How To Stop Your Consumers From Going To Your Competitors
Consumers can and will likely change their minds and loyalties when it comes to brands or products. They can switch their preferences from one brand of product, to the competitor product or a substitute product. If a business can predict where their consumers are likely to go, or know why they left, they will have much greater success retaining customers.
This idea of customers “switching” somewhat coincides with what marketers call the customer churn rate. For example, if Brand X had 600 customers at the beginning of the month and only 500 at the end of the month, its customer churn rate would be:
No matter which term, businesses have been using this metric to gauge the market for years. The really smart businesses use market research and intelligent data in which they can identify the customers likely to switch, estimate the loss, and prevent or manage the switch.
Emmet C. Murphy and Mark A. Murphy, authors of Leading on the Edge of Chaos offer these specifics:
- Acquiring new customers can cost as much as five times more than retaining current customers.
- A 2% increase in customer retention has the same effect as decreasing costs by 10%.
- Depending on the industry, reducing your customer defection rate by 5% can increase your profitability by 25 to 125%.
- Customer profitability tends to increase over the life of a retained customer.
Depending on the size of the business, these specifics may vary. For example, the impact of decreasing costs for a startup will likely have a more immediate effect on customer retention than it would for a larger, global company. Conversely, the startup may respond to any problems related to customer retention with more agility than the larger corporation.
How Can You Improve And Uncover Barriers?
To start, managing switching requires data mining customer data and differentiating buyer cancellations or switching from broader shifts in customer spending. By commissioning a brand tracker focused research activity along with product feedback, you can learn more about the switching potential of your customers and uncover any barriers or issues that could potentially cause you to lose consumers:
- Feel their pain. It helps to understand customer expectations and the pains they feel and act upon when shopping for your product or similar products. While switching will most surely occur before the numbers reveal it, there is a risk in assuming that customer loss in inevitable or that you have to live with it. The goal here is to always be gathering shopper insights to solve any problems with the shopper experience and make purchasing your brand or product, as painless as possible.
- Know your product. If the customer’s pains aren’t a result of the shopper experience, then you have to determine if it’s because the product fails expectations and why. Product insights provide information on the actual performance of your product not how you think, or meant the product to perform. You need to know what customers report as Liking, Willing to Recommend, and more. Needs or wants of consumers may change when it comes to your product, so staying up to date on product insights can help you prevent customer switching and improve your product.
- Revisit your competitive advantage. If the shopper experience and product are good to go, look to the unique selling proposition that put you in business. If it no longer aligns with customer needs, you have a problem. Evaluating consumer insights to find what’s relevant when it comes to a brand’s proposition tends to be conducted early on in a businesses life. While the proposition may remain the same, how it’s being communicated, who it’s being communicated to and why most certainly will; staying up to date on consumer insights is the best way to combat this.
- Don’t rely solely on CRM. Typical strategies to retain customers start with identifying those likely to switch to the competitor. Then, the businesses try to preempt the move by throwing incentives to stay. They might offer special deals, price discounts, personal contacts, anything to restore and strengthen the customer’s loyalty. Businesses smartly install Customer Relationship Management (CRM) software and Customer Loyalty Software (CLS) to administer their efforts. However, such programs are geared to metrics and ignore underlying issues. What businesses really need is a matrix of insights to pair with CRM to gain more context to the problems of customer switching and generate predictive analytics. The problem with CRM lies in its limited data and lack of results. It relies on data to trend futures. But, it misses the insights into where and how the trends originated.
Be Strategic and Act Fast
Measuring and responding to customer switching potential will always be a challenge. Particularly in a competitive, global economy where there is universal access to information and the ability to compare hundreds of products in seconds. As a result, businesses need deep insights where they can find information on products, customers, shopping, and markets. Don’t wait until your customers already switched to a competitor before you try and fix the problem. Use successful marketing research to gain insights early on and build a strategic plan when it comes to switching potential of your customers.