Solving the Customer Churn Riddle

INTRODUCTION
Churn is the burden of any customer centric organization. No sector is immune:
from hospitality, education, cable, wireless communication, retail banking,
digital media, and publishing to automotive, airline travel, insurance and
consumer packaged goods. Once a company has invested hundreds, if not
thousands, of dollars to acquire a customer how much must be spent to retain
that customer? The return on all these investments can be realized only through
long-term customer engagement and the life-time value generated. Traditional
retention strategies have become increasingly inadequate at leveraging the
customer engagement data stored in CRM systems to provide actionable
intelligence and insights necessary to reduce churn. Accordingly, organizations
both large and small have opted to solve the churn by either: i) making blanket
offers to all customers when confronted with a loss moment; or ii) ignoring
churn while spending more time and money on new customer acquisition. No
matter how fast you fill a leaking bucket you are still losing water.
Further complicating the churn riddle is that the typical reasons for
customer departure are no longer clear as the proxies we have used to correlate
issue to consumer are now broken and no longer effective. And, while
inducements to retain customers are well known, the applicability of the right
incentives to the right customers are not. If brands can arm their call centers and
sales representatives with the information and business rules necessary to
enhance the customer experience they can reduce churn and generate more
profit. People now expect companies to understand what they want from them
and to respond appropriately.
CRM systems have to develop the relational
intelligence to facilitate the evolution of the customer relationship from
industrial and transactional to personal and valued. The result, in this mobile
centered fast paced economy, is that the customer is demanding a pull from the
brand rather than the push.

SOLUTION
Step one- Understand each customer (personalize the connection)
Personalization is the key to optimizing the customer relationship. Often
discussed and promised yet the definition is not clearly understood.
Personalization is the alignment of engagement with an individual to their core
mental makeup. The Discourse Analytics Customer Activation Platform (CAP)
determines why your customer connects to your company and products. The
CAP ingests the activities and evidences of each consumer that have been
captured in a companys CRM and CMS systems to build an attitudinal profile of
each customer in the database. The profile is a representation of the customers
mental makeup what they value the most (e.g. price vs quality), and what
drives their actions (e.g. endorsements or objective data).
Our clients have discovered that gaining insights on the causal factors valued by
the customer can help a brand build the sense of connectedness and increase
the efficiency of retention campaigns by 73%.
Step Two Identify and target large groups of like-minded
individuals
Large clusters of like-minded individuals shed light on core issues a brand
should consider in its broader consumer engagement. These often reveal some
of the basic misunderstandings about the products, or collective responses to
competition. CAP uses a strong analytical framework to identify clusters of likeminded individuals and help our clients develop broad campaign themes to
address perceptions of deteriorating customer service, or shifts in consumer
interests driven by events.
By constantly evaluating the receptiveness of the offer and consumer responses,
the CAP organically develops the knowledge that helps our clients to develop
not just broad campaigns for the whole customer base, but also diagnosis and
prescriptive rules of engagement with individual customers. This relational
intelligence has been demonstrated to improve activation and reduce churn by
at least 15% annually.

Figure 1 - Clusters

In 2012 DA undertook modeling for a large national fundraising organization.

The organization had 1.3 million contributors who already expressed some
support for the either the organization or some if its initiatives. In an effort to
augment the fundraising efforts, the organization deployed the CAP. The
outreach strategies aided by the deep member insights helped the organization
launch one of its most successful fundraising campaigns. A comparison using a
control group identified that the CAP targeted member segment donated 3.1
times more money and contributed 4.9 times as frequently as the group
receiving the standard campaigns. This resulted in an effective 15X lift in the
fundraising efforts.
Step three Develop Proactive Response Strategies
Failure to meet customer expectation triggers churn. The speed with which a
brand responds to the likely causes of churn directly determines the chances of
reversing the trend. Satisfaction of expectation or happiness has recently
been quantified and modeled: Happiness is not about how well youre doing in
general, but rather on whether youre doing better than expected. Behavioral

economists have identified that people are happier when satisfied unexpectedly
instead of receiving an anticipated positive outcome. The challenge for a brand
then is to identify and meet a customers dynamic expectations in real-time.
The CAP has been successfully deployed to solve this exact problem. The CAP
can analyze existing data and identify the moment of churn along with
formulating the basis for any contextual response. In working with a wireless
carriers customer service data Discourse Analytics: i) built individualized
attitudinal profiles of customers along the key drivers, and appended these
profiles to the original customer record; ii) identified clusters of like-minded
customers with similar profiles; and iii) assessed longitudinal trends in profiles
and brand perception at individual and group levels. By mapping the customer
mindset and identifying clusters of like-minded customers, the Customer Service
team was able to assess likely churn, and proactively deploy strategies to
mitigate it.
Figure 2 User profile

CONCLUSION
Understanding the customer is the essential component to reducing churn.
Customer understanding results from listening to the customer and assimilating
that information to gain insights on what those customers value most and what
their needs are. By deploying a ground up customer centric approach that uses
the person to model the content and not vice versa, a brand can ascertain the
drivers that cause purchasing decisions. The CAP allows for scaled adjustments
to the broad campaign themes to personalize the messages to individuals within
each cluster.
Regardless of the size of the customer base, to win today you need to reduce
churn and optimize long-term stakeholder value.