Summer 2018, Vol. 3
- SUMMER 2018
CUSTOMER CHURN: Why It Happens And What You Can Do About It
WRITTEN BY: PHIL BARATZ
Customer churn knows no season. They come and go throughout the year depending on the weather, pricing, fuel supply, and more. The age-old question is still – how can I combat customer churn? Although you may never be able to completely defeat customer churn there are always solutions to help you minimize churn and possibly even predict it.
Why is customer churn so bad?
Churn has a tendency to rise and fall with swings in prices, as customers – incorrectly – believe that dealers are out to get them, and then dealers make the mistake of low-balling to get new customers, while fooling themselves into believing that customers will be loyal to them (despite the fact that they weren’t loyal to the prior dealer).
Another reason, not related to the price swings, has to do with increases in technology, data, and processing speed. The Old World of a customer choosing a dealer and sticking with them until they sold their house and retired to Florida has moved into a world increasingly dominated by Millennials who have access to anything and everything on their Smartphones. Easy access to information regarding pricing, in a world that doesn’t value relationships as much as in prior generations, makes it that much harder to keep customers.
Our industry has been slow to keep up with the times, and is all-too-often left with price as their only differentiator.
Can customer churn ever be good?
Companies who have “controlled churn” can see efficiencies by filtering out customers who do not fit the desired segment that the company wants. That could include customers who constantly put a strain on either customer service or have outgrown service needs. If you can actually measure the value – longevity, annual profitability, lifetime profitability or some other metrics that are impactful to your profitability and value – you can then treat customers based on their value to you, as opposed to a cookie-cutter approach that ends up with a major focus on the least profitable customers.
Why do customers leave?
Customers want more, they want to pay less and they want a “better experience, they want to use technology, they want apps, they want….New customers seem to stay for about 2 years less than they used to stay. You need to flip around the question and ask yourself “what am I doing to keep a customer from leaving?” and “which customers are leaving?”.
What makes customers stay?
Service contracts, price caps, and budget plans seem to always differentiate customer segments and add ‘stickiness’. Over the past couple of years wireless tank monitors have also been added to this list. Longer-tenured customers tend to have a higher tolerance for “the occasional problem”, and lower credit score customers (at least those who pay) have a harder time shopping and are therefore more likely to stay.
Let us help you find ways to combat customer churn. Contact us today!
ANGUS EDUCATIONAL SERIES
WEBINAR REPLAY: HOW TO GET THE MOST OUT OF YOUR TANK MONITORS
PRESENTED BY: DAVID MONTGOMERY, GREMLIN CUSTOMER RELATIONSHIP MANAGER
Whether you use tank monitors already or are thinking about investing in them, take 30 minutes to listen as David gives tips on successfully deploying them.
NEW CLIENTS –
WELCOME TO ANGUS ENERGY
Wilson Baker Petroleum, Wilton, DE
Auth Fuels, East Longmeadow, NY
Combined Energy Services, Monticello, NY
Weyant/OSI, Oceanside, NY
Como Oil Co. of Florida, Key West, FL
McGlaughlin Home Services, Waynesboro, PA
If you are interested in any of our solutions to make your business run more efficiently, effectively, and profitably contact us today.
*Blue represents the states of our new clients. Green represents the states of our existing clients.
New Customers…It Takes Time To Know Them
Written by: Bob Levins and David Clark, Sr. Business Intelligence Developer
All of the hard work done every day by your staff helps to ensure that the company’s brand equity is maintained, and the customer base continues to grow. Unfortunately, with any net-ahead or net-behind calculation employed in this industry for so many years, there is often the overlooked component of customer churn and its effect on operations.
Marketers will sometimes choose to ignore the ramifications of this when the growth counts are in the green but it’s the operations folks who have to absorb all things unknown with the new customer. The service department has their own set of challenges when dealing with unknown equipment; however, the delivery department must be extra cautious in order to be sure that the new customer does not experience any interruption in service due to run-outs.
They have learned to accept short drops as a consequence in order to minimize this risk of runouts. When I ask dealers, “What burning rate do you assign to a new customer’s tank”, without hesitation the responses are consistently, “Our test K-factor of approximately X”, generally a very conservative number but most always low (fast).
At one point, as more and more deliveries are posted, this number will hopefully stabilize. How long does this take? Depending on the time of year in which the new customer is signed, it could take up to 18 months. During this time, caution and inefficiency reigns.
To help validate our concern we analyzed hundreds of thousands of deliveries, across multiple markets to show you the progression of the relationship between your average deliveries and optimum deliveries.
Although in most cases, the examples have shown an increase in efficiency as time has progressed, the overall percentage of optimum remains generally low (100% = optimum drop), which is yet another issue that compounds the problem.
The following study consists of tanks that have been acquired since 2014, transactions that are coded as automatic deliveries, delivery units are greater than 0 (exclude stops with no delivered units, pump-outs, etc.), separate passes of the data for Propane and Non-propane, tank sizes 240-330
NOTE: Year 1, 2, 3 & 4 columns represent the average deliveries as a percent compared to the optimum drop target set within the tank record.
In each of the examples above, reflecting % of the optimum drop, you will notice steady increases in the average. Dealer 4 showed virtually no increase in the first two years but then made significant corrections in years three and four. Regardless, the analysis has shown in most cases that there is a gradual improvement in efficiency as time customer tenure progresses.
Notice with Dealer 2 that although the percentage of optimum was already excellent in industry terms, they still managed to improve over time.
Although the delivery inefficiencies of new customers may be the reality today, that doesn’t mean you can’t change your reality by using the technology and tools available to today’s marketers. Gaining new customers is always exciting for a company, but don’t forget about the customer churn and its effects on your operations. Find the right tool to help you minimize the inefficiencies so that you can get to know your new customers a lot quicker.
GREMLIN® Tank Monitors:
- “Install date” and “Inactive” flag for ADDs integrated dealers have been added to the Web Portal
- Users with the consumer mobile app can use the camera to scan the monitor serial number during the registration process
- The GREMLIN Web Portal is being moved to Google Cloud hosting to performance
BRITE® Business Intelligence Software:
- BRITE is in the process of being moved to Google Cloud hosting to improve performance