You’re in a big company in a competitive industry. You have great ideas to improve customer care and boost your team. That’s great. But of course there’s always competition for development dollars. Here is another concrete idea to get the attention of management to fund your project.
My previous blog explored improving top line revenue to fund your project. This part 2 blog post describes how you can get funding based on reducing your customer and employee churn.
Align your pitch with the classic “Big Three” business goals
Over my years as a Business Consultant, execs in the private sector ultimately always describe their business priorities as:
- Increase Revenue
- Reduce Operational Expense
- Improve Customer Experience
These are the classic “Big Three” business goals. And let’s be honest, in the private sector, Improve Customer Experience is really only valued when it drives the first two goals! To make your project resonate with management, clearly align it with the “Big Three”.
Monetize the benefits
Now, your project to improve customer care in your company will “move the needle” in the right direction for each of the “Big Three” benefits, but how much? In an early funding conversation, which of the “Big Three” benefits should you try to monetize to test the funding waters with your management? My experience says go first for the Revenue, then for the Operational, last for Customer Experience. The first two benefits can be monetized fairly easily. However, monetizing the third benefit, Customer Experience, is more challenging. In my previous blog “How to Fund Your Customer Care Project”, I explored the first benefit, Revenue. This part 2 blog will explore the second benefit, Operational Expense, with a focus on customer churn.
Benefit 2 – Reduce Operational Expense – Churn Reduction
Every company wants to decrease operational expense! There are many worthy ways to do this based on reducing employee time. But instead of focusing on the classic time savings based on more self-service and better equipping of employees, let’s focus on a different yet simple calculation that could help fund your project: churn reduction. Here are three steps to build your pitch:
Step 1 –Identify your types of churn. Customer Churn reduction is the obvious benefit, but don’t forget Employee Churn. Your project to improve customer care should drive reduction in both. You’ll need data. For example, how much does it cost to replace a trained, experienced employee that churns out? And how much does it cost to replace an unhappy customer than churns out?
Step 2 – Choose a conservative decrease in churns to drive your benefit. This is the magic. There is no way to forecast precisely how much churn benefit your new project will drive. So, estimate in relative terms. For example, assume your project will drive a modest customer churn reduction of 10% so a 2.5% rate drops to 2.25%. It’s small, it’s conservative, you can sell it to management. It’s sometimes useful to frame this same 10% decrease as “Today annually, we lose 25 customers out of every 1000. The new project could conservatively retain just an additional 2.5 out of these 1000 customers”. Use the same approach for Employee churn.
Step 3 – Do the math. Per the table below, estimate your Customer Churn and Employee Churn dollar benefits. For customer churn, ask your marketing department what their cost is to acquire a new customer. Ask your support department what the cost is to set up a new customer –don’t forget truck rolls, new equipment, and debugging support calls. For employee churn, ask your contact center what it costs to recruit, hire, and train an employee, and then how long it takes to get fully experienced – there is usually several months of ramp-up time. In the example below, a 10% churn improvement drives an $860k annual benefit or $2.58M over three years. Of course, your figures will vary according to your company numbers.
|Churn Type||Details||Churn Rate todayChurn Rate improved||Annual Churn Reduction Benefit|
|Customer ChurnCost to acquire = $100Cost to setup = $100||2,000,000 customers||2.5%2.25% (10% decrease)||(0.25%) * 2M customers * $100 = $500k|
|Employee ChurnCost per new employee to recruit, hire, train, ramp to full experience = $12,000||2000 employees||15%13.5% (10% decrease)||(1.5%) * 2000 employees * $12k/employee = $360k|
|Three Year Benefit||3 * ($500k + $360k) = $2,580,000|
Many Levers to Reduce Churn
There are many win-win levers your project can use to reduce churn. On the customer side, care improves by empowering customers to easily reach the right employee, in the right channel (voice, chat), at the right time (now, snooze, call back). On the employee side, improved training, intelligent routing, and extending beyond the contact center into your back office will drive your churn benefits.
In the next blog post I’ll continue this “Big Three” discussion with a systematic approach to estimate additional self-service to your IVR. If you’d like to learn more about the financial benefits of churn reduction, Return on Investment, or other topics please visit http://www.genesyslab.com/general-pages/contact-us.aspx