OK, on the surface it seems like a reasonable question to ask, especially as we are in a very good place to dip into our research findings and establish all sorts of loyalty, advocacy and potential customer defection measurements for a number of industries.
However, the fact that this question is being asked is a clear indication of two issues:
- An increasing number of companies are seeing customer retention as an important issue for their business
- There continues to be confusion about numbers and performance targets – especially when they relate to customer satisfaction, loyalty and advocacy
My answer to this question is best illustrated by one of my infamously obscure allegories.
One day, a (hypothetical) mathematician friend of mine was heading out to the shops to buy some bread and milk. On leaving his house he noticed that some of his money was falling out through a hole in his pocket.
Being a clever chap he made a quick calculation based on the number of coins he knew he had in his pocket, and the time it would take him to reach the shop, and the rate at which the coins were escaping.
He calculated that he would still have enough money to pay for the milk and bread when he reached the shop. He had calculated that the loss of coins was “within an acceptable level”.
So, he continued on his journey and all was well, until he reached the shop.
He suddenly remembered that he also needed some butter. Sadly, he had to return home with only the bread and milk.
So come on!
The day we start talking about an “acceptable level of customer churn” is surely the day we can say goodbye to a profitable business.
Don’t get me wrong though, having a good measure of customer retention and potential loyalty at-risk are vital to any business. But these measurements aren’t there to determine whether they are within acceptable margins. They are there to guide us towards setting priorities and taking actions.
To lose customers is to lose revenue.
Customers that are lost will need to be replaced with new ones, and getting new customers costs time and money.
Whether you are measuring customer satisfaction, loyalty, advocacy, churn, or various manipulative indices, scores, or expressions of each – the only “acceptable” level is to strive towards zero churn and 100% satisfaction, loyalty and advocacy.
Of course, it is unlikely that these levels will ever be reached, but the important thing is to continually search for the causes of customer churn and devise a cost-effective approach to reduce it.
For example - mend the hole in your pocket, put your cash in another pocket, or use electronic payments.
There’s usually a viable solution to be found that costs less to fix than the cost of doing nothing - instead of trying to justify inaction with expressions like “acceptable levels of loss”.
About the author: Paul Linnell
Paul Linnell is a service improvement champion, working internationally with senior managers and their teams to help them achieve business success, reduce risk and build customer loyalty and advocacy by improving service to customers. Paul specialises in the design and deployment of customer experience measurement, service quality improvement, complaints handling and preventive analysis programmes. For most of his career he has worked in Europe and North America and for the past 10 years Paul has been based in New Zealand, continuing to serve clients globally.