This year activists information portal statista.com conducted a survey of small business owners about which of the problems they face in the course of their activities, they consider the most important and relevant.

What do you think is the most popular answer?

Customer churn problem

Both old and young are concerned about this, as they say, and it is obvious why: no growth of the company will occur if the process of attracting new customers is not established. But the growth of the company depends not only on new customers, and you will agree with this.

In pursuit of new customers, we somehow got used to immediately throwing existing customers out of our heads. But this is much more difficult and more important: to retain a client, maintain his loyalty and cultivate loyalty to the brand in him. So it turns out that the main reason for such a phenomenon as the outflow of customers () is ourselves.

Meanwhile, experts call this phenomenon a business killer. Even a small increase in churn can cut your profits in half at once.

Take a look at this table that shows the correlation between customer churn and profit:

Churn can easily confuse your cards, or even destroy your business in the bud. If you let him.

In this article, we will look at the 4 most common reasons for customer churn and how to deal with them.

1. Stupid customer service

Many companies view the cost of customer service support as an expense and try to minimize it, when in fact it is an investment and it is better to maximize it, because it may someday save the life of your business.

The problem is this: if you see an expense item in the customer support center, then it will be so. Judge for yourself: if it is not your priority to provide the best customer service (which you can only afford), then the money that you spend monthly on its support will really be wasted. But the worst thing is that due to such carelessness (negligence) you will lose not only money, but also customers.

Poor customer service is one of the most common reasons why people lose all respect for a brand (according to a recent study, 9 out of 10 buyers who abandon a brand cite poor customer service as the main reason).

At the same time, high-quality service can give you the loyalty of 86% of customers who are willing to pay more for such an attitude towards them.

Good service is not only good as an antidote to customer churn, but it can also take your business to the next level. Revenues will rise and customers will be happy to pay more.

2. Ineffective support

In every business, there are, as a rule, two points that are significant for customers:

• when they signed up for your services, became your customers;
• when they achieved success with your product, when your product delivered real value.

Acquisition - the moment of purchase of the service, First Successes - the first success.

The main outflow of customers occurs just in the interval between these two moments, between these two control points. People may not understand something in the functioning of the product, they may not succeed, they may be prematurely disappointed in it (especially those who expect not just quick, but instant results) or simply lose interest.

To prevent this from happening, it is in your power and in your own interests to keep in touch with your customers and make every effort so that your product turns out to be for the future, so that it helps people achieve the goals for which they bought it. Otherwise, you will get the same churn.

3. Lack of consistent success

If you seriously think that with the achievement of the client's initial success, your communication with him will be limited to sending invoices, you are deeply mistaken. Initial success is certainly important, but it does not mean that the client has figured out everything and can now act without your help.

You updated the functionality, made some changes to the interface, changed the data display format - and the buyer found out about it only from the newsletter. Surely there will be questions. And if you do not give them an answer in a format that is convenient for them, the risk of losing customers will be very, very high.

Caption: "Customer success doesn't end here."

Clients should listen to you, and you should talk to them. If you do not work on these relationships, it will be very short.

4. Natural causes

Often, customers do not leave you because you made a mistake somewhere. Sometimes they stop doing business altogether, and then they simply don’t need your product. Sometimes changes in leadership lead to changes in service providers. It happens that they "grow" from the capabilities of your product.

This is happening and it's normal. It is not in your power to change anything. Therefore, you should concentrate your efforts in those areas that we have already described above.

Conclusion

The lower the outflow of customers, the higher the profitability of the enterprise. Customer churn is a metric that is directly related to such a category as profitability. A guaranteed decrease in the percentage of outflow leads to an increase in profits. What to do for this - you already know.

Good service affects profit different ways. One of them is that customers place orders for large amounts. Let's say a buyer orders a ton of raw materials over the phone, and the employee answering the call tells him: "You know, if you buy one and a half tons from us, you will get a 10% discount." The buyer says: "I'll take it." This is a more expensive order. This is an increase in sales and, probably, profit due to the quality of service.

Is there a direct relationship between company profits and customer satisfaction? I'm sure yes. When you do something for a customer, even something as small as a refund or a discount, the return will be far greater than the cost, as he will have a warm feeling for the company because of your act.

COMPANY GATEWAY

Gateway, a major computer manufacturer, is based on quality and service. In January 2000, its founder, Ted Waite, resigned and chose his own successor, Jeff Weitzer.

A year after his resignation, Waite personally fired Weitzer and nearly all of his management team. In 2001 net profit of the company decreased by 59%, to 241 million dollars. Sales decreased by 37% and amounted to 6.079 billion dollars compared to 9.600 billion dollars in 2000.

Weitzer began by introducing hate-filled policies and procedures that dictated everything from what posters employees could put up in their workplaces to the exact time they could go to lunch.

Many of these innovations not only spoiled the atmosphere in the team, but also caused damage to the business. For example, one of the rules limited the duration of customer service phone calls: if employees spent more than 13 minutes talking with a customer, they were deprived of a monthly bonus. As a result, people began to dodge, just to get rid of calls - they said that their phones did not work, hung up, or - often - sent expensive computer parts to customers. Not surprisingly, Gateway's customer satisfaction scores, once the best in the industry, have fallen to below average levels.

Worse, many customers stopped recommending Gateway to their family and friends; the share of referral sales, which accounted for 50% of total sales, fell to 30%. Upon his return, Waite immediately lifted 14 "stupid rules," as he called them, including a 13-minute time limit on phone calls with clients. By May 2001, customer satisfaction had risen to 73%.

How much does a good service cost?

Yes, implementing a service strategy costs money. Unfortunately, for some companies, the upfront cost overshadows the long-term; therefore they are not in a hurry with new programs to improve the quality of service.

But can investing in something that will bring profit be a stumbling block for a company? After all, most executives of various companies do not reject good ideas just because they are expensive. Price should not be the deciding factor even when we are talking about developing or maintaining good relationships with customers.

