Customer Churn Analysis: The Invisible Force That Every Organization Needs to Have in Its Arsenal
Customers are the backbone of any business, whether big or small, technical or general, company or a sole proprietorship. All depend on the interests of their invaluable customers. The primacy of the customers has taken businesses from “Scratch to Gold,” helping them build a reputation in the market for or to even maintain an image for an already established giant. Firms have to make sure that their customers are happy and satisfied or else they will reach their lowest point. For this very reason, various companies and firms have indulged in a practice to ensure their customers don’t buzz away from their business and their competitors don’t take advantage of their nonchalance. This Practice is called Customer Turn or, a more popular term in the business world, Customer Churn. Customers being withered away to competitors are a common sight and therefore companies around the globe differentiate between two important aspects of Customer Churn, “Voluntary Churn” and “Involuntary Churn.” The former relates to the loss of an existing customer due to the decision of the customer himself, whereas the latter occurs because of circumstances not in the hands of the company or the firm or the service provider. Healthy businesses keep a track record of their customers, and their analysts constantly search their databases for any loopholes giving birth to unfavorable circumstances which lead to Customer Churn. This process is called Customer Churn Analysis.
Organizations have separate departments and wings to take care of the needs and services for this very purpose. Banks, telephone and wireless service companies, Internet Service Providers, cable TV companies, alarm monitoring services, etc. are prime examples of businesses which use this effective function of analyzing Customer Churnin the marketing world. By analyzing the situation of the customer base, the experts and analyst make a typical distinction between ‘Gross’ and ‘Net Churn’ or Turn. Gross Churn is the loss of existing customers and their related or associated recurring revenue for goods or services during a period in the financial year. Net Churn on the other hand is Gross Churn plus the addition of similar customers at the original location within the same time period of the financial year. With the cost of retaining an existing customer being far less than gaining a new one and then maintaining it, a wise company is one which works on maintaining customer base rather than building a new one solely. Business acumen becomes a key factor in deciding whether a customer stays or steers away into opposition territory. The need of think tanks and separate departments mentioned earlier are necessary and for that very reason.CustomerRetention Strategies are used by the businesses to make sure they customers the main focus. Financial institutions, for example, often track and measure Customer Churn using a weighted calculation called “Recurring Monthly Revenue” (RMR).
Many business intelligence software programs having the capacity to search customer databases and factors associated for customer churn such as inefficient post-purchase service or non-fulfillment of contract are in use today as part of the customer retention strategies applied by various organizations. For the reduction in the number of customers due to variable factors, organizations have developed various standards for the safeguard of their respective customers. The International Customer Service Institute has developed the International Customer Service Standard to strategically align organizations so they can focus on delivering quality services that the customers demand and hence move forward in the right direction to mitigate the loss in business due to involuntary churn.Not every organization tends to overindulge its customers. In fact, experts recommend removing those customers that are bringing no good to the firm and this is a very integral part of Customer Churn Management. Customers being a lifeline of the business have to be taken very seriously and Customer Churn should be prevented by every business whether big or small to ensure success.
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