Solving Business Problems Using Mekko Graphics
Improve Customer Loyalty and Reduce Churn
Improve Customer Loyalty and Reduce Churn
Research has repeatedly shown that existing customers spend more,
purchase higher margin products and services, and are more likely to refer
additional customers.1
So, how do you avoid the high price of constantly replacing existing customers
with new ones? Knowing the reasons why your customers are leaving you or
spending less with you can help you to respond to issues and retain more
customers.
Using Mekko Graphics you can examine revenue churn and determine the
cause for controllable churn. Here is how…
1. Gartner, 2004: “Replace Customer Churn Predictions With Retention Analysis”
Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved.
Improve Customer Loyalty and Reduce Churn
Begin with Analysis
Draw Conclusions
Identify Areas for Improvement
Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved.
Customer Churn
Revenue Churn Analysis (2009-10)
Total Company Revenue (2009-10)
$981MM
$1,000MM
2009-10 Revenue Churn
Growth
15%
$300MM
$255MM
$853MM
New Customers
2009-10 Revenue Change ($MM)
Total Revenue ($MM)
800
600
400
200
200
Net = $128MM
100
Increasers
0
Decreasers
Churn = 15%
-100
Lost Customers
-$127MM
0
•
•
2009
2010
-200
When examining revenue growth, it is important to understand the undercurrent of revenue churn
Revenue churn is defined as the customer accounts that either decreased or were lost divided by the prior year
revenue
– In this case, -$127MM ÷ $853MM = ~15% revenue churn
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Customer Churn
Controllable vs. Uncontrollable Behavior Drivers
2009-10 Revenue Churn
Controllable vs. Uncontrollable Churn
$300MM
100%
$255MM
2009-10 Revenue Change ($MM)
200
100
Uncontrollable
Net =
$128MM
80
Percent of Total Churn
New Customers
Increasers
0
Decreasers
60
40
Controllable
Total Churn = 15%
-100
Lost Customers
20
-$127MM
-200
•
•
•
0
Behavior Drivers
Not all churn is the same
Some revenue churn is because of factors within the company’s control (“Controllable Churn”)
– For example: poor customer service can lead to a customer defection
Some churn is due to circumstances out of the company’s control (“Uncontrollable Churn”)
– For example: an account lost when a customer went out of business in 2010
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“True”
Controllable
Churn = 11%
Customer Behavior Drivers
Behavior Driver Detail
Q: Why did you reduce your spend with Company X?
100%
Delivery
Sales
Other
Percent of Total Churn
80
Price
60
Customer's Business
Conditions
Product Issues
40
Customer's Ordering
Habits
20
Customer Service
0
Controllable Reasons
•
Uncontrollable Reasons
The reasons for revenue churn can be isolated and quantified by doing a survey
among customers
–
A Marimekko chart is an ideal way of showing the results of this survey
because it clearly displays two individual dimensions of data
Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved.
Improve Customer Loyalty and Reduce Churn
Begin with Analysis
Draw Conclusions
Identify Areas for Improvement
Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved.
What does it mean?
Using Mekko Graphics to drill down into
their data, this business was able to get to
the root of its customer churn. In this
case, the marimekko chart in the previous
slide illustrates the following:
• 75% of revenue churn was due to
controllable causes
• Of that, 60% was due to customer
service or product issues
Using this type of analysis
you can zero in on the causes
of controllable churn in your
business.
Supported by this data this business would
be wise to investigate ways they might
improve both their product and processes
to provide better customer service and a
more fulfilling product experience.
Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved.
Improve Customer Loyalty and Reduce Churn
Begin with Analysis
Draw Conclusions
Identify Areas for Improvement
Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved.
So Now What?
Ask the right questions:
In this example a reasonable search for
improvement areas could begin with
questions such as:
• Are employees properly trained to
address customer issues?
• How could feedback from customers
be collected earlier in the cycle so
that issues could be resolved and
defection prevented?
• Do employees have the necessary
skills to produce the best possible
products and services?
• Is emphasis placed on ensuring a
positive off the shelf experience with
the product?
Asking the right questions
based on your analysis can
help you identify key areas
for improvement to increase
customer loyalty and reduce
controllable churn.
Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved.