Why automotive Original Equipment Manufacturers (OEMs) should make targeted investments to increase customer loyalty and implement effective recovery measures for connectivity and mobility services
Lowering churn rates and implementing targeted processes to win back lost customers are routine activities in the telecommunications, software, and energy industries. But churn management for connectivity and mobility services is uncharted territory for many automotive OEMs. This is starting to change as focus shifts toward new revenue streams from these areas. Our projects in other industries show that up to 80 percent of the profit from subscription models is generated by existing customers.
Furthermore, companies that excel at churn management typically pay attention to two target groups in particular. They develop loyalty measures, such as customer loyalty programs, early on specifically for their existing customers. And they implement tailored recovery measures for customers who terminate or don’t renew their contracts.
Successful churn management: Two best practice examples
1. Determine what drives customers to terminate their contracts. Use these insights to increase customer loyalty and generate repeat business
A common mantra in telecommunications is that it is significantly more cost-efficient to retain customers than to win back ones who have churned. Our experience in this industry: it’s roughly 50 percent more expensive to win back a lost customer than to retain an existing one. Investing in existing customers pays off. That is, if companies plan and implement measures in a structured way.
The first step is to determine which factors drive customers to churn. For OEMs, this could mean identifying and evaluating the impact of specific customer behaviors, such as product-related complaints or reduced usage of specific services, to anticipate which customers might terminate or choose not to renew. These drivers can then be combined to create risk classes. As soon as high-value customers start engaging in behaviors that place them in higher risk classes, a set of proactive customer retention measures is automatically initiated to prevent them from churning.
This approach should be applied as early as the offer-design stage. Offers can be set up around the principle that loyal customers will be given special benefits. The telecommunication industry’s "churn management champions” are adept at doing this. Mobile customers who renew their contracts with the same terms and conditions receive additional data volume.
2. Establish tailored recovery measures
Despite innovative offers, personalized customer service contact, and targeted loyalty measures, customers may still decide to terminate or not renew their contract. What should OEMs do then? Most companies resort to quick fixes, such as sending out a reminder email. This isn’t necessarily a bad move. However, it is just part of the solution and certainly not the last word when it comes to customer recovery.
Churn management champions in the energy industry differentiate their recovery measures with targeted approaches. Not only do they create risk profiles. They also analyze which contact channel each customer tends to favor and reach out to customers directly using their preferred method. I.e. phone, mail, or email.
Recovery measures are also differentiated in a way that works to the advantages of each channel. For example, contacting customers by phone allows energy companies to interact more easily with them, actively seek their feedback, gage customer satisfaction, and ask about previous usage behavior. Materials sent by mail can describe specific examples in more detail or contain testimonials from other happy customers. In emails, companies can embed links to videos or offer customers ways to chat with customer service. If a customer shows interest, these churn champions respond with predefined offers. For example, contract extensions with coupons for the online store or special conditions for certain services limited to a set time period.
OEMs can adapt these techniques to reach out to their own customers effectively and incorporate additional targeted measures. For example, communicating via vehicles’ in-built display systems or approaching customers when they visit dealerships.
By implementing well-structured, future-ready approaches, churn management can be made significantly more efficient. Companies are more likely to identify and use customers’ preferred channels and differentiate their recovery measures according to risk profiles and customer value. Automotive OEMs taking this approach will be better able to tap the full potential of their connectivity and mobility services.
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