Depending on which study you believe, and what industry you’re in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one.
Not my words. I’m quoting Amy Gallo from Harvard Busines Review, October 29, 2014.
As we already knew, keeping customers is important and valuable.
You can estimate the value as follows:
This is the annual cost to your organisation of replacing lost customers. In addition, you would have lost the Sales income from those customers.
Step 1 is to address the reasons why customers leave. You may know why your customers leave, but if not, you can look at the industry norms.
There are numerous studies to examine why customers leave. One such study by the Rockefeller Corporation produced the graph below.
Most of the time, customers leave because they believe your company, as represented by your front-line staff, don’t care about them. You’ve got to make your customers feel cared about. The best way to do that is to get your front-line staff to genuinely care about them.
You may need to invest more in your front-line staff to ensure they feel valued. Invest in additional training or development sessions to ensure they grasp the fundamentals of their role and consider what additional skills might empower them and increase their engagement. Only when staff feel connected and valued by your company will they genuinely care about your customers.
Step 2 is to equip your staff with tools to help them care for customers effectively. This is where a Customer Relationship Management (CRM) system can help.
CRM systems can help meet many business goals, but they are particularly good at helping with customer retention and the directly related goal of customer satisfaction.
In early 2015, Capterra surveyed 500 businesses to compare their CRM usage. They found that CRM software had the biggest impact on customer retention rates and customer satisfaction rates.
The graph below is extracted from the Capterra report:
The CRM system needs to be configured to help with customer retention and customer satisfaction. The system must fit with your overall strategy and processes. Remember, CRM is a toolset; it’s your people and processes using the tools that will make a difference.
Some ways CRM can help are as follows:
How to Identify Customers at risk of Churn
Prediction of customer churn allows you to take preventative measures.
One way is to set a statistical data analyst loose on your data and develop a model to predict the probability that a giving customer will churn based on the known data such as number of service calls, price compared with average price, last contact date, etc. This model can be verified and then programmed in to your CRM system to predict probability of churn. Of course, the model will need to be updated regularly. This method is laborious and expensive and not many organisations do it.
An alternative method is to utilise the new prediction capabilities available with Dynamics 365 Online. Customer Insights allows for prediction of events by simple configuration of the system.
See how it works here.
Losing customers is expensive but customer churn can be managed. Customers mostly leave because they believe you don’t care about them. To retain customers, your front-line staff need to genuinely care. A CRM system enables staff to care more effectively and can now deliver predictions of which customers are likely to churn so remedial action can be taken to retain them.