“Do you want to know the biggest secret of the global economy? So, if you have exceptional, amazing service, then you will get rich enough that you just have time to buy bags to drag money home, ”writes Tom Peters in his book Thriving on Chaos.

To name a few famous companies with amazing service: Disney, Federal Express, Wal-Mart, Commerce Bank, Nordstrom, GE, Dell, Home Depot and Amazon. British Airways recently announced that it had net income of $189 million on revenue of $7 billion, one of the most impressive numbers in the history of international airlines. But six years earlier, the company was one of the leaders in losses among airlines.

What's the matter? It's all about the service. At the same time with sharp rise profitability, the company has reached unprecedented levels of customer satisfaction.

Successful carriers satisfy dissatisfied customers by "explaining in detail why they can't meet their demand," says Dan Smith, director of consumer affairs for the Dallas-based International Airline Passenger Association.

New evidence confirms that customer satisfaction has a direct impact on profits. That's one reason companies — GE, Whirlpool, Coca-Cola and British Airways — are spending millions of dollars to improve claims handling.

Marianne Rasmussen, former vice president of quality international operations at American Express, says: “I use the following formula - best job with complaints equals higher customer satisfaction, which equals higher brand loyalty, which equals higher profits.”

SERVICE AS A MEANS OF ECONOMY

If customers are satisfied with the service, it helps not only to earn money, it helps to save them. After all, retaining customers means reducing marketing costs. And the money saved on marketing is your profit.

A strong customer service program allows a company to reduce marketing costs as fewer customers leave. And fewer former customers require replacement.

Club Industry, a magazine for leaders of club organizations (such as fitness clubs), has calculated that with a total membership of 2,000 people and a 40% annual reduction in numbers, a club needs to attract up to 800 new members a year to stay afloat. The cost of acquiring 800 new members is a big hole in the budget, the magazine continues. “Good customer service costs money, but annual recruitment campaigns cost disproportionately more,” the magazine notes. “If the same club were able to reduce customer loss by at least half through quality of service, it would have to attract only 400 new members a year.”

Multiply by five

Here's another important formula: How much you spend on customer service is how many customers you retain. And since customers change suppliers five times more often because of service problems than because of dissatisfaction with prices or product quality, good service is an essential ingredient for the success of any company.

Forum Corporation discovered that customers are five times more likely to switch suppliers because of service problems than because of price dissatisfaction. She interviewed 2,374 customers and employees of various companies.

Interestingly, dissatisfied customers also go to competitors five times (again the same ratio!) More often than satisfied ones.

The 5:1 ratio appears again when we compare the cost of acquiring a new customer with the cost of retaining an existing one. This rule has been in place in the service industry for many years. The difference in the cost of “acquisition” and “retention” is especially clearly visible if we compare the costs of acquiring a new client through marketing (advertising, direct mail, presentations at the point of sale, etc.) with the costs of providing quality service to an existing client.

How does the service save money?

Here's how good customer service saves money: Your employees serve customers better and thereby prevent dissatisfaction and complaints. This reduces and even eliminates the costs associated with problem solving, including the need to maintain a large customer service department. In addition, a good service saves on marketing costs, because it is much easier and cheaper to sell to existing satisfied customers than to potential customers.

Many executives find it difficult to realize that quality service reduces marketing costs. Moreover, quality work(when everything is done the first time) as an integral part of a quality service, it leads to a reduction in other costs - for rework, for repair and replacement, as well as for handling claims - they simply do not exist if the company provides quality service.

Finally, quality service significantly reduces the number of lost customers requiring replacement. According to the results of the 1990 consulting firm Booz, Allen & Hamilton study, poor customer service is the cause of loss of customers in 40% of cases.

Some managers believe that quality service is expensive, notes Ronald L. Vaughn, president of the University of Tampa. However, he notes, such signs of quality service as politeness, friendliness and positive attitude in communication with internal and external customers, absolutely free!

Service is income, not expenses

The initial costs required to implement a service strategy can also be viewed from another angle. A dissatisfied customer will cost you much more than their quality service, says Ronald Vaughn.

Service is not a cost. These are incomes. If you make your customers happy, you make sales easier, thereby saving on marketing.

In most cases, the choice of a brand, product or company is not so much a conscious act as a subconscious act. And the subconscious mind pushes the client towards the company for which he has warm feelings caused by good service.

Any businessman should understand that the service should be placed as high as marketing, not lower than any other development programs, after the customer base has been created.

My prediction is that in the not too distant future, service will be seen as an aspect of marketing, and not as an overkill or an undeserved bonus, as is often the case today.

BE SECOND TO BE FIRST

Despite obvious benefits quality service, experienced managers are sometimes unwilling to launch a service improvement program just because a competitor has launched such a program before them. No matter how they explain and justify their inaction, there is only one reason - pride.

Undoubtedly, pride is an important component of any. But sometimes pride can be a hindrance, like when you wrinkle your nose and twist your mouth when talking about a service just because a rival company tackled the problem first. The “not invented by us” syndrome deprives managers of the ability to think rationally (someone else’s idea, they argue, cannot be good). And they proudly declare: “We do not want to be imitators!”

Middle managers are afraid that they will look bad in the eyes of management and competitors if they try to adopt their strategy.

A department may spend several months developing a service strategy just because the company's management is afraid to tell its employees about the successful strategy of competitors. The management believes that this can demoralize the staff. Emotional reactions like these are the main reason why a company that launches a customer service program first is spared any attempts by competitors to compete with it in this area for at least the next year or two. Other companies simply won't want to let their employees know they've been beaten. However, companies in the airline industry and in the automotive industry do not experience such complexities: as soon as someone announces a special offer, within a day or two, all companies in the industry do the same.

