Churn, Churn, Churn

Have you ever tried running into the wind? Or filling a bucket with water, only to find that there were a few holes in the bottom? That’s the experience of churn, and it’s one of the most challenging and frustrating problem that marketers face. And although there may not be any easy answers, there may be a better way to go about trying to solve the problem using available data.

Provided, of course, you’re willing to look at it.

Learn From the Small

Simply put, churn is the rate at which your current customers are leaving your brand or company versus the rate at which new customers are coming in. If each month you lose 10 customers and gain only 5, you have the problem of a diminishing customer base. If instead you get 10 new customers and lose 5, you have the problem of hampered growth. If you get 10 and lose 10, you have the problem of stasis; you’re running to stand still.

The heart of the churn problem, really, is cost. The rule of thumb is that it costs 10 times more to get a new customer than to retain a current one. I don’t know if that’s true, but it certainly is easier, and better business, to try to keep the customers you’ve got. Even from a purely marketing mindset, keeping customers is a good idea. No matter what industry you are in, recommendations from current customers are probably the number one driver of sales for your product. Those recommendations come from happy, current customers.

A recent CMO Council report put a concise point on the churn problem: marketers tend not to have much of an idea of who their customers are. This is hardly a new condition. The wealth of data that’s available about a customer, from research and shopping patterns, often doesn’t get integrated and is only reviewed by teams in the beginning of a project as a way to get familiar with the customer.

There is, however, a small percentage of online marketers who buck this trend, and they tend to be the small guys. Small companies, often with under $1 million in sales frequently are absolute masters of their customers, and as such are really good at keeping their current customers.

There are two main reasons for small business success with customer retention. The first simply has to do with the company’s culture. When a company is small, customers will often deal directly with the founders or even the owners. Even if they never have an actual interaction with these people, there’s a distinct level of personal connection the company has with the customers, so service tends to be better and more genuine.

The second is that small businesses have made incredible use of the tools online publishers have offered them, at little to no cost. Publishers like Google and Yahoo offer online merchants sophisticated analytics packages that can tie directly into search engine and other marketing campaigns. Small businesses are hungry for knowledge, and they clearly make use of data availability.

Find the Churn

The availability of data from online sources can give companies of all sizes the chance to better know their customers and find and reduce churn. There’s no single solution for churn, and there’s no single data source that will tell you why it’s happening, but here are a few places you can start to look:

  • E-commerce. If you are on online retailer, churn is a real issue for you, assuming that you’re not in a category that people buy in just once (e.g., cars). But if you are selling books, music, clothing, electronics, or any of the other big e-commerce categories, you want to make sure the people who buy once keep buying. Most likely, you are tracking average value for each customer, how often they buy, and at what price points. But you also need to track average satisfaction and how it correlates to purchase frequency. Make sure you have some kind of purchase follow-up in place, even just an e-mail asking if the package arrived OK and that they got what they wanted. Either put something in place, or, if you have something, include the level of satisfaction in the consumer’s record in your database.
  • Site traffic. Churn isn’t limited to those who sell. If you’re running a content site, be it a blog or full-blown online content provider, you must be aware of the number of new and returning readers you have. If you have a growing audience, you’re in a good position to grab advertising dollars. Pay close attention to the traffic patterns, and try to extract some groupings of visitors. Often, you’ll find a group that comes to the home page but never dives any deeper into the content. That’s the most vulnerable group. Think about ways to address these readers directly, to see why they aren’t finding anything of interest to click on.
  • Surveys and research. If you want to know something, just ask. Send out surveys, call consumers on the phone, make sure your call center is set up to capture issues into a database. All of that will give you a very clear, very actionable vision of your customers. Yes, you should understand them as people and know their deep needs and motivations. But that’s step two. Step one must be why they are buying and the reasons they may not buy in the future.

Invest in Churn

Churn should be a top priority for any marketer. Most campaigns and most efforts focus on gaining new customers. Churn isn’t that exciting, but getting it under control may just give you the steady stream of revenue you need to really start experimenting and searching for growth.

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Overhead view of a row of four business people interviewing a young male applicant.