The effort required for customer experience management (CXM) is usually manageable and not too difficult to plan, especially when you consider that programs to avoid churn or to win back dropouts, let alone to acquire new customers, are significantly more complex and inefficient.
Nevertheless, budget planning in many companies usually does not take this into account: the large marketing budgets still flow primarily into acquiring new customers, avoiding terminations and winning back those who drop out. However, that money could be better spent considering CXM.
For example, as soon as the number of existing customers reaches a certain level, usually around one million, the churn rate becomes a problem and quickly reaches the order of four to twenty percent. At first glance, the requirement seems obvious: more new customers must be won than lost, or reactive measures to reduce churn must be established.
Many believe that this is the only way to secure sales and profits and, at best, continue to grow. But that is an expensive mistake, because this claim can only be covered with a lot of money for marketing and new customer acquisition.
In many companies, the constant loss of customers is considered unavoidable, so campaigns to retain customers who are at risk of leaving (churn prevention) and to win back dropouts take up expensive and fixed budget items in customer communication.
Another approach proves much more fruitful, namely putting the focus on budget restructuring, based on a new, sustainable, customer-centric attitude. Because fighting the causes is more efficient than fighting the symptoms.
In other words, reducing churn is a key driver of revenue and profit growth, which ideally starts at the beginning of the customer relationship in the customer lifecycle. Happy and delighted customers are less likely to quit but that requires more budget for CXM. They are more emotionally connected and therefore do not think of stopping. This saves money on churn prevention, churn recovery, and new customer acquisition.
Delighted customers not only cancel less often but are also more open to cross-, upselling and recommendations. This means that investments in CXM are successful and sustainable in many aspects and are therefore more efficient than reactive churn prevention and recovery measures.
By Daniela La Marca