Customer Churn

Techniques for Fighting Churn

Graphics courtesy of PredicaOpens in new window

Before you can fight churn with data, you need to prepare the data. Knowledge is going to be your weapon in the fight against churn. Described below are five data that work together as techniques to reduce churn.

1. Churn measurement — Uses subscription data to identify churns and create churn metrics. The churn rate is an example of a churn metric. The subscription databases also allows identification of customers who churned and who renewed and exactly when they did; this data is needed for further analysis.
2. Behavioral measurement — Uses the event data warehouse to be interpreted.
3. Churn analysis — Uses behavioral metrics for identified churns and renewals. The churn analysis identifies which subscriber behaviors are predictive of renewal and which are predictive of churn and create a churn risk prediction for every subscriber.
   
   
   At this stage, sources of information in addition to the subscriber database and event data warehouse can also be brought into the analysis. These include demographic information about customers or users who are individual consumers (age, education, etc.) and firmographi information about subscribers that are business (industry, number of employees, etc.).
4. Segmentation— Based on their characteristics and risks, divides customers into groups or segments that combine aspects of their risk level, their behaviors, and any other significant characteristics. These segments target customers for interventions designed to maximize subscriber lifetime and engagement with the service.

5. Intervention — Using the insights and subscriber segmentation rules derived from the churn analysis, plans and executes churn-reducing interventions, including email marketing, call campaigns, and training. Another long-term intervention makes changes to the product or service, and the information from the churn analysis is useful for this too.

Interventions that Reduce Churn

Companies use five main strategies to reduce churn. These are briefly discussed below.

1. Product improvement — Product managers and engineers (for software) and producers, talent, and other content creators (for media) reduce churn by changing product features or content, which improves the utility or enjoyment that customers receive.
   
   
   This can include adding new features and content or repackaging to ensure that users find the best parts of the product or service. This is the primary, most direct method of reducing churn.
   
   Another (software) method is to increase stickiness, which roughly means modifying the product to increase the cost for a customer to switch to an alternative. Switching cost is increased by providing valuable features that are hard to reproduce or difficult to transfer from one system to another.

2. Engagement campaign — Marketers reduce churn with mass communication that direct subscribers to the most popular content and features. This is more of an educational function for marketing than a traditional type of marketing. Remember, subscribers already have access and know what the service is like, so promises won’t help. Still, marketers often use this function because they are skilled in crafting effective mass communications.
3. One-on-one customer interactions — Customer success and support representatives prevent churn by making sure customers adopt the product and helping them if they can’t. Whereas Customer Support is the department that traditionally helps customers, Customer Success is a new, separate function in many organizations: it’s explicitly designed to be more proactive.
   
   
   Customer SupportOpens in new window helps customers when the customers ask for help; Customer SuccessOpens in new window tries to detect customers who need help and reach out to them before they ask for it. Customer Success is also responsible for onboarding customers and making sure they do everything necessary to take advantage of the product.
4. Rightsizing pricing — The Sales department (if there is one) may be the last resort in stopping churn, assuming the service is not free. Account managers can reduce the price or change subscription terms, managing the process through which a customer can down-sell to a less expensive version.

• For consumer products without a Sales department, Customer Support representatives who have similar authority usually take on this role. A more proactive approach is to right-size sales in the first place: do a better job of selling the product version that is optimal for the customer rather than selling the most expensive version possible. This can hurt short-term gains from each sale; but if done correctly, it reduces churn and ultimately improves the lifetime value of the customerOpens in new window.

5. Targeting acquisitions — Different channels where you acquire customers may produce customers with different retention and churn quality. If that’s the case, it makes sense to focus on the best channels.
   
   
   Rather than trying to keep the customers you have longer, you try to find better customers to replace them. This the least direct method to reduce churn and is limited because most products cannot get unlimited customers from their preferred channels. Still, it is an important tool, and you should take advantage of it if you can.

All of these methods are most effective when they are data driven, meaning your organization picks the targets and tailors the tactics based on the correct reading of available data. Being data driven does not require that you have a certain amount or type of data or a particular technology. Being data driven when fighting churn means designing product changes, customer intervention, and acquisition strategies based on a sound reading of available data.

One thing to note: interventions and service modifications are the final crucial step to achieving the goal of lower churn and longer retention. How to execute interventions is beyond the scope of this literature, however. Unlike data analysis techniques, interventions to influence subscriber behavior are generally specific to the type of subscription service. There is no one-size-fits-all intervention. Also, in general, people other than the data person make those interventions (product designers or marketers, for example).

The circumstances that shape interventions include not only the particular features of the product or content but also the technology and resources available for making the interventions.