In the last post of our four-part series on customer retention strategies, I would like to look at the impact of marketing campaigns on churn. Marketing or sales campaigns can impact churn, regardless of their primary goals. For example, contract renewal campaigns can have the unintended effect of reminding forgetful wireless customers that their contracts have already expired, and that they are free to explore the marketplace for better deals. Unfortunately, companies rarely remember to consider unintended churn when evaluating financial impacts of marketing campaigns—which often leads to poor decisions. Similarly, excessive efforts by companies to promote up-sells (such as credit card payment protection services) can have the inadvertent effect of irritating some customers and causing them to cancel existing services altogether.

An effective approach will include churn impact in the valuation of any campaign. This will help decision makers evaluate the list of campaigns on a set of standard financial metrics and roll-out the winners. Unfortunately, in my experience, this simple solution hits a road block when the acquisition and retention functions are separated across an organization. Campaigns managed by marketing or customer acquisition groups do not typically account for churn. By contrast, campaigns run by retention groups will be more likely to have an incentive to address churn. For example, call center representatives might be asked to substitute low-end packages with high-end offers at no new cost, or to decrease the price of current services in order to combat competitive pricing pressures.

Marketing and customer acquisition efforts comprise by far the most common type of campaigns, so organizations must do a better job of considering churn in these instances. Marketing and sales departments should work with support organizations to bolster the NPV models of their campaigns by gathering customer data on actual churn outcomes. Depending on the availability and quality of data, these departments should also consider supplementing the analysis with primary or secondary research.

The credit card industry provides one of the best examples of this integrated approach. Most of the best-in-class credit card issuers are diligent about managing their churn risks, and they achieve financial valuations that estimate and measure churn impact for all their campaigns—valuations that include added exposure of a new customer and the incremental credit line. Only campaigns that pass a specific level of rigorous scrutiny are introduced to the market. This industry example illustrates a key point: Companies will reduce churn and increase the marketing value if they can identify and refine, or eliminate, campaigns in which the churn cost negates or exceeds any new value created from adding or retaining customers.

Conclusion

It is necessary to develop a comprehensive approach to customer retention and churn management, considering not only their external drivers, but also internal factors that may impede an effective response. By adhering to our specific guidelines and principles, companies can build a strategic foundation for successfully managing churn and increase their retention rates consistently over the long term.

Keep in mind there is no silver bullet for churn reduction. Guidelines, tactics, and strategies will vary for each company; the only sure-fire approach for reducing churn is to develop a custom, comprehensive strategy and to execute that strategy through quality program management and coordination across the organization. Successful execution will routinely pay significant dividends, as low churn rates can vault a company to economic health and industry leadership in terms of profitability and brand equity.

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