The Importance of Predicting and Preventing Churn Risk (and How to Do It)


What are the signs that a customer is about to jump ship for your competitor? Predicting the signs early will enable you to take steps to convince them to stay loyal, and save on the marketing expenditure necessary for acquiring new customers to take their place.
Using the same methods to foresee customer churn, businesses can also apply the same predictive models to measure employee churn risk. Spot signs that your employees are unsatisfied before they come directly to you, and intervene to prevent the costs incurred by employee turnover.

What Is Customer Churn and Employee Churn?

Customer churn

Sometimes referred to as “customer attrition”, customer churn is the opposite of customer retention. The term refers to when a customer decides to cease buying from or interacting with a company.
For example, an eCommerce business would consider a customer “churned” if they haven’t bought anything, used their service, or interacted with their site within a determined period.

Cost of customer churn

We’ve already briefly mentioned the first cost: that of acquiring new customers. Your marketing team needs to attribute time, resources and expenditure to find new leads and attract prospective customers to replace those that have churned.
There are other costs as well. Most obviously, the loss of recurring revenue. Loyal customers bring stability to your business, it’s in your interests to keep them returning.
One additional result that is not often considered while measuring the fallout of a churned customer is the loss of expansion opportunity revenue. It’s much easier to upsell to an existing customer than to convince a new customer to take the plunge. The likelihood of upselling to a current customer is approximately 65%, compared to an 18% chance of upselling to a new prospect. This discrepancy is likely a result of the trust and relationships you build with your existing customers over time.
That means that it would take you over three times longer to reach your expansion revenue goal.

Employee churn

Employee churn refers to when an employee decides to terminate their contract and cease working for your company. Employee churn rate is measured as the number of employees that leave over a certain period.

Cost of employee churn

The cost of employee churn is predicted to be between 6-9 months of the salary of the lost employee. If your employee is in €80,000 per annum it could cost between €40,000 to €60,000 to replace them.
That percentage might seem exorbitant until you factor in all of the implicated costs.
Most obvious are the direct costs of marketing a job opening, onboarding and training a replacement employee, but there are also several hidden costs.
Over their time spent working for you, your employee has likely honed and refined their role-specific skills, has internalised your business processes such that they are second nature, and has potentially built relationships with their colleagues that reduce friction. Even if you find a well-qualified replacement immediately, it will take them a while to be trained up enough to fulfil the workload. In the meantime, other people in your workforce will have to pick up the slack resulting in potential delays and impacting your bottom line.
For some job roles, such as sales, losing an employee might also incur losing customers. Even with a non-solicitation clause, at the very least losing the relationship built with the clients, which might, in turn, result in them leaving (see customer churn above). Their replacement might also make some early mistakes, leading to poorer customer satisfaction.

How To Predict Churn Risk

How can you tell that your relationship with a customer or an employee is souring? In other words, how do you predict churn risk?
You can’t afford to wait until the signs are obvious. You can’t begin your preventative steps once the customer has already decided to end their subscription, or once the employee has handed in their notice.
Thankfully, with the help of advanced Natural Language Processing (NLP) technology, churn risk is spelt out by how the customer or employee communicates.
Word choice and syntax convey their people’s emotions and their sentiments to help you detect when their feelings towards your company are beginning to shift.
Symanto NLP technology automates the process of interpreting unstructured text data on review sites and in emails to identify whether someone is a loyalist, an ambassador, a critic or a churn risk

Preventative Steps

Reducing customer churn risk

Ultimately, a baseline amount of customer churn is unavoidable. People leave for many reasons that are completely outside of your control. All you can do is take the necessary steps to try and mitigate that number.
Identify common issues causing churn with the Symanto Insights Platform. Which topics and subtopics have the lowest sentiment scores? For example, is a recent feature change the cause of dissatisfaction? Or has the recent price hike disgruntled loyal customers? Use this information to direct your business strategies.
Once you’ve identified customers that are at risk of churn you can segment them and entice them back with premium customer service, special offers and targeted content.
Make churn risks a priority for your customer service team. Respond to negative or less-than-optimal reviews directly and offer to resolve the issue.
Use Symanto Communication Style API to identify the customer’s preferred communication style so that you can tailor your messaging and increase your chances of reengaging them.

Reducing employee churn risk

Analyse exit surveys to identify common issues that have caused employees to leave. If many ex-employees refer to the same problem, it could signify a clear cause of employee turnover.
If employees are becoming despondent or disengaged in their communication, it could be a sign that they no longer feel stimulated by their work. Offer opportunities for such employees to change their role or advance so that they feel that their career is progressing.

Get Started With Symanto

To find out more about how to predict and get insights on churn risk with Symanto technology get in touch, or book your free personalised demonstration of our Symanto Insights Platform.