2024 and Customer Churn is still too buttery for my taste!
An article we liked from Marcel Barrera, CSO & Co-Founder @serviceMob Inc.
Well folks ... its 2024, businesses across industries face a crisis of churn, where customers, frustrated by disjointed service experiences, are taking their loyalty—and their wallets—elsewhere. For sectors like SaaS, insurance, healthcare, utilities, telecom, and airlines, customer churn is a serious financial drain, compounding billions in lost revenue every year. According to McKinsey, reducing churn by even 5% can increase profits by 25% to 95% in high-touch industries like healthcare and financial services, underscoring the value of addressing these service failures directly.
Telecom and Utilities: The Disruption Cost of Unresolved Churn
Telecom and utility companies have long faced significant churn due to fragmented customer experiences, typically caused by unintegrated support systems that fail to deliver seamless service. KPMG reports that telecom customers in the U.S. have some of the highest churn rates, with issues like billing errors and complex service setups accounting for 75% of complaints. These frustrations, exacerbated by disconnected systems and channels, contribute to churn levels that cost U.S. telecom companies billions annually. According to EY, achieving even modest improvements in customer retention by integrating service channels could boost the U.S. telecom market by an estimated $12 billion annually.
This massive opportunity doesn’t just affect consumers but also businesses! Each year the businesses churn via their service providers in parallel to consumers. We often want our experience to be understood so that we are not dealing with cancellations because of failure points in our journey – but enterprises seem confused on what actions to take – bogged down by the Franken-stack and archaic metrics which don’t have a direct relationship to things, Telecoms especially care about – which is less contacts into support and optimized products and services which don't frustrate customers, and result in the need for support to begin with!
Airlines and SaaS: Managing Loyalty in an Era of Sky-High Expectations
In the airline industry, customer loyalty is fleeting, particularly when fragmented digital support channels fall short of handling critical service issues, such as flight cancellations and rebooking's. Airlines lose $1.2 billion per year due to service-related churn alone. When customers can’t seamlessly connect across self-service and human channels, churn skyrockets, which McKinsey cites as a major obstacle to long-term brand loyalty.
Similarly, SaaS companies face churn rates ranging from 10-25%, particularly in B2B contexts where product misalignment and inconsistent support are common culprits. Accenture’s research suggests that up to 68% of SaaS churn is preventable if companies proactively analyze support interactions to understand underlying pain points. For SaaS companies, these fragmented insights contribute to a high cost of reacquisition, as lost B2B clients are notably harder to win back, with each lost contract costing companies up to 50% more to replace compared to retaining an existing one.
Healthcare and Insurance: Fragmentation Costs Lives and Revenues
Healthcare churn has implications beyond financials, as the impact often touches on patients' well-being. Fragmented service models prevent providers from seeing the full picture of patient needs, leading to inefficiencies, repeat interactions, and costly lapses in care. According to EY, healthcare providers who integrate support systems see 32% less churn, which translates into reduced operational costs and increased patient lifetime value. Additionally, these systems help to drive 18% higher patient satisfaction, a metric closely linked to patient loyalty in a competitive landscape. With global healthcare spending projected to reach $10 trillion by 2026, the financial impact of reducing churn cannot be overstated.
Insurance companies, meanwhile, struggle to retain clients due to complex, often disjointed claims and customer service processes. KPMG highlights that the insurance sector suffers from high churn due to lackluster claim processing and a perceived lack of transparency, costing the industry billions annually. By adopting more proactive, unified service models, the insurance industry could reduce churn by up to 15%, enhancing profitability and boosting customer satisfaction.
The Economic Toll: Churn’s Multibillion-Dollar Drain on the U.S. Economy
Fragmented service experiences across these sectors contribute to an estimated $75 billion in annual losses within the U.S. economy. This trend reveals a systemic issue: companies operate with outdated metrics that don’t capture the full journey of customer interactions, and without the tools to unify data, they are unable to proactively resolve the issues driving customers away.
