Category: blog

Sounds like something from science fiction?

Conjures up scenes from the block-buster, Minority Report, where ‘pre-cogs’ predicted crimes before they happened and members of the ‘pre-crime’ squad arrested perpetrators before they even lifted a finger?

However, predicting churn before it happens is not the stuff of sci-fi. It is here with us today thanks to powers of artificial intelligence (AI) and the tenacity and determination of two Australian customer retention experts, Libby Dale and Mike Crooks, who have developed the world’s first churn predictive software applicable across industry.

Aptly called, SmartMeasures, this clever software enables businesses to accurately pinpoint if customers are on the verge of churn (or at the very least, are thinking about it) and to very quickly step in before an irritation or series of annoyances becomes a full-blown problem.

The new solution is riding on the back of a global trend focussed on retaining customers rather than accepting attrition as a normal but painful part of business. This, in turn, has spawned the emergence of a brand new practise area, ‘customer success management’.

Not surprisingly, says Ms Dale, SmartMeasures has the potential to save businesses millions of dollars in lost business.

“Conservatively speaking our software is capable of stripping 10 percent from our churn bill. By way of example, a company losing $500 million to customer attrition (which is commonplace in high-churn industries), can at the very least anticipate savings in the order of $20M per annum.

“Naturally our expectation is that it will save them much, much more.”

SmartMeasures is now available to English speaking businesses globally which has a churn problem costing them in excess of $10M annually. However, those with churn problems over $50M are likely to benefit most.

Rather than relying on the ‘pre-cogs’ of Minority Report to foresee pending attrition, the software relies on an exhaustive collection of customer risk markers or measures drawn from across business. These measures have the potential to contribute to changes in customer sentiment and can include negative customer behaviour such as not paying bills on time, declining product usage, complaints, calling the call centre on multiple occasions or impacts the business has on customers such as operational problems, late delivery, variable product quality, billing errors and so on.

When one of these markers or a mix of these markers is detected by Smart Measures, alerts are triggered in real time, enabling the system to instantly trigger a series of automated responses or for business to step in and remediate the problem.

The application of artificial intelligence or machine learning to the software is real ‘magic sauce’ and has taken the prediction and remediation of customer risk to a whole new level. It has also provided the software with its real edge in the market.

“Basically it has empowered our software to do what would not be humanly possible,” says Ms Dale

“AI enables Smart Measures to scroll through vast amounts of customer interaction data and very accurately predict which customers are at risk of churning and determine what action or treatment plans should be applied to the problem. The best is that this happens in real time which means that businesses can react instantly to a customer’s changing circumstances, rather than some time after the event when remediation may be too late and the damage is already done!

“Also rather than take a ‘one size fits all’ approach to managing risk, AI gives businesses the smarts to intervene on a case by case basis and apply treatment plans to suit the level and type of risk detected.  This cuts out the annoyance for customers of being placed in a mass retention campaign that has little or no relevance to them or may cause further irritation.”

By automating the monitoring and treatment process, the application of AI/SmartMeasures has lessened the need for human intervention such as constantly checking dashboards or calling up clients when non-human responses would be more effective. “This allows for a smarter and more productive use of resources.  However, this does not totally eliminate human intervention but which happens only when deemed absolutely necessary,” says Ms Dale.

The software falls into a rapidly emerging business practise area or discipline known as Customer Success Management. Subsequently, the product will be referred to as ‘customer success software’.

Unlike customer service, which takes a REACTIVE approach to managing customers and their problems, customer success is about businesses being PROACTIVE and dealing with customer problems and issues before they become insurmountable and the customer leaves.

“While so-called ‘customer success software’ has been about for some time, it has largely been used to measure the success of how customers use their software as a service (SaaS) purchases – if there is an opportunity to upsell or if customers are at risk of no longer purchasing. In essence, it has been an industry spawned to support businesses which sell SaaS or subscription based products. 

“SmartMeasures has significantly broadened this approach to include non-SaaS software usage and apply Customer Success Management to the industry more broadly,” says Ms Dale.

For more media information contact:

Wendy Parker on 0422 694 503

Regardless of what you call it – defection, attrition, turnover, changing providers, you name it – customer churn is a painful reality doing business. Even the largest and most successful companies are not immune.

In Australia, our businesses on average lose between 6-8 percent of their customers each year, with our utilities and telecommunications sectors taking biggest beating with losses of between 20-25 percent.

