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Reducing customer churn: How to grow long-term brand loyalty

Tara DeZao,
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In an era where customer expectations of brands and competition are at an all-time high, businesses are continually seeking ways to help keep customers engaged and satisfied. However, even the most customer-centric companies are challenged by customer churn, a pivotal metric that can significantly impact their bottom line. Economic challenges, for example, often encourage consumers to ditch brand loyalty in favor of the most affordable options of their favorite products and services.

Understanding, measuring, and mitigating customer churn is crucial for sustaining growth and ensuring long-term success. Maintaining high customer lifetime values is much more supportive of that goal compared to incentivizing short-term sales, which allows customers to churn after the transaction. And although acquiring customers is critical to growth, retaining an existing customer is much more cost effective for the business.

Identifying and tracking churn

Customer churn, also known as customer attrition, occurs when customers stop doing business with a company. Churn can be manifested in various ways: from cancelling a subscription to ceasing to purchase products or switching to a competitor. In essence, churn is the opposite of customer retention.

High churn rates can indicate deeper issues within the company, such as poor customer service, inadequate product offerings, or a lack of understanding of customer needs. Identifying customer churn involves monitoring customer behaviors and engagement levels. This can include tracking usage patterns, purchase frequency, customer service interactions, and feedback. Ultimately, in healthy economic times, customers don’t churn on price alone; it’s often a combination of factors that will impact brand loyalty.

Measuring churn

Churn rate is calculated by dividing the number of customers lost during a period by the total number of customers at the start of that period. The result is a percentage, and the ideal churn rate for mature businesses is between 5 and 7 %. Another way to measure and improve churn rate is to monitor and consistently improve net promoter scores. Gartner defines the Net Promoter Score, or NPS, as “a KPI used to assess overall customer satisfaction and how likely customers are to recommend a company to a peer or colleague.” Companies with high NPS scores usually have low churn rates.

Reducing customer churn

Contributing factors to customer churn rates vary across industries and businesses; however, centralizing AI in marketing and customer engagement stacks is a game-changer for reducing churn. That’s because centralized AI can unify data silos and brand channels, leading to smoother, more consistent, and relevant customer experiences. For example, a communications provider with disconnected channels may offer a customer differing pricing or subscription options in differing channels. This erodes consumer trust by signaling that the relationship is transactional and potentially leads to more human intervention needed by the brand, which is not cost effective.

Centralized AI enables alternate conversations beyond sales and acquisition, and enables brands to hyper-personalize and tailor customer experiences. If the only conversation a business has with customers is to continuously sell, they will start to tune out. Customers have varying needs, and centralized AI that uses adaptive and predictive analytics can sense real-time data signals and help brands understand the context of their customer so that they can meet their needs in the moment, with messages that help nurture, retain, serve, and help customers build financial resilience. Sometimes the right call is to not engage at all.

Pega’s Customer Decision Hub™ enables this type of dynamic relationship between brands and customers. It unifies data sources and channels by sitting at the center and acting like an always-on brain, reading customer signals and enabling highly relevant, personalized customer interactions. Customer Decision Hub clients typically have hundreds of conversations built out and ready to go at any moment – whenever the AI calculates that someone needs that message or offer. We call this a conversation library. It’s imperative to mix the messages in the images above throughout customer engagement programs. Organizations that over-index on acquisition and cross-sell messages likely will have higher churn rates. Proactive communication that adds value includes, but is not limited to, communications about new features, offers, and company news.

Wells Fargo is an example of a Customer Decision Hub client that has built out an advanced conversation library to execute any number of conversations. They call this “the conversation store” and the goal is to deliver highly relevant conversations to the bank’s customers and meet their needs in real time. According to Fleur Twohig, Executive Vice President, Personalization & Experimentation, Consumer Data & Engagement Platforms at Wells Fargo, "We’re now deploying more than 1,000 decisions per second in real time. Our customer engagement engine is identifying the ‘next best conversation’ our customers may need and delivering that timely digital experience on a one-to-one basis, all within less than 300ms."

Looking for even more ways to improve churn rates? Try these ideas:

  • Actively solicit and cultivate customer feedback. Implement a system for collecting and acting on customer feedback to improve products and services continually.
  • Ensure quality customer support that’s responsive, knowledgeable, and empathetic. AI can help here too. At Pega we enable this with Next-Best-Action-Advisor™, which delivers AI-powered recommendations to call center agents about which conversations are most likely to meet customer needs.
  • Keep your communication transparent, even when it’s not great news.
  • Incentivize loyalty by offering rewards, discounts, or exclusive benefits to long-term customers.
  • Don’t be afraid to collect feedback in real life. Schedule regular touchpoints with customers to ensure they are satisfied and engaged.
  • Be flexible and willing to adapt policies, products, and services based on customer needs and feedback.

Reducing customer churn is not just about implementing new technologies: it's about cultivating a customer-centric culture that values feedback, prioritizes satisfaction, and adapts to changing customer needs. With the right approach and technologies like Customer Decision Hub, businesses can significantly reduce churn rates, enhance customer loyalty, and drive sustainable growth.

Want to learn more about how centralized AI and decisioning can help reduce churn rates and promote long-term customer relationships? Download Pega’s business brief.

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Défi: Engagement client Groupe de produits: Customer Decision Hub Industry: Tous secteurs

À propos de l'auteur

Tara DeZao, Pega’s Product Marketing Director for AdTech and MarTech, helps some of the world’s largest brands make better decisions and get work done with real-time AI and intelligent automation.

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