Nobody likes a one-sided breakup. And yet, in business it happens all the time. No matter how good the products are or how efficient the support is, customers will inevitably defect. While the average cost of a customer defection is often debated and varies from industry to industry, it’s still easier to retain current customers than to search for new ones. And savvy marketers have digital ways to notice and combat churn.
Jerry Jao, cofounder and CEO of Retention Science, points out that businesses tend to believe that churn occurs once a customer unsubscribes from a list. “That’s not always true,” Jao says. “Your clients probably churned a long time before then.”
Cheyanne Sequoyia-Mackay, VP of marketing at SwayChic, says this happense once a customer isn’t actively seeking her company’s products on the website. SwayChic, an indie fashion retailer with six brick-and-mortar stores in the San Francisco Bay Area and a two-and-a-half-year-old e-commerce website, plays close attention to on-site activity. “If [customers] get the emails and subscribe to the list, but aren’t doing anything with it, that’s a churn,” says Sequoyia-Mackay.
But identifying and anticipating churn becomes even more complicated when the buying cycles are longer. Greg Whelan, the director of e-commerce at light fixture retailer 1800lighting.com, points out that once somebody buys a light fixture, it’ll be years before they consider another purchase. “We expected everyone to churn,” he says. “We were resigned to the fate that once people purchased, we lost them.” For Whelan, the challenge is maintaining brand awareness over years such that when a customer is ready for another purchase, she’ll remember 1800lighting.com.
Why are you leaving me?
While the definition of churn varies, businesses still need to identify the red flags that indicate it’s about to happen. This requires historical data that can determine customer lifetime value. The equation is simple: the more data points, the better a business can spot a potential defection. Jao spoke of a pilot study he’d conducted with NFL.com that used four years of transactional data to build a model that understood trends and churn cycles. But he’s also realistic: “Most businesses don’t have a rich amount of data, and with limited data points, it’s more challenging.”
Still, everyone needs to start somewhere. Though SwayChic didn’t have four years of online transactional data available, the company still noticed that as email open rates declined, customer inactivity went up. Email open rates are also a key indicator for 1800lighting.com. “We look at how often you’re opening and for those [who] don’t open often, we cut back so we’re not bombarding you,” Whelan says.
There are other indicators of churn that go beyond email, such as a decrease in website activity, or looking at fewer products than normal. In essence, deviations from an individual’s buying or website browsing patterns could signal a willingness to vacate the digital premises.
Once a company flags a potential defection, the cheapest and simplest route is to trigger an email either reminding the customer of the business’s value or offering a discount. SwayChic, which uses solutions from Retention Science, just wrapped up an email reengagement campaign called “We Miss You,” which offered promo codes for 10 or 15% off—the deeper discount for customers who’d purchased less and consequently were presumed to be more willing to leave.
Since becoming more proactive in customer retention, the company has had two to three times higher revenue per email, Sequoyia- Mackay says. And in optimizing the time emails are sent to assure maximum viewability, SwayChic has increased open rates 2 to 3%. “It’s not that much, but compared to how it used to be for us, it’s a big deal because the click-through rate has gone up as well,” Sequoyia-Mackay says.
1800lighting.com’s problem, because of the prolonged buying cycles, was more complex. Using tools from email solutions provider Listrak, it sent out a discount aimed at the friends and family members of customers who’d purchased recently. Whelan’s theory is that this promotion, which is still too young to derive results, will reengage past customers and acquire new ones.