Stanley Marcus, chairman emeritus of Neiman-Marcus, a chain of stores selling products from leading designers, believes that only a competitor can prove the value of service. But in half the cases, the company will lose such a competition in the service, without meeting support and understanding. However, the service is too important to allow its inner self to prevent such a program from running promptly.

Here are some more examples of how intellectual and emotional stereotypes can interfere with the implementation of a service strategy.

1. A manager who is accustomed to the most complex managerial and financial instruments It can sometimes be difficult to see how something as simple as customer service can increase profits.
2. The management is afraid to offend the people responsible for the service in the company by offering them to develop new strategy customer service based on competitor's program.
3. If a company operates in an industry dominated by one player whose service everyone admires, management often cannot believe that something as inexpensive and basic as customer service can be the reason for success and a 20% increase in ROI.
4. A service aimed at establishing strong trusting relationships with customers is hard work, and for some companies it is completely overwhelming. Perhaps this is the main reason why many firms do not pay attention to customer service.
5. Service is something intangible, intangible and abstract. Since the service does not require fixed assets, such as million dollar computer systems, a fleet of trucks, industrial robots, CNC machines, or new buildings, so it can't be important. Some managers are hard to convince that a customer service program is a waste of time and effort.

The benefits that a quality service program provides will sweep aside all empty talk.

It's sad that many companies don't even try to rise to the challenge of service leaders in their industries. It takes years and even decades before they lift the gauntlet in the customer service ring.

An unspoken non-aggression pact was concluded between the "stars of service" - Delta Dental Plan, Neiman-Marcus, Allied Van Lines, 3M, Ritz Carlton, Dow Chemical, Lands "End, General Electric, Eastman-Kodak, Home Depot, K-VA- T Food Stores, Federal Express, Disney, Nordstrom, etc.

Year after year, companies with first-class service are head and shoulders ahead of the competition in everything they do. Perhaps your competitors have already figured this out.

HOW TO CALCULATE PROFIT FROM THE SERVICE

Frederick Reichheld, director of the customer retention program at Bain & Company, and W. Earl Sasser, professor at Harvard Business School, argue that “the longer a customer's relationship with a company lasts, the greater the value it generates. The departure of a client has an extremely negative impact on the company's profits. Typically, companies lose 15-20% of their customers per year. When customer churn is halved, average growth rates more than double. A 5% increase in the customer retention rate increases the company's profit by 25-100%. In my opinion, this is the most compelling customer service research of the last two decades.

Despite the positive impact that reducing customer churn has on profits, existing accounting systems are unable to show what a company's profit will be if it prevents churn or returns a customer. Companies don't even count how many customers have left. As a result, executives seriously underestimate the cost of losing customers.

Most accounting systems focus solely on running costs and income, ignoring the supposed cash flows during the entire period of cooperation with the client. A more or less formalized churn control program would be a great help in the work.

CUSTOMER OUTFLOW CONTROL

Create a Special Purpose Group

Include in this group your most professional staff. Their job is to connect with departing customers and convince them to give your company another chance.

Make a list of measures to prevent customer churn

Make such lists for individual employees, departments and the company as a whole.

Education

Train your employees quality service(by changing the format or content of the program) every six months, because one single training is not capable of radically changing attitudes and habits. Train all staff. The training costs are small compared to the possible growth in sales and profits.

If you want to know how serious your company's customer churn situation is and if you need to take customer retention measures, here's what you need to do. First, determine the percentage of churn and establish the reasons. Secondly, to determine the average duration of cooperation with a loyal client and how much he spends per year during the entire period of cooperation with the company.

Create focus groups of line employees, lower and middle managers and challenge them to come up with a list of churn reasons. If regular customers leave you, call them and ask why. Interview line-of-sight employees: they are in direct contact with customers and usually know exactly why they leave.

You can send surveys to former clients, but don't forget to offer some kind of incentive to get them to respond. It is extremely helpful to talk to a departing client in person or over the phone.

Determine the COST of zero churn

What is the churn rate in your company?

What is the duration of cooperation of a loyal client with the company? How much does a loyal client spend annually during the entire period of cooperation with the company? This figure should increase annually.

It is necessary to find out the amount of profit that a loyal customer brings to the company. Every year, profits should increase due to a reduction in marketing costs and an increase in revenues.

The data obtained allows us to determine:

Percentage of customer churn per year ____________________________

Overall decline in sales ____________________________

Total Lost Profit ____________________________

Total: All losses ____________________________

After calculating the total amount of losses, you can have a heart attack. For most companies, these losses will be measured in the millions. Your churn prevention plan should consider:

• the cost of acquiring a new loyal customer;
• annual budget for marketing and advertising;
• the average amount of a purchase made by a loyal customer;
• number of customer complaints per year;
• a system for monitoring and measuring customer churn.

Now you have all necessary information to analyze how much customer churn costs you each year, i.e. how much profit you lose each year. Plug the numbers you want into the formula below:

The cost of losing customers

X

=
____________Total annual revenue lost as a result of customer churn

Total number of visits per year
X
____________Total profit during cooperation with the client
=
____________Total annual profit lost as a result of customer churn

Monitor the progress of your churn program by issuing monthly reports showing how much your churn rate has decreased and how much money your company has saved as a result. Communicate this information to all your employees.

Be sure to thank, praise, and reward those who deliver zero churn.

Recognition is essential if you want your program to work, which you do, because the benefits of reducing churn are enormous.

Why is it important to control customer churn?

