Avoidable customer churn costs British businesses £25 billion

Avoidable customer churn costs British businesses £25 billion

• Electricity, insurance, gas and broadband suppliers top the CallMiner Index
• Empathy in call centres is key to loyalty success

London, United Kingdom, 25^th July 2018. New research released today by CallMiner, the leading platform provider of award-winning speech and customer engagement analytics, reveals that British businesses are driving customers away for completely avoidable reasons. And it’s costing them billions. In fact, a conservative estimate of the price of switching is £25.05 billion per annum.

The report features survey responses from 1000 UK adults who had contacted a supplier in the last 12 months. Entitled the CallMiner Index, the report shows that 84% of adults switched suppliers 1.91 times in the last 12 months. The sectors that top the CallMiner Index over the last five years and the last 12 months, are:

The same four sectors top the Index over five years. Insurance and broadband have changed places with Insurance moving from #4 over five years to #2 in the last 12 months.

The pace of switching is on the rise

The CallMiner Index also looks at how often people have switched over the last five years by sector. The average rate of switching across all sectors is 3.4 times over five years or 0.68 times per annum on average. When you consider that the average rate for the last 12 months was 1.91 times, the rate of switching has accelerated by almost three times! Although Private Medical is the sector with the smallest number of people switching, it has the highest average frequency of switching at five time over five years.  Insurance is the only one of the big switching sectors that has an above average switching rate (3.8 times in five years).

The main reasons for churn – falling foul of the Brits’ sense of ‘fair play’

The survey uncovered that consumers want to stay loyal but are ‘forced’ to switch because of suppliers’ bad practices. There is a big difference between plans to switch and actual switching. For example, 23% say they are planning to switch electric suppliers but 29% did so this year. This gap between intention and action can be seen across all the sectors. The main actions by suppliers that force people say goodbye are as follows:

1. Prices are too high or have increased (71%)
2. There is no reward for contract renewal i.e. no reward for loyalty (45%)
3. Discounts offered to new customers are not automatically applied to your account (39%)
4. Feeling like you are not being treated fairly (31%)
5. There is a serious problem with the product or service (21%)

After price – which is an inevitable reason to change – the next three on the list are all related to being treated unfairly. Not only is this counter to the famous British sense of fair play, but neuroscientists tell us it also falls foul of a primary need that is hardwired into our brains – being fairly treated. Amy Brann, a leading neuroscience expert at Synaptic Potential, explains: “Being unfairly treated triggers a response in similar networks of the brain that controls physical pain. The reaction can genuinely hurt! That’s why people will go to great lengths to right wrongs. In the case of suppliers this can include burning lots of time in having a complaint handled, defecting to another company, bad mouthing the supplier online and offline and in more extreme cases, pursuing legal avenues.”

Unsurprisingly, the top advice consumers provide on how to keep them loyal matches the top three reasons for switching. However, the strength of feeling is indicated by the fact that more people provide this advice than those that switched for the same reason: keep prices the same or better than for new customers (81% v 71%); reward them for renewing their contract (68% v 45%) and automatically apply new discounts to their existing account (64% v 39%).

Frank Sherlock, Vice President for the UK at CallMiner, said: “With 84% of people switching in the last year, churn has reached epidemic proportions. And three of the top four reasons all relate to fairness. Treating people unfairly is completely avoidable. Suppliers could slash their churn rates if they listened to what consumers are saying in this research and put treating customers fairly at the heart of their brand values.”

Call centres are now centre stage in the battle for loyalty

The telephone remains the preferred way to contact suppliers and is subsequently the #1 channel used. Just over a third (36%) of respondents list the phone as their first preferred method to interact with suppliers. However, almost double the number of consumers (61%) used the phone to contact suppliers in the last year. This may be because the top two reasons to contact a supplier relate to problems with the service or product (61%) or problems with the bill (61%). Both these issues require specialised support from a contact centre agent. Issues around bills fall into the category of avoidable triggers for churn.

Call centre experience can decide if consumers stay or say goodbye – empathy is key to success

When it comes to delivering services to keep consumers loyal, call centres top the list: 66% want call centre staff to be aware of their service history so they don’t have to explain multiple times.

The survey also uncovered that call centres play a pivotal role in a consumer’s decision to switch or stay loyal. When asked how likely they are to switch suppliers if they have a bad experience with a call centre, 68% scored between 7 and 10 on a 0 -10 scale (where 10 = extremely likely). About one in five (18%) scored 10. When asked how likely they are to stay loyal to a supplier if they have a good experience with a call centre, more people (74%) scored between 7 and 10 – with 20% scoring 10.

The ability to show empathy seems to be key to success. When asked about their emotional state before a call to a call centre, the top response by almost half of consumers (46%) is that they want someone to listen to them.

The next four answers show what a tough job call centres staff have in dealing with the emotional state of callers. Over a third (36%) say they arrive annoyed; a third (33%) arrive hopeful; one in six (16%) arrive angry and the same number arrive ready for an argument!

It seems some call centres are good at taking the heat out of the situation. The top response for the emotional state after the call, by over a third (35%), is satisfied. The percentages of people feeling angry, annoyed or upset, all show reductions of an average of 28% from the before-call figures. However, other call centres may be less empathetic. The second highest response by 32% of people is feeling frustrated. The third highest (23%) is being listened to. This is half the level of those that wanted to be listened to before the call – showing that half left a call feeling ignored.

Aimee Lucas, Vice President and Customer Experience Transformist, at Temkin Group, said: “Our own research shows that call centre interactions that were more emotionally negative led to longer calls, more frequent transfers, and lower likelihood of the customer recommending the company to others. It’s imperative that companies use the available tools to their advantage to identify reasons leading to negative customer experiences and churn and coach their call centre staff on the behaviours that create more positive interactions with customers.”

According to the Office of National Statistics there are 52,078,525 adults in the UK. A conservative estimate of the cost of acquiring a new customer across all the main sectors in the survey is £300 per person. This is based on the level of incentives applied to attract new customers and a conservative estimate of associated sales and marketing costs. The CallMiner Index identified that in the last 12 months 84% of adults have switched 1.91 times. This represents 43.745 million people. The total cost of churn is therefore at least £25.05 billion.

The research was carried out for CallMiner by 3Gem Research & Insights. 1,000 UK adults responded to an online survey in May 2018.