Customer Churn is defined as the rate at which a company loses its customers. The main reasons for it could be poor quality of a product/service, lack of brand loyalty, and lack of ongoing customer success. The lower the churn rate the better is it for a company to keep its customer acquisition costs at bay and focus more on keeping its existing customers happy.
However, it has been quite difficult for enterprise marketers to reduce the churn rate in the new decade. With both consumers and businesses following a digital-first approach, marketers are forced to come up with innovative strategies that can help them tackle customer attrition or churn.
Why is Customer Churn Important
Customer Churn gives marketers a sense of how their product or service is performing. It explains if the existing customers are happy with their offering or not. If they are happy, then they can try to sell more addon features to them and generate more revenue. If they aren’t happy, then marketers need to get their feedback to understand what worked and what didn’t and how it can be improved.
As per a Gartner research report, a company can generate 80% of its future revenue from just 20% of its customers. This is a staggering percentage. Another report from Harvard Business School claimed that the profit percentage of a company can be increased from 25 to 95% just by increasing its customer retention rate by 5%. And 65% of its business comes from its existing customers. These numbers prove that retaining customers and reducing churn is a top priority for enterprise marketers.
Reducing Customer Churn with a Customer Data Platform
A Customer Data Platform (CDP) is a SaaS-based martech tool that enables enterprise marketers to aggregate and unify customer data from disparate data sources. By doing this, marketers get a complete view of a customer’s journey with their brand. This includes all details such as their transaction history, website and mobile app behavioral details, buying propensity, channel propensity, interaction history, etc.
The advantage of knowing all these details is that the marketer can understand each individual customer intimately. This enables them to do the following:
1. Get a firm grasp of a customer’s needs, wants, and preferences. As a result, they can 1:1 craft personalized journeys that are contextually relevant for each customer. This helps in keeping customers loyal to a brand and also increasing their engagement and conversions.
2. Identify customers who are not happy with a company’s products or services. These are the customers who need special attention as they are likely to jump to another brand. A company can reduce 90% of its churn if it can properly identify such at-risk customers.
3. Deliver next best experiences that result in increased cross-sells and up-sells and thereby boosting engagement and revenue. A customer who receives the next best personalized offer/recommendation is more likely to spend more time on the website or mobile app researching about the offer.
4. Using AI-powered algorithms, marketers can utilize the CDP to intelligently segment customers into various churn buckets and orchestrate the right personalized message at the right time and on the right channel. They can also help in predictive analytics wherein a customer’s future behavior can be predicted and personalized offers can be crafted on the basis of their predicted behavior.
As per Forrester, the cost involved in acquiring new customers is five times more than it does to keep existing customers. Another report from Marketing Metrics claims that the probability of selling to a new prospect is only 5 to 20%. Whereas for an existing customer, it is 60 to 70%. Therefore, a data-driven personalization strategy can reap huge rewards with respect to reducing churn and increasing customer retention. And the best tool with which enterprise marketers can do this is using a Customer Data Platform.
To know more about how a CDP can help in reducing customer churn for your company, do connect with us here.
By Bijoy K.B | Senior Marketing Manager at Lemnisk