To add further insult to injury, our energy retail market boasts one of the highest rates of market churn in the world, worst affected being Victoria which at last count was seeing one in four customers head for the door each year!

Much of this churn has been attributed to the liberalisation of energy retailing which has seen a succession of new entrants streaming into the market.

While competition at the best of times is good, constant switching between providers is significantly detrimental to profitability.

Australia’s health insurance sector – another group struggling under the yoke of unusually high customer churn – understands this all too well. It is seeing around 10 per cent of policy holders switching providers each year, which says health insurance industry consultant, Avnesh Ratnanesan, is putting $2 billion of revenue at risk on an annual basis.

While it is difficult, if not impossible, to determine what churn overall is costing Australian businesses, (these figures are not publicly available, in fact most businesses prefer not talking about customer attrition) best estimates put it at billions of dollars each year.

Sadly these losses, in the main, are viewed by most organisations as a part of doing business and something they have to live with!

The general consensus is that acquiring more customers and generating new business will in time balance out these unavoidable losses.

Regrettably, this thinking loses sight of the fact that it costs business 2-3 times more to acquire a new customer than retain an existing one (and in the case of the utilities sector, 6-7 times).

Businesses often forget that the cost of losing a customer is not just determined by the costs associated with recruiting replacement customers. There is also the loss of the ‘life-time value’ or the revenue the customer would ordinarily have brought in during their relationship with a business, not to mention the loss of revenue during on-boarding process.

These additional costs have the habit of just slipping under the corporate radar!

According to Sanjivrao Katakam, Principal Consultant – Energy & Utilities, Wipro, in India – who has worked extensively in the utilities sector around the world, including Australia, losing customers also has implications beyond loss of revenue.

This includes the loss of market share, a decline in brand image, not to mention the perilous threat of acquisition should a company be perceived to be haemorrhaging customers!

Tide is turning for customer retention

However, the good news is that despite the prevailing acceptance that customer attrition is part and parcel of doing business; the global tide is now turning.

More and more businesses are now no longer prepared to cop a financial belting and increasingly turning their attention to customer retention.

They are increasingly sharpening their focus on better understanding the key drivers of churn and how to step in and address an issue before it becomes a full-blown problem and a customer leaves.
Are you one of these more forward-thinking, progressive businesses? Do you believe churn is not something we should passively accept but rather something we should actively look at reducing?

Go to the Customer Churn Cost Savings Calculator to find out how much churn is costing your business.

Apparently not! Over the past year or so I have been chatting to business managers and friends on the topic of being smarter about servicing customers … not just giving customers online self-service, but really putting in the effort into making life easier for them to stay our customers.

In these conversations, I have been genuinely surprised by the focus on customer acquisition and the apparent lack of concern for customer retention. In fact, the more I looked into the issue, the more I realised that Australian businesses overall view customer churn as a painful reality of business and something they have little control over.

Basically, it’s been put in the ‘too-hard basket’.

For starters, there’s no one person or department stepping up and taking responsibility for customer churn. On top of that there a huge misalignment between sales and service in businesses.  Sales people are rewarded for the customers they bring on board, irrespective of whether they are a perfect fit or not and with total disregard for their longer term prospects.

Sadly it is often the service team that is left to pick up the pieces when the sales team gets it wrong and customers are sold the wrong product or service!

Growing global groundswell to managing retention

Despite the somewhat gloomy picture I have painted I am happy to report that there is a growing global groundswell to more effective customer retention.

This has resulted in the emergence of a brand new practice area, ‘customer success’, and is seeing businesses increasingly focussing their attention on customer retention and systems and processes aimed at keeping their customers happy.

Think of the cost to business and the unnecessary effort for customers in the current ‘acquire – churn – acquire’ way of doing business.  According to Harvard Business Review “If you’re not convinced that retaining customers is so valuable, consider research done by Frederick Reichheld of Bain & Company (the inventor of the net promoter score) that shows increasing customer retention rates by 5% increases profits by 25% to 95%.”

“In many industries, hyper-competition has eroded traditional product and service advantages, making customer experience the new competitive battlefield,” said Jake Sorofman, research director at Gartner…. The reality is that focusing innovation on new products — and even new business models — is subject to shrinking periods of competitive advantage.”

The big question is: are Australian businesses embracing this new thinking?

Are we moving away from ploughing millions into new customer acquisition and truly getting behind improving customer retention through better customer experience. More importantly, are we doing a better job holding on to them than we have up until now?