Effective Customer Retention through Early Customer Attrition Detection

In banks, the marketing team focuses more or less always on acquiring customers as it is by far the most appealing and seductive route to higher sales and profit. At the outset, unless your bank is just starting out, your current customers may actually contain more untapped potential than theoretical new ones. Having bought from you at least one time before, they are already in agreement with your company’s unique selling proposition (USP), organizational philosophy and “niche” in the marketplace. That doesn’t mean existing customers don’t need to be reminded of all of these things. They do – because everyone eventually forgets. But in most of the cases, you don’t need to convince them from square one to make a second or third purchase.

Think about your favorite take-out restaurant in your city. It helps to be “nudged” by getting fliers in the mail or seeing TV commercials for their food, but the reason you buy over and over again is because you did before and know that they’re good. The same principle applies, roughly, to your existing customers.

Banks do have dedicated teams and specialized offers that they can extend to prevent a potential churner from abandoning the bank. In very few instances, however, does the save rate exceed 30 to 40%, meaning that the majority of all attempts to prevent churn are ineffective. There could be multiple reasons to it. Most times, customers are identified and offered alternative value propositions only after they’re already upset about the product or services purchased, or they’ve already compared competitive offers, or they’ve already decided to abandon service. They may even have already started the switching process and signed contracts or invested time and effort in installing or getting familiar with a new environment.

The question is how to make the best use of customer data that is available but still be relevant and contextual in our communication and reach-out.

 

Find the root cause

Identify clear symptoms of customer attrition and try rebuilding the case. Try to look her relationship with the bank across channels, across financial instruments and at the interactions/conversations that a customer had with the bank before she actually abandoned it. This helps to identify the root cause of the problem. The analysis should be shrewd enough to identify addressable drivers as in some cases the cause might be something that you cannot influence (Ex: Macroeconomic conditions)

Specialized Churn Models

Not all churn models (however good their statistical performance is) can tell why certain customers are about to churn and how to prevent it. Taking a doctor/patient analogy it is not important to predict which patients are about to die without telling the doctor which diseases to treat. The model need not be complex but should give actionable insights in real-time so that appropriate steps can be taken in time. They need not be 100% accurate but should have the flexibility to self-learn so that the number of false positives is eventually reduced over time.

Only when the reason for customer attrition is investigated correctly, the preventive or corrective action like targeting at-risk customers with the right offers can be accomplished with maximum efficiency.

After all, “switch to competitor” is not a root cause for churn. The product, service, or pricing issue that prompted the customer to compare and switch is.

Sales Channel Performance metrics

In addition to having a robust agile early warning system, the sales performance metrics should also encompass softer aspects of customer communication and ensure that the root cause of the problem is addressed. Sales should not only be measured against the new customers/revenue that they bring in but also how do they ensure to keep the customer attrition under control. Their efforts to go the extra mile to delight the existing customers must be measured and rewarded

Align bank strategic objectives to performance metrics

It is not only sales personnel prerogative to build enduring loyalty. It is in fact every bank employee’s especially every customer facing employee’s responsibility to ensure that your customers become your brand ambassadors. Their performance metrics should be aligned to your bank’s broad strategic objectives like ensuring superior customer service, increase profitability through existing customers and above the industry customer satisfaction levels.

In fact, we’ve seen many promising churn reduction (and thus profit-increasing) initiatives fall short because the departments responsible for other metrics focused on reaching their own performance targets—even at the expense of churn objectives.

At a minimum, management must make sure that separate departments do not get tempted to sacrifice overall profitability so they can reach their own performance targets.

Operational efficiency at every touch-point

For improved communication and service you need to attain operational efficiency at every customer touch-point. It can be achieved through systems that help to form an optimized match between the customer and the agent she would be talking to so that the conversations/interactions are relevant. The agent would be equipped enough to make a product/service recommendation and the conversion rates would be high.

Consistent Customer Communication

The communication across channels should be consistent. For example, imagine the irony when a customer has a service issue, is agitated and has lodged a complaint, he receives a call from the Inside Sales team regarding a banking product sale. Hence, it is important to avoid disconnected and impersonal marketing campaigns.

To summarize, curing churn is possible with the help of right technology, active involvement of all the stakeholders across functions in fighting against the identified churn root causes, and an organizational level strategy to prioritizing excellent customer experience above anything else.

 

- By Madhavi Natukula

CustomerXPs offers real-time, intelligent products that empower banks with instant insights enabling influenced outcomes of deeper customer engagement and fraud-free transactions.

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