Part 1 of a 9 part Customer Retention Story
‘Price’ is often the reason given for why companies are seeing customers churn. The reality is usually very different.
Research shows that feelings/emotions are the primary force behind decisions, and justifications follow. This means that your customers leave or stay based on how they feel. If customers feel they’re getting value and are happy with your company, they’ll stay. However, if customers don’t fee they’re getting value or they’re frustrated with their customer experience, they’ll use price to justify those negative emotions.
You can use your own personal experience with purchases to see this in real life. Every purchase you make is with the goal of it some how making your life better or easier. Some purchases are exactly what you hoped they would be, and some go into the donate bin. Your willingness to pay for the product wasn’t about the price until afterwards. If you bought the product, you felt it was worth it. It became ‘too expensive’ only after it failed to meet your needs and led to frustration and maybe even anger.
When they became a customer, they were hopeful. Hopeful that your product or service could help them in some way. Their emotional peak was at its highest when they purchased. But if they don’t get the results they expect or it takes them a long time to get there or they can’t get sufficient support to help them, they go from being at a hopeful peak to a disappointed, frustrated, upset valley. We’ve all experienced this low valley. It’s called Buyer’s Remorse and is an emotional state.
This stage is usually where the price becomes the issue. The customer is looking for a rational explanation for their feeling of remorse. My research has shown that approximately 97% of customer leave because of how they feel. The other 3% is due to outside factors (mergers, acquisitions, new strategic direction).
Here are some of the most common ways customers express their negative feelings:
- Price is too high
- Customer support was lacking
- It took too long to see results
- Results were below their expectations
- Product has missing features
Each of these comes from emotional points in the customer journey that we have named “Churn Factors”.
Within the 5 groups (Product, Other, Value, Service, and Expectations), you can control, influence, or change 4 of them. The Other category is driven by the market or other influences that you have no impact on, but this leaves 22 factors that you CAN impact.
Of the 4 categories in your company’s control to change, the most straightforward groups are Product and Value. Product changes, pricing, renewal negotiation and terms of payment are clear in what they are. In other words, there’s no ambiguity as to what they are and what they mean for both the company and the customer.
The Service and Expectation categories, on the other hand, are more nebulous. Customers and the company can interpret each of these 15 Churn Factors differently. And the greater the difference between those interpretations, the greater the chance for negative experiences to slip in.
These 15 Churn Factors are the reason that customer retention can be so hard to improve.
You have to uncover and change all these emotional points in the post-sale customer journey that tie to the 25 Customer Churn Factors. These are critical areas that affect your customers’ decision about whether they want to stay or leave.
How to start retaining more customers
Onboarding is the first place to focus on. Since this occurs immediately after the purchase and is typically when buyers’ remorse appears, making sure customer expectation versus reality is going to be important.
Use the Service and Expectation factors to gain an understanding about your customer expectations. Use emails, a survey, or your kick-off meetings to clarify needs in these areas.
Look for patterns and begin to make changes based on:
- Churn Factor with the biggest gap between expectations and reality
- Churn Factor that leads the most customers to churn
- Churn Factor that is the easiest to change
Pick whichever works best for you and start there.
Retaining more of your customers is a constant work in progress. There is no finish line! However, you can look to points in the post-sale customer journey where your customers’ emotions are more likely to change sentiment – from positive to negative. Buyer’s Remorse is a phenomenon that everyone has experienced at some time. And it happens shortly after purchase when there is a big gap between expectations and reality.
Using the 25 Customer Churn Factors, you can discover the expectations your new customers have as they start their journey. Use the data you collect to help you decide which Churn Factor to change first, second etc. This is the ideal starting point.
In the next article, we’ll cover the solutions you can use to improve retention – there are 3 big ones we’ll cover including one that you’ve probably never thought about before. Coming in May!
**This blog was adapted from its original publication on ATI. GGR will release 1 per month for the remainder of the year.
Anita Toth is the Chief Churn Crusher (and founder) of ati, your customer retention experts.
ati's 3-step customer retnetion 360 system (based on research, strategy, and education) helps you to confidently and predictaby reduce churn, accelerate revenue growth, & make your customers happy.