Churn. It’s a problem that impacts the top and bottom line of every organisation. When customers leave, the organisation misses out on future revenues. They also incur the extra costs of trying to bribe/keep/replace that customer. So how do you go about retaining your customers for longer? Does your customer retention process kick in when the customer cancels or does it start before they join? Put another way, do your processes and KPIs focus on churn or retention?
The problem with customer churn
Churn and retention are often seen as opposite sides of the same coin. Retention is about keeping customers and churn is about losing customers. But the strategies being put in place for each are very different. The churn strategies we’re seeing are reactive and targeted at specific individuals. They focus on identifying members with a high risk of leaving, and then singling them out when they come into the gym or through a text/email/call. If they’ve given in their notice, then they get a call to try and talk them round. If they’ve not been in for a while, then they’re left alone so they don’t get prompted to cancel their direct debit.
The problems with this churn-prevention approach are:
1) it’s not sustainable, because it rarely addresses the root cause of why the member is at risk of leaving
2) it’s reactive and based on being able to identify and target individual members
3) it’s not very effective, as often the member has already made up their mind and found an alternative
The importance of the customer journey
The alternative is to be proactive about customer retention. This means looking at the entire customer journey.
The sales process is where the customer’s initial expectations are set. They talk to sales staff, friends and existing members. They research memberships online. They ask questions of existing and ex-members on Twitter. They read reviews and check out Instagram feeds. Before they’ve even signed up, they have established their expectations about convenience, value for money or the sense of community.
As a result, the first 90 days of their membership are crucial for customer retention. First impressions count. New members are trying the booking process, changing rooms, classes and equipment for the first time. As they do so, they’re comparing the experiences against their needs and expectations. For example:
– will it really be practical to work out during my lunch break?
– does the gym really have people like me that I can make friends with?
Regardless of contract length, in the first 90 days each member is deciding whether they’ve made a smart decision. Do they feel proud to be a member, or trapped by the contract.
Once they’ve made that decision, they then see every customer experience through that lens. Humans can be very selective about what they notice and how they interpret it. If they feel good about the decision then any minor customer experience issues are quickly forgotten, if they’re even noticed at all. But what if the member is already starting to regret their decision to sign-up? Then every minor customer experience issue becomes further proof of the bad decision.
3 steps to improved customer retention
This is why a proactive customer retention strategy covers the entire customer journey. It also focuses on proactively managing expectations, not just trying to meet them. It’s not about saying yes to everything or trying to deliver 5-star service and low-cost prices. It’s about having clarity, consistency and continuous feedback.
The 3 key parts of a successful customer retention strategy are:
Clarity. Set clear expectations in the minds of your new members. Explain the most important customer experiences as part of the welcome pack and induction sessions. So if the member wants to do the GroupEx classes, and the booking process is clunky, tell them upfront. Don’t wait for them to get frustrated.
Consistency. Explain to your staff the importance of consistently delivering on your chosen customer experience, across all touchpoints and stages of the journey. Then ask for their ideas. How would they improve internal processes to deliver more consistent customer experiences?
Continuous feedback. Establish a robust and continuous feedback loop. Track the consistency of the customer experience and how well it is meeting expectations. To complete the loop, regularly share a summary of the feedback with staff and customers. The more you show you’re listening, the keener they will be to help you deliver the experience they expect. And when you consistently meet and exceed their expectations, customer retention goes up.