The Service Quality Institute conducted a study at a large donor center, Plasma Group, to determine how customer churn affects profits. This organization has 17 branches and 300 employees. The company's annual income from each donor is $5,035.88. The calculations were based on the following inputs:

• Churn rate 6% / 40,600 donors per year
• The average period of cooperation with a loyal donor is 41 months / 3.4 years
• The total amount of material donated by a loyal donor for the entire period of 164 liters of cooperation
• Average market price for plasma $11.48
• The average profit per liter of plasma after processing is $40.
• Profit brought by a loyal donor for an average term of 6560 dollars of cooperation

The total losses from customer churn were calculated (USD):

• lost income for the year 103,320,000
• lost income for the entire period of cooperation 351,288,000
• lost profit for the year 59,040,000
• lost profit for the entire period of cooperation 200,736,000
• total losses for the year 162,360,000
• the total amount of losses for the entire period of cooperation 552,024,000

If one donor leaves, Plasma Group loses $18,040 that it could have earned over the entire period of cooperation with him. On one donor!

TARP, a Washington, D.C.-based service research and consulting firm, has developed economic models that predict the return on investment in handling customer complaints and requests. Models take into account the nature of buyer behavior, profit margins and many other factors.

Another TARP model allows you to evaluate the effectiveness of the existing customer service system, as well as determine how you can improve the service at minimal cost.

The Service Economic Effect Model provides an opportunity to calculate what the results will be if you establish contact with dissatisfied customers and solve their problems. It shows managers the real monetary return on the existing level of service and service improvement; quantifies different levels of service; specifies what needs to be changed in the existing service system in order to achieve maximum profit growth. In addition, this model allows management to determine how profit and return on investment increase as the level of hidden dissatisfaction decreases, i.e. the number of unspoken claims. Finally, it determines how profit and return on investment are affected by lower customer contact costs and increased customer satisfaction.

This model is a real lifesaver for service departments and customer service departments. She allows for concrete figures show that they play the role of profit centers and sales stimulators in the company.

This model assumes that the return on investment in service can take the following forms.

1. Increased sales volume and increased ROI as a result of improved service. Service is improved through measures aimed at preventing customer dissatisfaction.
2. Reduce service costs by preventing customer dissatisfaction.
3. Growth in market share, the result of an increase in the number of satisfied customers thanks to good service.

With this model, TARP provides the company with specific information, such as the relationship between incremental costs and incremental profits.

The increase in this case is an increase in personnel costs in this office in order to achieve, for example, a 3% increase in customer loyalty. Then the impact of such an increase in loyalty on the final profit is calculated.

The model uses data provided by the company and obtained from a sample survey of customers to estimate sales growth and return on investment in the service. As a result, the following parameters can be evaluated:

• net purchase volume of customers whose complaints were resolved;
• the net volume of purchases made through word of mouth advertising;
• sales revenue from resolving complaints and positive feedback About company;
• return on investment in service improvement.

HOW TO MAINTAIN A HIGH LEVEL OF SERVICE

Imagine that you found employees with the necessary makings to provide excellent service and trained them in your customer service system. Now your main concern should be to maintain a consistently high level of service.

Pride is your best helper in this endeavor. People are proud to work for a company where the president and top managers constantly talk about the need for quality customer service and back up their words with deeds. They are proud of a company that demonstrates its commitment to excellent service by training its employees and creating the right atmosphere, and proves this commitment with specific financial support.

Poor service increases employee turnover

According to a study by Forum Corporation, employee turnover directly depends on how employees evaluate the level of service in their company. If employees consider the service to be of high quality, then they are more loyal to the company. And vice versa: if the service in the company is bad, then it loses not only customers, but also employees.

The Forum Corporation report states: “The highest rates of employee turnover are observed in companies where employees rate the quality of the service provided as very low ... Factors such as length of service in the company, official duties and the frequency of contact with customers, do not actually affect this indicator.

Since reductions in employee turnover are a proven consequence of staff motivation generated by quality service programs, the opposite phenomenon—increase in employee turnover—should be seen as a warning sign of serious service problems.

This is one of the main findings that the Forum Corporation made in a study of more than 700 companies around the world. Staff turnover directly depends on the opinion of the staff about the quality of the service provided.

An epidemic of lack of pride in one's work is raging these days, and Forum's findings only confirm its danger. Companies must take this into account if they want to gain a strong reputation as leaders in the quality of the service provided.

With the development of any business, not only its profitability and influence in the market increases, but also the number of users who refuse its services. Even a stable retention of the customer churn rate (Churn) at an acceptable level of 2% can mean large financial losses, because if the platform’s customer base is in the thousands of users, leaving even 2% of them means losing a significant share of the profit.

As we can see on the graph, regular (Regular User) and new users (New Signup) cloud service regularly use the platform (Avg Logins/Day) and work with it for a long time (Time). As for unsubscribed clients (Lost Customer), their activity indicators gradually decreased until they stopped working with the service at all.

One of today's top Internet marketers put it this way: "As a company grows, working to reduce user churn is very similar to getting into quicksand - the harder you try to get out of it, the faster you sink even deeper."

This comparison very well describes the state of affairs of many companies trying to build strong long-term relationships with customers and satisfy all their needs, thereby reducing the bounce rate.

Fortunately, there are many effective ways to significantly reduce the loss of users.

Make the most of your current opportunities

The task of any entrepreneur is not only to reduce the churn rate, but also to increase the profitability of the business. To do this, you can apply a number of effective practices.

Bounce rate analysis

Before you solve any problem, you need to understand why it arose. That is why the analysis of lost customers and determining the reasons that forced them to unsubscribe from the service is a key factor in reducing the bounce rate.

The most powerful tool for obtaining such information is a survey about the reasons for leaving the company's services, which can either be included in the process of unsubscribing from the service, or send an email to the user asking them to tell about the reasons for leaving the company.

According to research, such a survey was completed by a large number of respondents, but using this format requires much more effort from the marketer than simply asking to complete the survey sent by e-mail.

The key to using analytics to determine why customers churn and calculate your monthly revenue is to analyze the right metrics.

