that. Why? People assume that it is better to keep a customer rather than alienate a customer. But often this is not the best decision to make.

I want to distinguish between two types of customers – those who buy products and those who buy services.  There is a key difference between them – products are fixed and tangible; services are experiential.  In short, products are about hand-offs and hand-overs, and services are about handshakes. Be clear on what you are dealing with – the product or the service.

So when is the customer NOT right? Simply put, there are three times.

Firstly, when the customer is not a customer. Just because someone has bought from you does not mean that they are a suitable customer, or that they are someone you want to have and keep as a customer. Think of a time you had the “customer from hell” where the cost, stress and effort involved in servicing the client was not worthwhile. What did you do? Keep them and continue to suffer or let them go?

Secondly, when the customer is wrong. Yes, they are human and fallible and prone to making mistakes just as often as you and I. Just because they believe they are right does not mean that they are right. Think of a time when you believed you were right, but when you considered the situation further you found that you were wrong. Caving-in to a customer just because they think they are right does damage in two ways – the customer is kept uninformed and unaware of the risks/costs they are incurring; and you are doing the wrong thing by the customer, it may be a difficult conversation but you need to act in the customer’s best interests and educate them.

Finally, when you are right. You should be an expert and experienced in regards what you are selling to your customers – whether products or services – and you should be able to distinguish between when you are right or not. Just because a client is more vocal or aggressive in what they are saying or claiming does not diminish you or your expertise. Be assertive and calmly state the position whilst staying focused on the issue and not the individual.

So what are you going to do when the customer is not right, and how will you handle the situation? Share here the one action you will take, right now, to address this.

To find out more about how to attract the right prospects, convert them into great customers and deliver great results for you and your clients in building a sustainable business please 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.