I Can’t Get No…Satisfaction, Retention, and Churn

Author: Terry Mickail
9 / 6 / 2018
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Picking up from last time, Personalization is very closely related to Retention in that timely Personalization actions can serve to stop Churn. Churn indicates the propensity of customers to cease doing business with a company in a given time period. The success or failure than an individual organization experiences, depend, to a large extent, on the ability of making acceptable decisions on time. So, here’s where we are:

There is three-step method to controlling customer churn:

  1. Churn Detection
  2. Customer Profiling
  3. Retention Plan

Customer churn prediction consists in building a prediction model that ranks the customers from most likely to leave the company to least likely to leave the company, based on past customers’ behavior which relies heavily on whether the customer is satisfied.

Customer Retention Strategies come in four flavors with the customers who are more prone to attrition need to be handled in a more personalized manner, increasing satisfaction and reducing the factors that cause attrition.

  1. Top-down:  Based on managerial level experience from prior actions, action are defined independent of customer profiles.
  2. Bottom-up: Customer profiles are defined prior to defining actions, but requires considerable amount of supervision effort.
  3. Customized: The offers has to be granular enough and the customers are free to choose from the wide set of alternatives.
  4. Similarity-based: Actions are triggered based on customer preferences inferred from customer profiles.

Due to improved access to information, customers are more transient and it is easier and less costly for them to switch between competitors. A deeper understanding of customers has justified the value of focusing on them, because it costs five times more to gain a new customer than to keep an existing one, costing ten times more to get a dissatisfied customer back.

Since net return on investment for retention strategies are generally higher than for acquisition, it is now widely accepted that companies should concentrate their marketing resources on customer retention. This translates into increased revenue for the company because loyal, satisfied customers continue transacting for a relatively longer duration, while ignoring offers from competitors.

In the next post, we will explore the relationship between Customer Lifetime Value and Satisfaction. For now, make sure to follow along with our series on Loyalty and Satisfaction.

About the Author

Terry Mickail earned his BS in cognitive psychology and biology at Louisiana State University. He moved to Seattle in 2011 after being accepted to the Masters program of Measurement, Statistics, and Research Design. After completing, he worked on an NIH research project where he studied children with learning disorders and focused on eye tracking measurement techniques. He accepted an offer to work for Prime 8, where he primarily worked with Microsoft, performing several studies within Microsoft EDU. He joined Lenati in April of this year. During his free time he enjoys gaming, hiking, and playing pool at the local bar.

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