Customer Attrition: What You Can Learn From Those Who Leave

If your institution doesn't take customer attrition seriously, you’re missing out on valuable insights that could point to huge gaps in your customer experience.

Where does the responsibility for measuring customer attrition fall at your institution? Is it anyone’s job to keep an eye on closed, dormant or inactive accounts? As marketers, we’re accustomed to bringing business in. But the real objective should be net growth, whether you’re talking about new customers, loans, deposits, or fee income. You work so hard to bring on a new customer, guide them through your carefully planned onboarding process, and turn them profitable. Why would you let those customers leave without knowing what drove them away? A managed attrition process can make a huge difference in your institution’s growth; it can also help you gain valuable insight to help you improve the customer experience and slow future runoff.

If all customers were equal, the new customer you acquired today would be of equal value to the customer who just left. But it’s not that easy. It’s doubtful you’ll replace a lost customer who has e-statements, mobile deposit, a mortgage loan, and pays ATM fees with someone equally profitable (at least not immediately), no matter how great your onboarding program is. However, it is important to compare the profitability of existing customers with that of customers who leave and those who just started their relationship. This can give you an indication of where your institution’s profitability is headed.

Start Small

If you employ profitability measurement at your institution, whether it’s in dollars, products per household, relationship level or some other measurement, you can build a meaningful attrition analysis. If you don’t have access to these tools, at least measure the difference between customers-in and customers-out, and do this for all product lines. Beyond that, try to learn a little more about these customers — both outbound and inbound customers. Among those who leave, how long were they a customer? Which electronic channels did they use? Did you lose loan balances as well? Credit cards?

Next, determine why your customers are leaving. This is the type of question that can make every marketer cringe. We’re so accustomed to touting the benefits of our institution that we can’t imagine why anyone would leave. But you have to ask. Prompt outbound customers privately and politely (now is not the time to get defensive) and give them a chance to air any grievances. Give your frontline staff a tool (e.g., a spreadsheet or a data field in your core system) to track the reasons departing customers cite as their reasons for leaving. Another approach is to survey customers after they’ve left, whether by mail, email or phone. Keep in mind that you will likely receive different responses depending upon the channel you use — the more anonymous consumers feel, the more candid their response — and how close to the time of their departure that you pose your questions.

Soon after you start tracking, you should begin to see patterns emerge. Some portion of your customers leave because of life circumstances, such as moving, marriage or divorce. Others will have a complaint with something (or someone) at your institution. By understanding the reasons your customers are leaving, whether it’s fees, service quality, branch network or ease of doing business, you can determine if there is a larger issue that needs to be addressed within your organization. Factoring in your institution’s profitability measurements alongside the reasons your customers mentioned will give you a more complete picture of the impact attrition has at your institution.

How to Move the Needle

Once you have a few months of data behind you it’s time to take action on your findings. Remember, your goal is to increase overall growth, and some customers you might be glad to see go. After all, not everyone is equally profitable. So it’s important to focus on your most profitable customers. What are the top reasons profitable customers told you they are leaving? What can you do to address those issues? Does it require enterprise-wide changes, or simply better communication with your customers? Is one branch or department a problem? Make sure that these reasons are on the radar of your leadership team. Tackle the most prevalent reasons first, because those will make the most difference in retaining more of your profitable customers.

If you don’t find recurring reasons that cause your customers to leave, you’re off to a good start provided you are bringing in more customers than you lose. You can still use this exercise as an opportunity to improve by looking at trends among similar customers. For example, are customers paying off a car loan but not coming to you to finance their next vehicle? Do you have greater turnover among your millennial customers? These insights can help you focus your marketing efforts more effectively.

Change for Good

Life is full of changes, and consumers change financial institutions for a variety of reasons. Not every reason is bad. While we all like to think that we’ll have customers for life (especially true with credit unions and their members), a “lifetime” customer may not be with you as long as you’d like. Parting ways with customers who are no longer profitable is okay. But saying goodbye to a once-loyal, engaged customer could point to larger issues that need to be resolved at your institution. Make sure you know what the pain points were that prompted them to leave.

Beyond the reality check, a managed attrition process can be used as a road map to identify gaps in an otherwise exceptional customer experience. Use customer attrition to your advantage so that you can learn and improve from it. Sure, not every customer is profitable, but if you aren’t measuring customer attrition in some way, you won’t know what you’ve lost or whether you are retaining your most profitable customers.

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