Why your customers break up with you
This article originally appeared on LinkedIn.
Recently a colleague’s son decided to cut the cord to his cable provider. He bought a Roku stick so he could stream movies and TV shows from Netflix, Hulu and others. He installed a high-quality antenna so he could pick up over-the-air channels from neighboring cities. “I was surprised,” my colleague said, “because he’s a big Red Sox fan, and those games are the one thing he can’t get. But he was completely fed up with the cable company’s terrible service and the expensive bundled pricing.”
In cutting the cord, the young man became part of what service providers call churn, meaning turnover among customers. When my Bain & Company colleagues recently studied churn, they found that most telecommunications and media companies lose between 2% and 2.5% of their customers every month. For a company with 5 million customers, that churn rate means that about 1.3 million customers and $2 billion in revenue vanish each year and must be replaced.
Why so many? A number of service providers seem to attribute customer defection to some recent occurrence—a bad service call, say, or an enticing offer from a rival. But the reality is quite different, and my colleague captured it with the phrase “fed up.”
People don’t leave on a whim. They leave because they have reached the breaking point.
As part of their research, my colleagues organized focus groups of customers who had recently left one provider and asked participants to write stories about their experiences. Virtually everyone recounted a whole series of bad episodes. “I finally had enough and switched,” said one participant, adding that he wouldn’t return even if the company paid him.
There’s one good way to nip this kind of exasperation in the bud and build loyalty among your customers: Ask them for feedback, then act on it. Resolve the issues people raise. Fix the procedures or policies that cause the issues in the first place.
That philosophy is at the heart of the Net Promoter System my colleagues and I created. Net Promoter companies create systems for gathering quick, regular feedback and channeling it to frontline employees and others throughout the company. The companies learn to track down the root causes of dissatisfaction and invest in changing them. Sure, creating a full-blown system means changing a lot about how your company operates. It can be expensive. But the cost is nothing compared with the cost of more than 20% of your customers walking out the door every year because they hate doing business with you.
And then there is the related problem of employee churn. A friend of mine left her executive job at one of the leading cable companies to join a start-up. I asked her how it felt trading that high-paying, steady job for the crazy hours and uncertain future of her new company. She said she felt liberated—and only wished she had left sooner. The reason? She explained she finally felt good about the example she was setting for her kids— she now works for a company that treats customers in a way that makes her proud.
Many cable companies have neglected their customers to the point where the “cable guy” has become a national joke (along with their middle-management bosses and executives). But they aren’t alone. Too many banks, communications providers, insurers and other large service businesses seem to take their customers for granted. And then they wonder why so many of those customers decide to cut the cord.