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customer service for churn

Customer Service is Uniquely Positioned to Own the Churn Challenge

Social monitoring service Mention was growing quickly, acquiring its first 100 customers, then 1,000, then 200,000. But as the SaaS business evolved from a plucky startup into a bona fide company, a new problem emerged: churn.

Most companies, especially SaaS companies, know about churn. It’s the percentage of your existing customer base that stops using your product or service. In cases where growth cannot outpace churn, companies become trapped in a downward spiral.

“Acquiring new customers is time and capital intensive, and this growth is meaningless if those customers do not stay,” writes Lightspeed Venture Partners investor, Anoushka Vaswani. However, humans are psychologically primed to believe that new is superior to old, leading growth leaders to prioritize net-new customer acquisition to the detriment of churn reduction. 

Fortunately for Mention, its then-Chief Marketing Officer, Clément Delangue, recognized the problem as an existential threat. Mention’s meteoric growth had created a support bottleneck, and customer experience was suffering. This poor experience was driving away customers, pushing the company’s churn rate past the recommended 5 to 7% threshold.

To safeguard the company’s future, Delangue took control of the challenge and launched a three-month project wherein he overhauled Mention’s support system, prioritizing paying customers, batching tickets to timezones, and rolling out an automated customer nurture program.

The project had an immediate impact, surpassing the CMO’s 20% churn reduction goal in a single month, rather than the three he initially planned. It accelerated the company’s growth and set Mention on a course for acquisition.

Delangue’s project was an oddity in churn. With a single, easily identifiable root cause, a single functional executive could drive a significant improvement in customer retention. But more often than not, there is no one root cause. Customers are pushed away by a series of interconnected and interrelated factors.

“Churn is affected by every single function of business, from acquisition channels to product,” writes Delangue. “Sometimes it’s hard to know where to begin when it comes to trying to reduce it.”

With every single function of a business contributing to churn, driving improvement becomes a logistical nightmare.

Churn is a complicated machine

In 2019, Hussian Moselhy, professor of marketing at Kafrelsheikh University, investigated the impact of customer churn factors on telecommunication contracts. He identified seven primary factors:

  • Cost of Conversion: Moving between carriers costs a mix of time, energy, and money.
  • Quality: Call quality, coverage, consistency of service, and availability of text, video, and audio service all ladder up into one factor.
  • Competitors: Few companies have a complete monopoly. The positioning and competitiveness of competing carriers play a key role.
  • Advertising: This encompasses all paid commendations of a carrier’s ideas, products, and services.
  • Security: With data breaches becoming more common and the privacy debate heating up, a carrier’s security—or lack thereof—can push consumers away.
  • Price: At the end of the day, it comes down to dollars, pounds, rupees, and euros.
  • Satisfaction: A measure of perceived customer value minus customer expectations. In other words, are you underpromising and over-delivering, or vice versa?

Now, try to consider which business unit controls each factor. 

Customer service plays a role in the cancellation process. Product marketing influences competitive positioning. However, both these factors are heavily influenced by external entities. On the other hand, the product team is almost entirely responsible for the quality, perhaps with some assistance from R&D. IT is likely to own security. Advertising and pricing live within marketing and sales, with input from finance on the latter. Satisfaction is a combination of everything from sales and marketing to finance and product, although marketing and service likely have the largest impact since they drive product positioning, messaging, and experience.

Across these seven factors are [atleast] seven stakeholder departments: customer service, marketing, product, R&D, IT, finance, and sales. But few churn reduction initiatives are as cleanly segregated as Delangue’s. Each factor influences—and is influenced by—those around it. Alterations to product positioning must reflect the product’s live capabilities and also flow down into sales strategy. Changes in ads and promotions must be echoed by customer service and sales. Pricing changes must be echoed by all. And so on.

Any uncoordinated attempt to improve churn will likely become a discordant mess.

Most companies’ churn strategies resemble a football team without a quarterback. Wide receivers are running routes, the offensive line is defending the pocket, and tight ends are chipping pass rushers… but no one is pulling the strings and managing the offense.

Even though all departments are equally responsible, churn needs a single owner to define the charter; a single leader to champion the cause, facilitate cross-functional collaboration, and drive real progress. While no departmental leader is perfectly positioned to oversee everything, customer service is several steps ahead of the others.

