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Churn Management

There has been a norm around for many years that somewhere around 75 per cent of customers who defect say they were "satisfied".
                                                                                           - Anne Mulcahy, CEO of Xerox

According to a survey, major companies lose 50% of their customers over 5 years. A significant portion of these are "Silent Attritors", customers who normally say they are satisfied much less betray their intent to leave.

How do you identify these "Silent Attritors"? How do you intervene in a timely fashion to prevent these seemingly satisfied customers from leaving?

The biggest challenge facing marketers is getting the timing of the attrition right and reaching out to the customer in time to incent them to stay. Companies often make significant investments to get back lost customers with win-back programs and re-acquisition efforts. These efforts are quite often wasted since they are too late in their intervention.

Recent advances in data mining and predictive analytics make it possible to not only predict quite accurately the likelihood of a customer attriting but also when they most likely to attrite. Knowing this in advance it is possible to stop customers from leaving by intervening immediately before they decide to leave. Reducing the elapsed time between potential attrition and customer outreach produces dramatically higher levels of customer receptivity and, as a result, significantly lower attrition rates.

The first step towards developing an analytical process for retention program is to identify the segments of most profitable customers or those with high Customer Lifetime Value (CLV). For the customer within segments that are profitable or high value, predict the likelihood of attrition and when they are likely to attrite using data mining techniques such as survival analysis.

A logical approach to churn management might include the following steps:

  • identification of factors influencing customer defection
  • determining the factors that influence when the customers are likely to attrite
  • assessing the effectiveness of available customer retention tools
  • selecting the optimal retention channel for a given customer profile and churn risk level

The remedy for churn is inducing loyalty. To encourage loyalty in their customers, firms implement strategies such as greater personalization of services, bundled services or differentiated customer service. Proactive churn management is extensively followed in telecom, insurance, financial services and healthcare industries.

 

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Behavioral Segmentation
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