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January 15, 2007
Where Have All the Customers Gone? Latest Diamond Whitepaper Offers Prescription for 'Curing Customer Churn'
CHICAGO, Jan. 15 /PRNewswire/ -- There's nothing more disheartening to a marketer than spending millions to attract new customers, only to miss out on long-term, profitable relationships because something, somewhere, somehow went wrong.
But instead of pointing fingers, Diamond Management & Technology Consultants, Inc. , recommends that companies precisely pinpoint the problems that need fixing. Using a combination of careful call monitoring, detailed process analysis, primary research, and data analytics to identify the root causes of customer churn can eliminate the "blame game" and get the organization pulling in the same direction.
Customer churn is commonly measured as the rate at which a number of customers discontinue a service during a specific time period divided by the average number of customers over that same time period. A major concern in the communications industry, where customers move from carrier to carrier in search of better deals, churn is prevalent in every business that relies on long-term relationships to drive profitability.
"Unfortunately, many companies are relying on ineffective churn strategies," said Bill Abbott, a partner in Diamond's Information and Analytics practice.
"Customer care specialists rarely save more than 30 to 40 percent of customers from defecting. Expensive, excessive offers to retain customers are often misdirected to savvy shoppers who are just bluffing for a better deal. Customer service representatives rarely gather any actionable intelligence about why customers are defecting," Abbott said.
"Likewise, churn modeling software packages may be good at predicting which customers are most likely to churn but knowing 'who' isn't enough," Abbott added. "You need to know 'why' and how to prevent it."
Diamond's latest whitepaper, "Curing Customer Churn," shows that it is far more profitable to first understand why customers are leaving and then target at-risk customers with offers that actually increase profitability. A complete copy of the whitepaper is available by sending an e-mail request to: [email protected] .
In addition, Diamond maintains an active blog at http://www.diamondinfoanalytics.com/ where readers can access and share current views on a wide range of issues ranging from churn and other customer service issues to campaign management, process analytics and business intelligence.
No Single Tool Can Uncover Root Causes of Churn
Diamond has found that it often takes a combination of tools to develop an accurate and detailed understanding of the root causes of churn.
Call monitoring is often the best place to start. However, the basic call reason statistics most companies track are usually misleading Abbott cautions.
"Inexperienced or indifferent customer care reps and reason code systems that are either too detailed or too broad make it difficult to accurately pinpoint the root causes of customer dissatisfaction," said Abbott. "A common mistake is to build a list of reason codes that combine root causes and corrective actions, which makes it difficult to identify the underlying problems.
"But if done correctly, call monitoring and analysis can yield a variety of actionable insights, such as process deficiencies and which save offer is most successful for which cancel reasons," Abbott said.
Because business process breakdowns and information system inaccuracies often inadvertently undermine customer relationships, a detailed process analysis of core business and technological operations is often useful. The goal is to understand systems issues, processes, and policies that are inconvenient or upsetting for customers. The analysis typically includes internal interviews with process owners and customer-facing employees, simulations of the customer experience, mystery shopping, and primary research with customers.
"Often we'll develop a 'leaky pipe' report, outlining where along the customer care continuum information is lost or mishandled," Abbott said. "Since each leak can be tied to a specific churn event, it is usually easy to develop a cost/benefit analysis for fixing the leak and eliminating a customer pain point."
Primary research can be useful in complementing or confirming findings from call monitoring and process analysis.
"In our experience, customer surveys are particularly useful for building internal consensus around contentious issues that come up between departments," Abbott said. "When cross-functional collaboration is required, it's particularly important that everyone hear from customers."
Data Analytics Pinpoint Causes of Churn
Abbott said that data analytics are a powerful tool for pinpointing specific areas within complex operating environments where churn events are disproportionately high.
"Data analytics are most powerful and accurate when combined with other tools, as they distinguish statistical correlations from true cause and effect relationships," Abbott said. "With the right statistical methods, and by combining data from a variety of sources, it is possible to create an accurate timeline of the events in the customer lifecycle that ultimately lead to churn."
For example, a wave of analysis for a telecommunications company looked at churn across a variety of factors -- devices, rate plans, billing patterns and usage behavior -- to isolate a specific subset of channels, and granular points within each channel that were causing customers to churn. The company was able to target specific actions at a small number of high-impact customer touch points and clearly model the impact on financial performance. After that, prioritizing and sizing the cost and effort of remedial efforts was easy.
About Diamond
Diamond is a management and technology consulting firm. Recognizing that information and technology shape market dynamics, Diamond's small teams of experts work across functional and organizational boundaries to improve growth and profitability. Since the greatest value in a strategy, and its highest risk, resides in its implementation, Diamond also provides proven execution capabilities. We deliver three critical elements to every project: fact-based objectivity, spirited collaboration, and sustainable results.
Diamond's Information and Analytics practice provides fast, insightful analysis of complex marketing and operational issues, where intelligent use of data holds the key to better decisions and actions. Specific services include analytics to uncover and realize new revenue and cost savings; information management to track and measure key strategic business metrics not available otherwise; and information strategy to identify ways of using information to increase competitive advantage and to improve underlying information architecture for sustained, cost-effective delivery of higher quality information throughout the enterprise.
To learn more visit http://www.diamondconsultants.com/ . Information specific to Diamond's Information and Analytics services can be found at: http://www.diamondconsultants.com/dias .
Contacts:
David Moon
Media Relations
+1.312.255.4560
[email protected]
Margaret Boyce
Investor Relations
+1.312-255-5784
[email protected]
Diamond Management & Technology Consultants, Inc.
CONTACT: David Moon, Media Relations, +1-312-255-4560,[email protected] , or Margaret Boyce, Investor Relations,+1-312-255-5784, [email protected]
Web site: http://www.diamondconsultants.com/http://www.diamondconsultants.com/diashttp://w
ww.diamondinfoanalytics.com/
(source: http://www.tmcnet.com/usubmit/2007/01/15/2245354.htm)
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