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4 Lessons on Customer Churn

Roy Bendor Cohen
March 9, 2021
“We don’t know why customers are leaving us, and this is becoming a strategic problem that threatens our existence as a business.”

These were the words of the CEO and Co-Founder of a growing start-up providing energy solutions in emerging markets. Two days later, I caught a flight to embark on a two-week journey to Abuja and Lagos, Nigeria to help find answers to his threatening problem.

As a result of our work, the company experienced a 13% increase in their ARPU (Average Revenue Per User). And, along the way, we learned important messages about retention, customer churn and customer experience that I’m excited to share as their universality can prove useful to many businesses.

#1 Valuable insights often come from overlooked sources of information

Interviewing people from within the company is great to get some background information on the situation. Their intuition serves an important starting point. However, to extract valuable insights - you need to get much closer to the source, meaning, customers themselves and the personnel who interact with them directly (call center agents, technicians, churn agents, etc.). These people are the only ones who can provide you with information that is specific, concrete and relevant enough (often in the form of stories and anecdotes) to serve as raw material for future insights.

#2 There's more than meets the eye

Questioning common knowledge is essential. Employees in the company are expected to know what’s happening. This means that they won’t admit if they don’t know something, so they will always come up with explanations. In our example, customer service managers continuously attributed one of the drivers of churn to the “seasonality” of the product’s usage. However, explanations such as seasonality are dangerous because they are only partially true. The risk lies in the parts unknown. Those that I spoke to were missing the hidden aspects of the challenge that could only be discovered through deep inquiry. By deep inquiry, I don’t mean just talking to your customers. Interviews are useful but seldom enough to get a broad picture. Subjective reports are prone to different biases, so get a better understanding you need to tap into people’s actions which are often implicit. Going deeper means performing observations (beyond interviews) and analyzing usage data, for example.

#3 It’s not (just) about the product; it’s (also) about the experience

Since the product was new in the market, customers were experiencing technical issues. But, these issues were not solely the reason for churn (it was a trigger, but not the cause).

In fact, one somewhat counterintuitive finding was that customers who had a technical problem that resulted in a system replacement were actually less likely to churn. You’d think they’d be the most likely to give up and request a refund. But, the personal attention they received and the customer care in replacing the unit restored their trust in the system.

Furthermore, training loyal customers to become ambassadors and serve as their community’s customer support point of contact made all the difference. The approach of meeting customers’ cultural behavior and moving beyond the product was a game changer. This shows that even when there is a faulty product or undeniable issue, insights that answer “why” rather than just “what” can pave a way to the solution.  

#4 Trust is the name of the game

This sounds trivial, right? Still, most of the causes that we identified for churn (with different research methods, from different sources) can be attributed to issues of trust. For me, this was fascinating. Why? Because our initial leading hypothesis was with regard to customers’ perception of product’s capabilities; and therefore, no where close to trust.

Tying it all back to trust, we found that:

  • A customer whose system was entirely replaced was less likely to churn (likely because they received personal attention),
  • A massive opt-out happened after the company raised prices (people couldn’t trust the pricing model),
  • Customers who needed support would first rely on the people they trust the most (friends, family, neighbors),
  • And when we implemented the solution of training ambassadors in each community to build this level of trust, the solution worked.

The Bottom Line

Any business leader knows what it’s like to face customer churn and desperately seek solutions to reverse such a reality. Through behavioral insights, we are able to dive deeply into a company’s internal controls and the external factors that impact churn and overall customer experience to boost retention.

Ask us anything.
We’re in the business of finding answers!

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