Numerical and strictly verified parameters that most accurately reflect the effectiveness of your business:

• monthly income (Monthly Recurring Revenue, MRR);
• the already mentioned churn indicator (Churn);
• Customer Acquisition Cost (CAC);
• average income per client (Average Revenue Per Customer);
• maximum profit brought by the client for life cycle(Lifetime Value of the Customer, LVC).

The analysis of customer reviews and the above 5 indicators is enough to reduce churn and increase MRR.

User segmentation

Dividing the customer base into loyal users and those who are most likely to leave gives the marketer the opportunity to more clearly see the differences between regular and temporary customers and determine their basic needs.

With this information, it is much easier to influence the decisions of exit-prone clients. For example, you can contact them and offer some help or service, whether it's training on how to use the service or a discount coupon. The most important thing is to contact the client directly, since it is possible to reliably find out his specific needs and wishes only through direct communication.

Segmentation is possible when developing the Lead Scoring system inside CRM.

Educational materials

Providing useful training materials to a failure-prone segment of users can significantly reduce that segment. It is possible that some customers do not receive best results from using your solution simply because they themselves do not use all its technological capabilities without realizing it.

A segmented mailing list with helpful tutorials (manuals), tips and answers to frequently asked questions (F.A.Q.) would be very useful for such subscribers, and having a section with educational content on your blog is a must.

Most top companies are popular with the target audience and have many loyal customers precisely because they provide free and useful learning materials.

There are several ways to train users:

• e-mailing - training materials go directly to the subscriber's mailbox;
• email coaching - this format (by the way, very appreciated by users) is more like direct communication with the client, during which he is taught to use the service to the maximum and get all the possible benefits from it;
• a series of blog articles about the features and benefits of your offer that subscribers may not be aware of;
• trainings on the most efficient use of your platform;
• trainings on near-target topics in the field of activity of your subscribers;
• webinars;
• creating a learning center or YouTube channel.

Active User Rewards

Rewarding customers with bonuses and discounts for their loyalty and positive results of working with the service not only encourages business, but also makes them more inclined to switch to advanced tariff plan for which they received a discount.

You can reward customers for loyalty from the very beginning of their buying life cycle, - during the registration process - by setting the subscription price for 1 year cheaper than the total annual cost monthly rate.

Sell ​​additional services

The idea of ​​this practice is very simple: to persuade a person to switch to a more expensive and efficient tariff or to purchase related services and services.

The incentive to make an expensive transaction is more natural for buyers: if a person needs something, he will be ready to pay the required amount for it. This implementation of the cross-selling technique will not only bring you additional profit, but will also have a positive effect on reducing the outflow rate.

The main thing is to correctly display all the key differences and advantages of more expensive offers, convenience and profit for the buyer.

It’s worth mentioning right away that people often use the term “Up-selling”, meaning “Cross-selling”. In order to avoid confusion, we will denote the difference between these concepts.

If the store/website/platform offers the buyer additional options or a more expensive version of the product that he is going to buy (or has already bought) - this is Up-selling.

Imagine the situation: you came to the store for a 27-inch TV, and you are offered to pay attention to a model with a diagonal of 32 inches or, for example, to purchase additional warranty. In this case, the business uses an upsell strategy in an effort to increase its profits.

An offer to purchase an additional guarantee is a classic example of using an upselling strategy.

The essence of cross-selling is to offer the buyer a product that complements his purchase. In addition to the TV, you are recommended to purchase game console or media player? This is a typical example of using the Cross-sell strategy.

Both methods are designed to help your client get everything he needs, and you, accordingly, to extract the maximum profit.

Let's take a look at the top three benefits of these customer experiences.

1. A well-built upsell system allows you to establish closer contact with customers

Sales guru Jeffrey Gitomer believes that upselling is a way to "help the customer win."

When Jeffrey was asked how he himself could be forced, for example, to change credit card to a more expensive one to maintain, he replied: “Explain what my winnings will be. If I win, you win too."

Let's take an example. Husband and wife decided to spend the weekend outside the city. When checking into the hotel, they were offered breakfast for two for $29 instead of the usual $49.

Of course, they gladly accepted the offer, which allowed them to receive a benefit of $20. The hotel, however, also did not lose money, because in addition to $ 29, it received the opportunity to establish closer relationships with its customers. There is a win for both sides.

Summary: Up-selling is more than just a sales strategy. This tool will allow you to get closer to customers and build mutually beneficial relationships with them.

2. Up-selling is easier than finding new customers

The book Marketing Metrics provides an extremely interesting statistic: “The probability of selling a product to a new buyer is 5-10%. The probability of selling a product to a person who has bought from you before is 60-70%.

The left column is the probability of selling the product to a new buyer. The right column is the probability of selling the product to a person who has made purchases from you before.

The difference is simply huge. However, this is not surprising. People tend to be wary of everything new and are not too willing to apply to companies about which they know practically nothing.

Among other things, upselling allows your business to grow faster. Entrepreneur Joel York explains, "The low cost of up-selling gives SaaS companies the ability to reduce the time it takes to make their first profit."

The chart above shows how Up-sell affects the time it takes for a company to make its first profit.

The point of intersection of the blue and light red lines shows the moment of making the first profit if the company increases sales only by attracting new customers.

The intersection point of the green and light red lines shows the moment of receiving the first profit if, in addition to attracting new customers, the company uses an upsell.

Many companies focus all their efforts on finding new customers, losing sight of the opportunity to work with the existing customer base.

3. Using an upsell strategy increases life value client

Customer Lifetime Value (CLV) is an indicator that characterizes the amount of profit that a company can receive from a client for the entire time of cooperation with him. Investor, entrepreneur, and VP of marketing at PBWiki, Chris Yeh, provides an example of how a company can use Up-sell to increase CLV.

“Once I had to call a tow truck. After I informed the dispatcher of my location, he suggested that I take out insurance at a discount. After 15 minutes, after listening to all the details, I agreed to increase the insurance premium for my house and car by about $100. The sum insured thus increased by $1,000,000.

