Retaining & Growing Customer
Case Study
Situation
B2B European logistics company
facing declining revenues due to
high customer attrition
Revenue churn rate of
15%
No formal process for
understanding or managing
customer attrition
A recently launched B2B European logistics company had enjoyed 3 years of exponential growth due to strong customer acquisition. However, in early 2022 the Finance team identified decreasing revenues from their base of customers, which, after some deeper investigation, proved to relate to a high level of departing customers. The leadership team recognised that they had become complacent about customer retention but, while the level of revenue churn equated to 15%, the leadership team was unable to understand the root cause, given the lack of any formal attrition management process. It was clear that urgent intervention was required to stem the ‘leaky bucket’ and reverse eroding profit margins.
The Optilium Solution
Created a clear, objective set of churn reasons for better tracking and understanding
The three part plan to reduce customer attrition, started with creating a clear and objective set of churn reasons that could be applied within the CRM platform. Previously, when customers called to leave, informal notes were added to customer records with the majority of explanations relating to “price too high” or “other reason”. Not only were these notes inadequate, they were masking the truth behind customer dissatisfaction. A new set of clear “reasons for attrition” (initially eight) were created, with input from Customer Experience, Sales, Marketing and Product functions, which were used to log every customer departure. Importantly, these were not designed to apportion blame to any one team, but to create honest feedback that would enable solutions to be created.
Implemented an early warning
system based on four critical
triggers of churn
Secondly, to enable the business to anticipate attrition, an early warning system was implemented based upon four critical triggers of churn. The tool containing the triggers (which is complimentary to all CRM platforms and without any integration requirements) has become central to the account management and customer experience communities. Intelligence captured in the tool, combined with new insight derived from in-house data, has enabled pro-active management of attrition.
Launched "Customers for Life" program to nurture customers throughout their lifecycle
Finally, a programme called “Customers for Life” was launched, recognising that customers need to be nurtured for their whole lifecycle within the business. Retention starts before the customer is onboarded and continues with a series of interventions and ‘customer-delighting’ initiatives that ensure stickiness. All parts of the business are invested in the programme and are now targeted for customer satisfaction and retention.
The Outcome
New criteria revealed operational
services as a major
source of dissatisfaction , not price
After three months of churn insight, using the new set of criteria, it became clear that “price” was not a major factor in dissatisfaction. While value for money remains important, two specific operational services relating to ‘our of hours’ services and ‘returns’ became evident as a major source of pain and an area the competition excelled in. Increased clarity on these issues, plus other new areas of insight, is allowing the Product and Marketing teams to adapt offerings to better suit the needs of the market.
Enabled proactive management of
attrition and adaptation of offerings
to suit market needs
Rather than assessing ‘rear view mirror’ data and reacting when it’s too late, management teams are now anticipating areas of potential attrition and taking action to mitigate risks. To improve this, IT teams are continuing to learn how to leverage AI when working with repositories of customer data within Finance, Sales and Marketing. Attrition Risk (rather than simply “Attrition”) is now a formal agenda item at monthly operational reviews.
Customer satisfaction, lifetime
value, and churn rates
now measured at board level
Retention is no longer treated as a mutually exclusive event i.e. the remit of Customer Experience agents trying to cling onto departing, dissatisfied clients. Customer Satisfaction, Customer Lifetime Value and Churn Rates are now measured at board level with all functions taking responsibility for the wellbeing of customers.
The Results
Attrition rates reduced from
15% to 8% within 12 months
The estimated impact on group
EBITDA has been
20%
Goal to further reduce
to 5% by Q1 2024
Aligns with Bain & Co. research that a
5% improvement
in retention can increase profits by
25% to 95%
Resulting attrition rates (excluding uncontrollable losses) have reduced from 15% to 8% within 12 months. The goal for Q1 2024 is 5%. The impact on group EBITDA has been estimated at 20%. This appears to mirror expected returns based on research carried out by Bain & Co. whereby they found that 5% improvement in retention can increase profits by 25% to 95%.