Churn the Beat Around: New Data on The State of Customer AttritionSep 21, 2016 - by Jason Grunberg
For marketers, churn really is the creeping crud.
Sure, every marketer expects some churn in their customer file. But in the long run, that supposedly small, manageable, amount of churn becomes a nightmare.
The problem is that compounded over time, even modest rates of churn make a mess of efforts to sustain growth and profitability. Churn means that the acquisition team has to run just to stay in place; it means brands are losing not just the immediate sale from a particular customer, and the money they’ve invested to acquire that customer, but all the income they would have generated from that individual over his or her entire customer lifetime.
Reducing Churn = Sustained Growth
You don’t have to make a huge impact in your churn numbers to see a noticeable impact on revenue. According to a study from Bain, a 5% increase in customer retention can boost profits from 25 to 95%. So while churn will always be a fact of marketing life, seemingly minor improvements can lead to major, long-term results.
Acquisition is flashy and gets plenty of attention, but it doesn’t matter how many new leads you pour into the top of the funnel if they’re leaking out the sides.
In theory, a focus on customer retention should do wonders to prevent churn. Marketers who devote themselves to customer retention should be figuring out what aspects of the user experience are most compelling, what causes a customer stick around, and what tends to drive him or her away. They ought to have figured out the best acquisition sources and the best onboarding techniques – the ones that result in superior customer lifetime value. But have they?
The True State of Customer Attrition
Sailthru recently asked Forbes to conduct a survey of 300 marketing executives at both retail and media brands. The purpose of the survey was to figure out how brands use customer retention strategies, and how those strategies impact performance.
Of the 300 executives, 72% said that their companies don’t particularly prioritize either acquisition or retention, and budgets aren’t skewed one way or the other. They walk a middle road. Fourteen percent of executives said their companies were squarely focused on acquisition (the acquisition athletes), and the other 14%—we’ll call them the retention gurus—said they were focusing heavily on retention. So in many cases, we’re able to compare the benefits and drawbacks of both retention-led and acquisition-led strategies.
And when it comes to churn, the retention gurus are clearly getting the better end of the deal. Two-thirds of acquisition masters said they had increases in churn over the past year, compared to 45% of retention gurus.
Interestingly, retail companies were likely to report problems with churn that were somewhat worse than those of media enterprises. Fifty-nine percent of retailers said churn had increased over the past year, compared to 51% of publishers. Churn actually decreased slightly at 2% of retailers, compared to 4% of publishers.
For all marketers, of course, churn remains a persistent problem. Not many seem to have figured out how to beat it all together. To take another look at the acquisition vs. retention figures, 67% of acquisition athletes had flat or increasing churn, compared to just 55% of retention gurus.
Combat Churn with Personalization
Personalization is one strategy been shown to consistently decrease churn — and the numbers are truly impressive.
Among our own customer base, Sailthru has found that digital retail brands that use personalization to dynamically populate email content, and to create individualized recommendations, see churn rates 44.8% lower than those sending static email. You read that right: They cut churn almost in half. For publishers, the numbers are even more persuasive: a 74.7% decrease in churn.
By looking at churn through the lenses of acquisition and retention, we find that when it comes to encouraging your customers to stick around for the long haul, a retention strategy really does pay significant benefits—benefits that flow through the entire organization, leading to higher profitability and more sustainable growth.