Banking Review

To everything, churn, churn, churn…

Many organisations operate on the premise that it is better to save an existing customer than it is to find a new one. The theory being that the time and cost to discover, convince and convert new customers is far more expensive than keeping an existing customer.

After several decades with one bank that had 100% share of my wallet, I moved to a new bank. Oddly it was only when I wanted to cancel the credit card that I received a call from the bank to discuss ways to keep me as a customer.

What triggered the bank to call to save me over the comparatively lower value credit card compared to the high value home loans remains a mystery. I accepted the offer of zero fees on the card for the rest of my life; yet the card sits unused in a drawer six years later. I was saved from churning but at what cost to the bank? Zero balance accounts for the card are sent in paper form every quarter, new cards are issued every two years. Was it worth it?

In line with the thinking of Frederick F. Reichheld about good and bad profits, rewarding unhappy customers and not rewarding contented ones seems illogical. It is puzzling that failing to renew a magazine subscription results in special offers and free gifts to encourage re-subscription. Why are customers being encouraged to let their subscriptions lapse just so they can be rewarded with gifts and better offers?

Recently I decided that I needed to upgrade my mobile phone. This task has proved to be an interesting customer experience. It begins badly by having to wade through the plethora of mobile phone plans on offer. This requires patience, diligence and sharp actuarial skills to make an informed decision. It was more frustrating than comparing insurance policies.

Aggregator services such as youcompare made it easier but as with insurance, not every Teleco wants to be a part of that market. Yet if the value proposition was obvious in the first place, aggregators would not have a market. And yet aggregators thrive in both telecommunications and financial services.

After hours of research, I began the experience of being a churning customer. Despite being a Telstra customer for more than a decade nothing was offered that was worth staying for. Until yesterday I was not unhappy with Telstra; simply my needs had changed and there was no immediate solution. However I needed information from Telstra to complete the changeover.
I endured a seemingly endless loop on the IVR system unable, despite even mashing the phone keypad, to speak to a real person. I resorted to going in store for assistance only to be told the information could not be retrieved and was given a number to call on Monday. It was midday Saturday.

In the end I established the account with the new Telco and had to phone in the missing information after retrieving it from the depths of the filing cabinet. So now I join the ranks of many others unhappy former Telstra customers. Previously I would have considered returning at a later date if the offer was right. Now, the company has been removed from my consideration list.

Not every churning customer is unhappy; yet making it difficult for them to leave will ensure that they are by the end of the process. If a customer cannot be saved, making it easy for them to leave is the least that can be done. Creating processes that seek to lock customers in only results in negative outcomes for both customers and the company.

So what is the answer to customer churn? Deliver great products at the right price and back it up with great service; and keep offering it, even to the ‘rusted on’ customers. They deserve rewards as much as the ones about to leave.