I have been a customer of GEICO for 16 years and there is no reason to believe that I will not be a customer for the next 20 years. In this way, GEICO has transformed a costly technical assistance call into a $2,000 CLV addition.”

Summary: Each upsell can significantly increase the lifetime value of a customer.

4 Use Cases for an Up-Sell Ecommerce Strategy

Up-selling must be applied taking into account the specifics of the industry in which you work. Below are 4 good examples how SaaS companies and firms from the sector ecommerce use this tool successfully.

1. Upsell and applications

If your Dropbox personal storage is full, the app will prompt you to get more storage:

Top caption: Your personal data storage on Dropbox is full. Get more space.

Promptly offering the user a solution to his problem, the company thereby establishes a trusting relationship with him.

2. Up-sell and shopping cart

This is perhaps the most popular way to use an upsell strategy in eCommerce. Some people are good at using this tool, some are not.

When you order flowers on the 1-800-Flowers website, you will be offered several products that can really enhance your gift. For example, you can additionally buy Balloons, a box of chocolates or a teddy bear:

Top caption: Would you like to add something to the gift? (optional)

Compare this to what GoDaddy offers you when you purchase a domain name. Neil Patel, an expert in conversion optimization, comments:

“They could significantly increase conversion rates by offering up-sells to users that really complement their purchase. For example, I added a domain name to the cart, and received the following offer:

"Build trust with your site visitors. People want to be sure your site is trustworthy. Give them proof."

Why offer a domain certification service to a user if they probably don't have hosting or a website? I don't know about you, but I've never built a website before purchasing a domain name for it."

3. Up-sell and technical support

The quality of support work has a huge impact on customer loyalty. Let's bring specific example. Groove offered its Live Chat to users as an alternative to email. This gave any client of the company the opportunity to reduce the flow of letters coming to his email. Naturally, people were happy with the fact that their problem had been solved.

Hello. I understand you very well: getting a bunch of extra letters is very unpleasant. Would you like to add our Live Chat to the site? So you could quickly answer incoming questions without using email.

If you are interested, I will be happy to send you a free 14-day trial. I'm sure Live Chat will help reduce the flow of emails coming to your email. Of course, if the results do not satisfy you, you can refuse the purchase.

Do you want to try Live Chat?

Summary: Offering a client an upsell that allows you to establish a dialogue with him, you certainly strengthen the foundation of your relationship. However, if you can solve the problem technical support user without using upsell, do this.

4. Up-sell and customer achievement

Ramit Sethi sells online courses for people looking to build successful career, to achieve business success or simply to increase the productivity of their activities. A large number of courses offered allows Ramit to use Cross-selling effectively.

When a client completes one of the courses, thus achieving the set goal, he feels a spiritual uplift. At this moment he email box sends an email that looks like this:

Hello, today I want to offer you a special bonus. You can access the Ramit's Brain Trust program completely free of charge. This is my gift to you.

Read it, it's worth it.

In this letter, the user is invited to receive a free 30-day trial as part of the loyalty program.

Summary: The moment when the client has reached the goal is ideal for offering him an up-sell.

Connect with your clients

As we said earlier, only by contacting users directly can you absolutely know their specific needs and preferences. The classic online surveys that only a few take are not suitable for this, and it is unlikely that you will be able to personally contact each client. But there are several effective ways to effectively communicate with customers, successfully applied in practice by many large brands.

Customer Opinion Research

The results of such surveys are very valuable information, on the basis of which you can both retain current customers and develop your business in the future. But in order to get this data, it is important not to alienate subscribers with the complexity and length of the survey - 10 key questions are enough to get important information about the needs of buyers.

Help us help you survey

This format is very similar to the previous survey, but is presented as beneficial primarily for the user himself. Your goal: to convey to the client that, based on his answers, you will create a better and more valuable product, from which he will receive the benefits.

Social media survey with rewards for participation

Polls in in social networks are a great way to connect more personally with your former and current customers, and the various bonuses, coupons and discounts that respondents will receive for completing the survey will greatly increase their incentive to share their opinion with you.

Social media branding campaign

Once the causes of customer churn are identified, the marketer can resort to very effective way mitigating the problem by running a social media branding campaign, as social media communication is more personal than email.

In addition, the loyalty that a person develops when communicating with a brand on social networks makes him less susceptible to the prices of the products of the business he follows, and also significantly reduces the likelihood of a client leaving for competitors.

Reward users at specific lifecycle stages

In trying to win back lost customers, marketers sometimes completely lose sight of caring for their current users. But it is important not only to understand the reasons for leaving, but also to keep regular customers - bonuses for the long-term use of your product or a small financial compensation can be very helpful in this regard.

There are many incentive options:

• provide customers with a discount coupon for upgrading to an advanced plan;
• open access to download useful software for the user;
• reward a year's use of the service with one month of free subscription.

Increase loyalty with high-quality support service

Your relationship with users plays a huge role in building strong partnerships: serve your customers on highest level, do not make promises beyond your strength and always fulfill the obligations you have given.

Listen to your users and thank them for their help and helpful tips:

• thank the person for good idea on his page in the social network;
• indicate on the site page about technical properties your platform company names, software which you use;
• mention the name of the user who gave you helpful advice, in one of the blog posts.

Evaluation through the eyes of buyers

Look at your service through the eyes of your customers: what is the most important feature for you as a user, what would you like to add or change?

For a more objective assessment, try to analyze your closest competitor:

• Is your offer more attractive than his USP?
• what are the main advantages of your competitor, and do you have them?
• What modifications could you make to stand out from the competition and gain a significant advantage?

Customers are the most important part of any business. By looking at your solution through the eyes of your users, you may be able to understand what they lack or what they would like to improve.

