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Reasons customers leave, reasons customers stay

Category: Blog & News

We all know customer retention is a big deal. Acquiring a customer is significantly more expensive than retaining one – five to 25 times more expensive has been cited – but you probably already know that?

With the end of year approaching it’s a chance to learn what really makes customers stay or leave, and how to get ahead of retention issues in 2018.

Reasons customers stay

In general, customers stay if you are delivering what they want and they are given no reason to change. But there are some misnomers around why customers stay which I’d like to clear up.

Unique

Customers will stay if you can offer them something so unique that they have no alternative. If you are the only business who can fly people to Mars, then they will stick with you. For the rest of us, there are usually offers against which we compete. The trick is to remind your customer about what makes you unique because while your competitor might do something similar, they don’t do it exactly the same.

Satisfaction…?

I used to work for a company that repeatedly had scores of 80-85% satisfaction for its online sites, and yet usage of the site was in free fall. How could this be? People say the experience is satisfactory and yet they are turning their backs on it?

When I asked our analytics team for an explanation, all they could say is there is no correlation between satisfaction and usage. Great! So why bother with satisfaction at all then?

In my experience it is more useful to think of satisfaction as a way to reduce the likelihood of leaving rather than increase the chances they’ll be retained. In other words, a customer who is dissatisfied will almost certainly leave but just because a customer is satisfied does not mean they will stay.

Loyalty…?

As I’ve written before, loyalty is a loaded term and can set you up for failure. While customers like to be appreciated for their repeat business – what they cite as “loyalty” – it is very rare that a business actually wins the customer’s true loyalty. You know, the type of loyalty where they will eschew any alternative even if it’s better, cheaper or more convenient – because they can’t bear the thought of being separated from you?  My point is, don’t think your customers are loyal. That’s not why they stay, that’s why they say they stay.

Sunk cost

Now we’re getting closer to the mark. Customers tend to stay if they have already sunk too much into the relationship to warrant changing – there’s too much at stake to leave. That might mean you are in a complex field where they had to do a lot of thinking and jump through a lot of hoops to do business with you, or the costs of walking away cannot be recouped. In other words, the barriers to exit are significant. Which brings us to the most likely reason customers stay.

Laziness

Our natural state is to leave things as they are. Called Status Quo Bias, all things being equal, customers will seek to stick with where they are and what they know rather than seek change. After all, life is busy and there are plenty of other things to think about.  This is no surprise to many businesses that prey on customer inertia. In the health insurance sector, for example, 48% of people said they were thinking about switching but only 14% did. Similarly, 44% cited a desire to change their mortgage but only 28% bothered.

Of all the reasons customers stay, laziness is the most likely. That doesn’t mean you should take your customers for granted, but it does mean you should help them not have to reconsider you. How? Don’t make them angry, frustrated, embarrassed or annoyed.

Reasons customers leave

Perhaps most obviously, your customers will leave if they get better value elsewhere. Value may include a component of price, but also things like service levels, convenience, range and status.  You goal should be to communicate your value in such a way that alternatives look undesirable.

The other reasons people leave, which I alluded to earlier, are they are annoyed by things like a performance decrease (e.g. failing SEO rankings), service level change (e.g. from face-to-face account manager to call centre) or a price or fee increase.

Unfortunately, these pieces of “bad news” are inevitable. The good news is you can communicate them in a way to reduce their likelihood of triggering churn.

Here are some tips when relating unfavourable news to your customer.

  • Use an ambiguous subject line – Avoid hitting them with the bad news in the subject line. Instead, encourage them to read the message in full so you can provide context for the bad news
  • Anchor pricing/fees – Customers never like price rises, so be sure to use the behavioural technique of anchoring so they have a reference point that contextualises your value. Say you are an accountant, for instance. Before talking about your fee, first remind them of the balance of their asset portfolio, anchoring them to the larger number.
  • Avoid inflammatory language – Without obfuscating, communicate the bad news with softer words like “change” or “adjustment” rather than inflammatory words like “increase”
  • Externalise – Where relevant, link the bad news to factors beyond your control. For example, citing changes in financial markets over a period of time. But don’t externalise without also minimising the impact on them.
  • Minimise impact – Customers will be more likely to tolerate bad news if they feel you are impacted too. Help them understand what steps you have undertaken to minimise the impact on them so you signal your commitment to their needs

This article also appeared in Smartcompany.

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