For, a customer service leader’s role involves balancing the needs and aspirations of both the customer and the company. They are, in a sense, an agent of both. And they only succeed on the strength of their orientation to goals, challenges, and opportunities on both fronts. This makes them the most powerful catalyzing force in any organization. Perfectly suited to own a strategic imperative like churn. 

Customer Service: The churn quarterback 

The case for customer service as a churn owner is helped by the fact that it can drive people to delightful experiences, not just define it. 

Consider this.

Churn is triggered when a customer is poorly ‘activated’. It is symptomatic of poor experience and low value generation. As a thumb rule, any value must be activated within the first 90 days. When customers have to wiggle long to reach an “Aha!” moment or the cognitive burden of starting a new business relationship is too high, they inevitably opt-out. This, in turn, adversely impacts CAC and profitability. Properly activated customers, on the other hand, are 80% less likely to churn compared to those who did not receive a quantified value over their first 90 days with your business.

Customer service can take the lead in ensuring a great onboarding experience. Rather than relegating customer service to the end of the customer journey, it can play a much earlier role by identifying opportunities for activating self-service portals, FAQs, chatbots, and live agents at key touchpoints. 

Furthermore, white glove customer service can be made available, selectively or throughout a customer’s journey, as a way of preventing and fighting aggressive churn-like symptoms. 

Disha Gosalia, VP of customer success at Freshworks, narrates the instance of an at-risk customer – an insurance co. – that was actively looking for a new software vendor on account of “having outgrown our product.” “They were looking to park their bets with an enterprise-grade solution and weren’t sure if we were fit for purpose,” she recalls. Immediately, her team jumped into action and triggered “sentiment” inflection points – the point where perception shifts in favor of or against a brand. To impact positive movement, they displayed urgency, added value in the capacity of product specialists, and demonstrated proactiveness. Such hands-on, collaborative problem-solving ultimately moved the needle for the customer to remain and renew their contract for three additional years.

“Sometimes, you can turn around an unhappy customer to a happy one just by making a combined plan with them,” Disha remarks. 

Among other things, what this episode confirms is that when customers find it easy to work with you and avail of your service, they are more likely to stick around. Combining product usage analytics with proactive customer service can go a long way in ensuring customer retention.

Let’s take this a step further. 

According to Esteban Kolsky, chief CX evangelist at SAP, two-thirds of people churn due to poor experience with products and services

As an intake for complaints and cancellations, customer service has a wealth of customer data. Low CSAT and NPS data are both leading indicators of future intent to purchase. By reading feedback from these accounts and mining behavioral data, customer service can surface common friction points and early signs of churn.

With basic research in place, customer service leaders can connect relevant transactional data like recent purchases to broaden the optics of the problem itself. This provides a better sense of where their (potential or actual) detractors and at-risk customers are. For accounts with an 80% likelihood of churn, providing an enhanced or expedited service—for example, resolving all tickets within 24 hours, is a good next step. 

customer service in onboarding

Underutilization of data and poor experience aside, there’s another less commonly discussed lens to churn: diminishing quality.

Power users and long-standing customers typically exhaust product functionality faster than a company can deploy new features. This is especially true in industries like fintech and healthcare, where development speed is limited by reviews, approvals, and regulations.

To this segment, customer service must deliver a white-glove service, treating these individuals as a select VIP group within the wider customer base. By using them as a development-guiding resource, as advocated in the “customer-centricity” approach developed by Peter Fader, organizations can retain their most profitable accounts, while optimizing future products and services development.

A multi-billion dollar bet

Customer churn is big business. According to CallMiner, B2C companies in the U.S. lost $136 billion in 2018 due to avoidable customer switching. Expanded that figure to include all business models and all countries, the losses would be significantly larger.

To make matters worse, the pace of switching is accelerating. The index reveals the average switching rate increased by 2.5X compared to the five-year average.

With consumers more willing to move between suppliers and vendors to find the best deal, organizations must work harder than ever to reduce churn and maximize retention. Our first step should be assigning responsibility— as psychology tells us when everyone is responsible, no one is responsible

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