Do not forget also about the pleasant little things that can have a very positive effect on the attitude of the target audience towards the brand:

• congratulate your users on their birthday and all holidays;
• do not forget to respond to customer reviews, while paying attention to what they write;
• communicate with your target audience in various groups on social media, establishing direct personal contact.

(this is a service for analyzing the behavior of site users and communicating with them), since they launched the automatic e-mail sending function, one of the most common use cases for this feature has been to re-engage customers who have stopped using this or that SaaS product. Let's see how to do it most effectively.

The very concept of "OUTFLOW" is always indefinite

User churn (Churn) is a concept with not very clear (in best case) definition. App owners are ignoring too many variables when they talk about their customer turnover percentage.

When someone tells me that they have a “5% churn” and asks if this is normal, I always have a hard time answering. This figure is so uncertain that I have to ask a whole series of clarifying questions:
1. Are new users who signed up this month included in the count, or is it just a loss of customers compared to the previous month? In short, if we started with 100 subscribers, 30 more signed up, and at the end of the month there were 110 of them - what kind of outflow will we get?
2. How does the loss of customers compare with the loss of profitability? A 5% churn is okay, provided that only free users left; but what if all the premium clients who made 50% of the income fell into the same 5%?
3. How much did this decrease in activity? How many previously active users have stopped using the product? This is usually a good metric for predicting future churn.

As you probably guessed, the questions continue until the real picture begins to emerge. Aggregate numbers, whether it's churn or conversion metrics, rarely reveal the real picture. As I have repeatedly said - if there is no real data, show me your bank balance better.

Decrease in activity - that's what really matters

Decrease in user activity - this is what really matters. Usually, the loss of users statistics takes into account only their refusals from further subscription (closing of the user account). But closing an account is very relative indicator. This is the very last thing that happens. Customers don't suddenly decide to stop using an app and delete all of their data—unless your product has screwed up badly enough. Typically, users leave gradually: first, your application is launched every morning, then every week, then once a month. Then the data in the application becomes outdated, and in the end the client notices that he pays 29 bucks a month for something that he does not need and does not use. It is already difficult to return him at this point, but only now your statistics will notice that there are problems with him.

What to do when activity decreases

The most effective time to fight for a client is when you see a drop in activity in an entire team of users from the same company. And just at this time, automatic mailings react incorrectly. When I return from vacation, I find in my mail dozens of messages like “Come back, we miss you!” sent to the wrong address. If one user from your client's account disappears for a while, that's just fine. It is much worse if the activity of the entire team drops - then you need to take care of the possible loss of customers.

If you see that a previously active client is starting to elude you, then a timely personal message can still help the cause. At best, he will return; at worst, you'll find out why he's leaving. Both are better than doing nothing at all.

What to write in a letter to an outgoing client

1. CONTACT THE "NECESSARY" CUSTOMERS

There is a difference between a user who simply did not renew their subscription after the 30-day free period expired, and one who used the system whole year, and then began to reduce activity. As a result, there are two different approaches to their retention. Don't shove them both into the same "we-miss-you" basket. Work with them differently.

2. CONTACT PERSONALLY

A client who has several unanswered calls to technical support should not be sent automatic mailing with a login reminder. You should also not start with the appeal “Dear customer”. Such actions do more harm than good. When writing to a client, introduce yourself. Make it clear that you are a real person who is really interested in hearing their opinion about your application.

3. BE INTERESTING

From a simple call like “Come back, we miss you” is of little use. You need to motivate the user to return. You can often find things in your product that will help you win back or keep a customer. You can also get outgoing users interested in talking about your new features and plans for the future. Convincing them to stay with you is usually through features that save time (such as improved imports), increase efficiency (such as integration with other systems), or provide new features without additional user effort (such as automatic weekly reporting).

If there are well-known long-term problems with your program (with functionality, accuracy, limitations, and the like), it's tempting to promise to fix them. However, there is a high probability that you have been promising this for several months, or even years. If so, and you know you can't promise anything specific, don't say anything at all, and focus instead on fixing the problem itself.

4. BE VISUAL

If you have new features or interface improvements coming soon, long-term users may be especially interested in seeing screenshots. If improvements are coming in terms of the organization of work processes in the system, one clear schedule will often be better and more understandable than several paragraphs of descriptive text. Never forget that your email is just one of many in your inbox and everyone promises something. Any sign that will make your message stand out in the general flow can help you.

5. BE GRATEFUL, HONEST AND RESPECT

Some clients will inevitably leave you. Someone enters the business, someone leaves, and with them the demand for your product. When saying goodbye to a client, be sure to say goodbye. If he has a fair claim to your product, admit it. Do not try to deceive yourself and prove your case. Thank the departing person for their cooperation and let them go. The worst thing you can do afterward is keep spamming him for a few more months or years after you leave. This does more harm than good.

How customer churn affects your work

How do you deal with customer turnover? Do you analyze the decrease in activity, churn rates, do you send “engaging” emails? Share your experience.

Part 1. Theoretical aspect

From the editor: The Lipetsk cable operator told the cableman about Telekom Novation, which helped to stop the outflow and normalize sales. The company specializes in a relatively new, but at the same time very important area - customer retention. Of course, we could not miss this opportunity and turned to the specialists of Telecom Innovations with a proposal to tell about their experience, to give professional recommendations to cable operators. The material turned out to be voluminous, so we divided it thematically into three parts, two of which will be published after this material. The first part is theory. It contains the main points that you should pay attention to for a more conscious understanding of the following parts.

Subscriber retention strategy

Retaining a subscriber, for which the money was spent, is a necessary component of a successful business. However, not all companies are at the stage of understanding this direction and do not think that new client can cost five times more than the existing one. Some do not see the point in retaining subscribers at all, considering disconnecting subscribers as a “natural flow” from one provider to another. Here I would like to mention the following phrase of M. Fry: "There is nothing more deceptive than confidence in one's own invulnerability." In order not to be deceived, pay attention to the points below, which will help you deal with the situation with the retention of subscribers in your company.