KPMG’s research shows that industries that can address service fragmentation with predictive analytics see a 20-30% reduction in churn, saving billions in reacquisition costs. For telecom, this means fewer billing inquiries due to streamlined processes. For healthcare and insurance, it means smoother interactions across claims and patient support channels, which can reduce unnecessary follow-ups by up to 40%.
Anecdote moment - anyone know if they are playing Customer Service Roulette?
Imagine calling customer service and feeling like you’re spinning the wheel on Customer Service Roulette. Each transfer, each "Please hold," and each "I'm sorry, but I can't help you with that" just makes the wheel spin faster. By the time you've gone through five agents and are back to where you started, you’re not just frustrated—you’re practically being nudged toward churning. It’s like they’re daring you to say, "Forget it, I'm done!"
Fragmented Service Models: Why Traditional Metrics Don’t Move the Needle
Most companies rely on traditional metrics like CSAT and NPS, which reflect customer sentiment after interactions but offer little insight into the cumulative impact of fragmented service journeys. Predictive metrics inaccessible to the market like Contacts Per Experience (CPE) and Average Minutes Per Resolved Experience (AMPx) could be game-changing actionability into customer effort – doing what we would desperately hope that companies globally would want to proactively address and prevent issues. These metrics go beyond efficiency to reveal deeper drivers of churn, which can be especially useful in sectors like SaaS, telecom, and healthcare, where customer effort is a known predictor of churn.
In the SaaS industry, companies that adopt proactive support models, analyzing real-time customer behavior across touchpoints, report churn reductions of up to 15% within the first year, per Accenture’s findings. This predictive approach enables companies to spot dissatisfaction early and intervene before churn occurs, a capability sorely needed in industries with high customer acquisition costs.
Call to Action: How Churn Reduction Could Impact Industry Economics its in the data
Telecom: By reducing churn by 5%, U.S. Telecoms could potentially increase profits by an estimated $12 billion annually, as EY reports. This would result from minimizing costly re-acquisitions and improving loyalty, particularly among high-value customers. Yet still today – the switching economy between telecom providers is just ... well in the Billions ... I mean wholly cheez-its crazy!!!
Healthcare: If healthcare organizations could integrate systems that reduce churn by 10-15%, patient loyalty would improve significantly, adding billions in economic value as patients remain with their providers longer and engage in preventive care. The other aspects not measured here would likely be correlative to better health outcomes for patients, better adherence to care plans – bring costs down significantly!
SaaS: For every 1% reduction in churn, SaaS companies can see as much as a 6% boost in revenue. Predictive models that detect early warning signs of churn in user data can offer tailored, proactive support, improving long-term client retention. Even now the providers across each value chain of enterprises and even consumer software are astronomical in terms of the Ol’ switcheroo! Teams today struggle to understand customer efforts impact to churn via service and something no – platform is measuring – unfortunately businesses typically look at churn via the Success lens in this industry missing massive opportunity to protect the topline via service based churn analytics.
Insurance: Reducing churn by 15% in the insurance sector could save up to $5 billion annually by decreasing claims-related rework and fostering greater trust in customer interactions. Not only that my friends, think of all the commercials – why do you think they run so often- because its that easy to switch and people looking for cost savings in parallel to better service are often able to get both, at least perceptually until the ... dreaded... claim journey !!!!
The Path Forward: Prioritizing Unified Data and Predictive Models
The message for executives is clear: the fragmented systems and outdated metrics driving churn are economically unsustainable. Addressing the root causes with proactive, predictive analytics that unify service experiences can reverse this trend. As Accenture points out, integrating data across all touchpoints allows companies to understand and anticipate customer needs, converting customer service from a reactive to a strategic function.
In 2024 and beyond, it’s essential for businesses to shift from surface-level metrics to comprehensive, predictive models that illuminate the full customer journey. This shift represents a significant investment but one that can add billions in value by reducing churn, fostering loyalty, and improving operational efficiency across industries. For companies ready to tackle this challenge, the reward is a sustainable competitive advantage in an economy where customer expectations are higher than ever.
Source:
https://www.linkedin.com/pulse/2024-customer-churn-still-too-buttery-my-taste-marcel-barrera-v4uyc/
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