Reduce Churn and Improve Customer Loyalty


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Solving business problems using mekko graphics: This presentation shows you how to improve customer loyalty by identifying reasons for churn and ways to reduce them

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Reduce Churn and Improve Customer Loyalty

  1. 1. Improve Customer Loyalty and Reduce ChurnMekko Graphics Solutions
  2. 2. Improve Customer Loyalty and ReduceChurnResearch has repeatedly shown that existing customers spend more,purchase higher margin products and services, and are more likely torefer additional customers.1So, how do you avoid the high price of constantly replacing existingcustomers with new ones? Knowing the reasons why your customersare leaving you or spending less with you can help you to respond toissues and retain more customers.Using Mekko Graphics you can examine revenue churn and determinethe cause for controllable churn. Here is how…1. Gartner, 2004: “Replace Customer Churn Predictions With Retention Analysis”
  3. 3. Improve Customer Loyalty and ReduceChurnBegin with AnalysisDraw ConclusionsIdentify Areas for Improvement
  4. 4. Customer ChurnRevenue Churn Analysis (2009-10)-200-1000100200$300MMNew CustomersIncreasersDecreasersLost Customers$255MM-$127MM2009-10RevenueChange($MM)0200400600800$1,000MM2009$853MM2010$981MMTotalRevenue($MM)15%GrowthTotal Company Revenue (2009-10)2009-10 Revenue ChurnChurn = 15%Net = $128MM• When examining revenue growth, it is important to understand the undercurrent of revenue churn• Revenue churn is defined as the customer accounts that either decreased or were lost divided by the prior yearrevenue– In this case, -$127MM ÷ $853MM = ~15% revenue churn
  5. 5. Customer ChurnControllable vs. Uncontrollable Behavior Drivers020406080100%Behavior DriversUncontrollableControllablePercentofTotalChurn-200-1000100200$300MMNew CustomersIncreasersDecreasersLost Customers$255MM-$127MM2009-10RevenueChange($MM)Controllable vs. Uncontrollable Churn2009-10 Revenue ChurnNet =$128MMTotal Churn = 15%“True”ControllableChurn = 11%• Not all churn is the same• Some revenue churn is because of factors within the company’s control (“Controllable Churn”)– For example: poor customer service can lead to a customer defection• Some churn is due to circumstances out of the company’s control (“Uncontrollable Churn”)– For example: an account lost when a customer went out of business in 2010
  6. 6. Customer Behavior DriversBehavior Driver Detail020406080100%Controllable ReasonsDeliverySalesPriceProduct IssuesCustomer ServiceUncontrollable ReasonsOtherCustomers BusinessConditionsCustomers OrderingHabitsPercentofTotalChurnQ: Why did you reduce your spend with Company X?• The reasons for revenue churn can be isolated and quantified by doing a surveyamong customers– A Marimekko chart is an ideal way of showing the results of this surveybecause it clearly displays two individual dimensions of data
  7. 7. Improve Customer Loyalty and ReduceChurnBegin with AnalysisDraw ConclusionsIdentify Areas for Improvement
  8. 8. What does it mean?Using Mekko Graphics to drill down intotheir data, this business was able to get tothe root of its customer churn. In thiscase, the marimekko chart in the previousslide illustrates the following:• 75% of revenue churn was due tocontrollable causes• Of that, 60% was due to customerservice or product issuesSupported by this data this business wouldbe wise to investigate ways they mightimprove both their product and processesto provide better customer service and amore fulfilling product experience.Using this type of analysisyou can zero in on the causesof controllable churn in yourbusiness.
  9. 9. Improve Customer Loyalty and ReduceChurnBegin with AnalysisDraw ConclusionsIdentify Areas for Improvement
  10. 10. So Now What?Ask the right questions:In this example a reasonable search forimprovement areas could begin withquestions such as:• Are employees properly trained toaddress customer issues?• How could feedback from customersbe collected earlier in the cycle sothat issues could be resolved anddefection prevented?• Do employees have the necessaryskills to produce the best possibleproducts and services?• Is emphasis placed on ensuring apositive off the shelf experience withthe product?Asking the right questionsbased on your analysis canhelp you identify key areasfor improvement to increasecustomer loyalty and reducecontrollable churn.