How to use CDPs to prevent customer churn

4th Dec 2018

To counteract customer churn rate, brands need to keep their customers engaged, create engaging content, and deliver personalised customer experiences. Customer data platforms could be ideally placed to help. 

Customer loyalty is a key driver of long-term profitability. Studies show that the longer the relationship a customer has with a brand, the more they will spend in a given period of time. On average, customers spend 67% more in months 31-36 than they do in the first six months of the brand relationship, according to Bain & Company. Additional research shows that a 5% increase in customer retention can lead to a 25% increase in profit.

Because keeping the right customers is so valuable to the bottom line, customer churn rate is one of the key indicators of a brand’s overall success. Brands with low churn rates tend to have more repeat customers than those with higher average churn, and often deliver the more personalised experiences that customers have grown to expect.

While companies can be profitable with high churn rates, they tend to spend more money on customer acquisition. In fact, Forrester found that it costs 500% more to acquire a new customer than it does to keep a current one.

Since retaining customers is more profitable than acquiring new ones, brands will succeed by managing customer churn through using smart customer experience strategies, often powered by a customer data platform (CDP).

Understanding customer churn rate

Before we can measure customer churn rate, wemust first define what is an active customer. What qualifies a customer as active varies from brand to brand and is based on factors like amount of time since last purchase, since last email open, or since last interaction on social media.

For example, Facebook could define a user as churned when they have not used the social network in three days. However, a furniture brand may consider a customer churned when they have not made a purchase in a year. A brand’s churn rate is dependent on how they differentiate an active customer from a churned one.

It is also important to note that churn rate is not a static measurement. Rather, it is a constantly evolving judgement. The definition of a churned customer can change with the ebb and flow of sales. It is vital to monitor the customer churn rate, and once it is defined, to spot changes in customer behavior trends and adjust strategy accordingly.

Counteracting the churn threat

There’s a recipe for success when it comes to preventing customer churn, and the first step is keeping customers engaged. One of the easiest ways to achieve that is by shifting the primary purpose of the brand’s messaging from sales to engagement. This gives customers a reason to keep interacting with the brand and therefore builds a stronger and more loyal following.

In the same vein, brands must also focus on developing engaging content that will encourage interactions at all stages of the customer lifecycle. For example, since most consumers do not buy a new mattress every year, a mattress retailer might focus on creating content like research on the importance of getting a full night’s sleep. This will make customers more likely to keep them front of mind when they are ready to make a purchase.

Driving positive customer experiences is another critical piece to the puzzle. Consumers have come to expect personalised experiences, and if their expectations are not met, they are likely to abandon the brand. We need to ensure that every customer interaction is relevant in order to drive loyalty.

Above all, to avoid churn, we must have a deep understanding of their customers’ actions and know what keeps them coming back for more. Data is at the heart of this understanding. Many brands are beginning to leverage a CDP that provides a single point of control to connect all customer data, determine the next best actions in real time and orchestrate interactions across all touchpoints.

With always-on and accurate data, brands can gain insight into the customer’s needs, wants, and desires - and use that knowledge to ensure every interaction is relevant, drive loyalty and ultimately prevent churn.

Mike Ferguson is VP EMEA, at RedPoint Global.

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