You can determine the need for optimization of the “retention” direction in your company by the following parameters:

Do you think that there is no churn in your company;

You don't divide churn into "managed" and "unmanaged";

You don't have a churn reason classifier;

Managers do not have colorful presentation materials and high-quality speech modules that allow them to retain customers;

You do not take into account the number of new subscribers in the outflow;

No churn plan;

You can't name the average life cycle of a single subscriber's activity;

You are convinced that it is more profitable to attract new subscribers than to retain regular customers;

You do not generate monthly reports on outflow to competitors;

You are not familiar with the concept of “hidden churn”;

The company has no business processes, job descriptions and time plans in this direction.

If you answer yes to at least 2-3 of the above points, you need to think about reorganizing the work of this block.

Here is a typical situation: the number of disconnected subscribers is increasing in the company, and the management decides to reconsider its attitude towards retention. As a rule, first of all, they look at the reasons that prompted subscribers to disconnect. Some, for inexplicable reasons, go to competitors (and this, by the way, is the result of competent work of direct sales agents), some move, someone disconnects due to poor quality, and someone simply does not see the need for further use of services ...

In today's competitive environment, and especially among telecommunications providers, the following anecdote often comes up:

There are three competing stores next to each other.

The owner of the left hung up a sign: "We have the lowest prices."

The owner of the right hung a sign: "We have the highest quality goods."

Nowadays, in a fast race for a client, the winner is not the one whose product is better or cheaper, but the one who can be the first to find the right approach. Retention is the same sale, only you must be able to sell services to a subscriber who has come to disconnect from your services. And this, you see, is not easy.

At the core of our customer retention methodology is systems approach. In the figure below, from top to bottom, the order of analysis of churn controls is shown, and from bottom to top, the order of its design. A well-organized order of all these elements leads to the achievement of planned indicators for reducing outflow.

First of all, you need to understand why the subscriber is disconnected. In order to understand the true causes of a shutdown, one should correctly compose a classifier, or, more simply, a list of reasons, and then develop a series effective methods for each of them.

You can diagnose the retention system yourself, you can turn to professionals in this field. In the course of these works, all elements of the churn management system should be checked: a churn reason classifier, business processes, motivation, etc., i.e. all the elements that actuate the “mechanism” for achieving planned outflow indicators.

We, in turn, get an idea about all these blocks from the customer's questionnaires, after which we carry out diagnostics in stages:

1. Questioning (quantitative questionnaire + descriptive questionnaire);

2. Formation of a hypothesis indicating the main problems;

3. Checking the reliability of the hypothesis “in the fields” (3-4 days);

But before proceeding with the formation of a hypothesis, we advise you to study the main differences between the concepts of “cause” and “symptom”. This will help you fill out the questionnaire correctly (in the event that you order these services in consulting companies), or independently outline the circle of the main problems.

To begin with, I would like to give the main “reasons” that, according to the management of the companies with which we cooperated, prevent them from retaining subscribers:

1. Many subscribers simply stop paying and disappear, which makes it difficult to work with them.

2. When disconnecting, subscribers do not always say the true reason for refusing services or do not indicate it at all.

3. Employees do not retain customers due to lack of time spent on other operations.

4. Difficulties in finding a candidate for the head of the retention service: the direction is new, so it is difficult to find an experienced specialist for this position.

5. Offers of competitors are much more profitable than offers of the customer. Thus, competitors lure subscribers to more favorable conditions.

As a rule, the problems voiced are SYMPTOMS, but the true CAUSES are different:

1. Companies do not have a clearly defined implementation project plan based on market conditions.

2. Subscribers do not know about the rules for disconnecting from services.

3. There is not enough experience and knowledge in setting this direction, there are no prescribed methods.

4. Human resources are not enough to keep clients in the office

5. An inefficient system of staff motivation makes it difficult to retain customers.

6. There is no detailed classifier that reflects the real picture of departed subscribers.

7. There is no presentation module for subscribers that demonstrates the advantages of the company in question and the disadvantages of competitors.

After listing the main problems and formulating a hypothesis, one should move on to building a competent classifier of causes and clarifying the correctness of obtaining incoming information. After all, the basis for the correct operation of the retention system is the correct determination of the true reasons for the outflow and the presence of transparent business processes. Our version of the classifier contains 33 points indicating the reasons for subscribers leaving (below is a part of the classifier - the first 15 points and the final 33rd). We clearly divide churn into managed and unmanaged. This is necessary in order to correctly determine the volume of subscribers, which can and should be guided in the design of retention methods.

Correctly identifying churn reasons is only half the battle. you can also build a chain of methods to reduce the corresponding positions. For example, the reason “moving out of reach” often means leaving for a competitor. Unfortunately, operators rarely systematically consider the group “quality of service” (and care for it). Providers, based on forum posts about how they speak about all the companies in the city, mistakenly believe that “everyone is like that now”. The presence of a detailed classifier and threshold values ​​will allow you to quickly identify weaknesses and understand economic effect from implementation: it will be expressed in the difference between what is now and the normative figures.

Before we move on to practice, I would like to focus in theory on such an important element as staff motivation. In order to manage the outflow, it is necessary to have a target figure for disconnected subscribers in the context of services. It is obvious that stage-by-stage check of all levels of management is necessary. An example of an erroneous setting of a motivation system aimed at retaining customers: our company had a customer whose personnel motivation system in the subscriber department provided for bonuses / de-bonuses for churn. The essence of the motivation was that if the company reduced the outflow of subscribers by 20% (this is about 200 people per month), the salary of managers who accepted applications for disconnection would increase by only 200 rubles. Agree, not very big money, even for a person who receives 10 tr. per month. In addition to such an “effective” motivation system, there was another problem: managers could not physically deal with such subscribers due to heavy workload, especially in the CNN.