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Customer churn is a growing problem for companies in all industries. Accenture examines the issues in depth and proposes a customer retention model that builds on the experience of leaders in this field.
Customers demand competitive pricing, value for money and, above all, high-quality service. They are more prepared than ever to switch providers when they don’t get what they want and, thanks to social media, individual switching decisions can have rapid and widespread consequences.
Accenture 2010 Global Consumer Research exposes the scale of the challenge: two in three customers have changed providers in the past year in at least one of the industries covered in the research because of dissatisfaction with service levels.
While the rate of switching varies by industry, customer churn is clearly a cause for concern because the cost of acquisition is always significantly higher than the cost of retention. The research suggests that companies with large and diverse customer bases are struggling to retain customers—yet few understand why customers leave, or what to do about it.
Many organizations lack the tools to identify the drivers of churn.
Few organizations are masters of retention marketing.
Loyalty programs are often inconsistently executed and frontline employees are frequently misaligned with overall retention goals.
Many companies lack cohesion across their customer interaction channels.
The upshot is unhappy customers who too often suffer the consequences of organizational processes optimized to deliver operational efficiencies instead of positive customer experiences; poorly executed product or service launches; erratic or conflicting experiences across multiple channels; and inadequately trained and equipped employees.
A few companies are winning the battle for customer share, gaining an advantage in the race to achieve high performance. The secret of their success? Combining a top-down, enterprise-wide retention strategy with sophisticated analytics that allow them to “micro-segment” their customers.
In many markets, growing the customer base has been all about the acquisition of new customers and retention marketing has typically come a distant second in terms of senior management attention and resource allocation. To reverse this legacy mindset and manage customer attrition effectively, organizations need to adhere to three fundamental principles:
Based on these principles, organizations can build an effective operating model to manage churn. Such a model needs to take an end-to-end approach, with a centralized Churn Command Center that spans organizational boundaries and centralizes churn decisions. Retention strategies need to be based on customer value and profitability, which means that analytics plays an important role.
In addition, effective retention marketing should focus on three key outcomes: speed to market, maximizing campaign return while minimizing risk and operational reporting of key metrics.
Finally, for better customer retention, organizations must improve their specific retention interactions (proactive or reactive), and the customer interactions associated with life cycle events such as the initial period, change of life, or when a customer is nearing the end of a contract.
Accenture has extensive experience in helping clients develop effective customer retention strategies.
September 27, 2011
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