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How business leaders are fighting the battle against customer churn

This is a guest blog post from Jo Causon, chief executive of the Institute of Customer Service, the professional body for customer service.

We live in an age of ‘austerity spending’, where businesses have to work harder than ever to hang on to their customers.

Last year we commissioned research that concluded that the average cost to replace a lost customer is around £6,500 and 56 days. A potential to cost UK businesses of just under £2.3 billion over the next three years.

The research indicates that business leaders agree. 58% think that customer retention is vital to the sustainability of their business while more than a third (35%) identify churn as the greatest threat.

Service and experience are the key strategic drivers of loyalty
The UK Customer Satisfaction Index (UKCSI) shows that companies that differentiate on customer experience are well positioned to achieve market growth.

Conversely, those that don’t risk losing their customers. We can see an example of this in Tesco’s response to disappointing financial results – it stated that it would refocus its efforts on its customers’ experience.

In other words, service is the key differentiator when it comes to holding on to customers in difficult market conditions.

Here’s how the market leaders improve customer experience:

1. Establish a relationship with new customers quickly
Your new customers must understand what you’re offering from the start of the relationship.

Vodafone has developed a Perfect Start programme to make sure first time customers understand how to use – and get the best from – its service.

Simplyhealth calls new customers directly to make sure they understand what and when they can claim on their insurance policies.

2. Solve problems quickly
Empower staff to own customer service issues from start to finish so that they can decide when, and how, they can solve problems quickly. Customers don’t want to be sent around departments unnecessarily.

As first direct show, a consistent, personal experience leads to better customer retention and loyalty rates.

3. Use customer insight to drive training and employee engagement
Boots surveys 30,000 of its customers every week in order to identify problems and opportunities to improve the customer experience.

It uses this data to focus on customer care, which means it continues to invest in more training, better recruitment and better rewards.

4. Make it personal
By concentrating on the emotional aspect of the business/customer relationship, organisations can establish authentic connections with their customers.

Simplyhealth’s telephone operators are measured on the empathy and care they demonstrate. Eurostar has used research into its customers’ emotional journey to make service design changes.

5. Measure the impact of customer service on top and bottom line results, and report at board level
Boots have seen their customers’ very satisfied rating increase from 45% to 71.9% over the last 4 years.

They’ve also linked this to sales improvements, concluding that every 5% increase in customer satisfaction reaps a 1.5% improvement in sales.

Similarly, Vodafone have recorded a 1-4% reduction in customer churn since the introduction of their Perfect Start programme – figures that are reported to their board.

In a time of austerity spending, cutting back on service might seem to provide a way of protecting profits.

But for sustainable growth it’s critical that businesses invest in the whole customer experience, align their offerings and invest in training and development to drive employee engagement and understanding.

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