For utility providers, the churn rate is a central metric which defines overall business performance and revenue. Customer churn occurs when customers discontinue business with a company or brand and switch to a competitor or adopt an in-house alternative.
According to studies, a 1% shift in a company’s churn can have a 12% impact on the company’s valuation in 5 years. Highlighting the importance for service companies to consider customer churn as a KPI which needs to be constantly monitored and controlled services.
Why does customer churn occur?
- They are not satisfied with your service or product. If your offering omits a key feature which a customer demands, or it runs slowly or is full of bugs it will deter customers away. For example, if your customer service portal is hard to use or is constantly no working effectively, this can alienate your current customers as will cause them to switch to a provider that makes it easier for them to manage their accounts
- They have no need or are not using the product. If clients do not understand how a product works, or they no longer need it or have an alternative in-house option, they will stop using your product or service
- They have found a more affordable or cheaper alternative
- They are unhappy with the customer services
Tricks to reduce your customer churn
The key here is to invest in an interactive and engaging onboarding process. Ensuring your customers have a meaningful experience from the beginning will reduce churn as they will feel more connected to your brand.
Typically, it is what your brand does for the customer in-between acquisition and their first success which will predominantly impact customer retention rates. Clearly explaining how to use your product and highlighting the value upfront will enhance their initial experience with your brand and thus increase their satisfaction.
Some processes that have been successful for utility retailers include:
- Taking complete care of the end-to-end switching process, free of charge have been successful in retaining customers.
- Utilising in-house online support teams to resolve issues effectively This has been well received by customers when the issue is not passed to multiple departments.
- Developing a billing structure that is transparent, easy-to-understand and clearly explained. The most successful utilities send customers pre-invoices every month ensuring there are no surprises.
Calculate and analyse churn constantly
When it comes to your customer churn, it is important to be proactive. Rather than waiting until a customer has left your business, companies should be using data before a customer churns in order to build strategies to proactively prevent it.
The key here is to understand why previous customers have switched to another provider and why other customers are satisfied with your brand. This will allow you to anticipate the key signs of customer satisfaction and dissatisfaction so that you are able to engage with customers and salvage the relationship before they churn.
Increase switching costs
Rather than unreasonably locking customers into contracts, create switching costs by offering features and services that are superior for the customer. By offering solutions or products that are not offered by your competitors, it will dissuade your customers from switching providers and ultimately reduce churn. To do this, identify your key competitive advantages as a company, compare them to your competitors and use these as key selling points for your customers.
It can be easy to fall into the trap of thinking that in order for your business to become more profitable you must gain more customers but in actual fact ensuring you retain the customers you have can be more lucrative.
If you require advice regarding how to implement processes or technologies to better manage your client base and reduce churn, contact the team at Utility Software Services today.