In the previous article, we explored the fundamentals of customer churn and why addressing it is critical. Analyzing customer personas is the next important step in this process: getting a better understanding of what drives your customers’ behaviors is critical to proactively prevent churn – and a golden rule to remember is that it is always easier to fix a problem in its early stages than later, when things get more complex.
Knowing Your Customers
Brands often use segmentation to understand and target their audience, by taking into consideration general details about the average customer, including the geographic and demographic characteristics of gender, location, age, profession, and income. However, such a segmentation creates homogeneous groups, sometimes overlooking key personal traits and needs. Granular customer personas here will help you identify and prioritize changes to your offerings based on what your customers need the most. Here is a (non-exhaustive) list of questions to create the grounds for an empathy map, helping you better understand your customers with more qualitative insights:
What is their consumption profile?
What are their pain points?
What are their needs/values/aspirations?
What are their main influencers?
Let’s look at some examples in relation to prospective customers of a gym service:
Camilla, 37 y.o., HR Director in a small IT company, parent to 2 children. Very committed to health, fair trade, and contributing to environmental conservation initiatives through charities and associations. She hates waste and is very concerned about passing her values on to her children. She participates in a lot of sports to gain a sense of accomplishment, is generous, and wants to please everyone, so she is usually extremely busy. She earns a good living and is not very price sensitive. Instead, she looks for fair value for money, for herself and also for local producers, whom she prefers over large retailers.
Alex, 28 y.o., freelance graphic designer living in Paris and a semi-professional singer. He is passionate about art and, in his free time, works on multiple artistic projects. He has a large network of friends and acquaintances, is very active on social media, and dreams about having his own YouTube channel with one-man-show videos on music and design. He is very extroverted, creative, tumultuous, and needs a lot of recognition. He spends a lot of time online looking for inspiration and is very indecisive. Usually very price-sensitive, he is willing to spend a lot of money when it comes to a product that makes him feel unique.
Jimmy, 48 y.o., VP marketing in a pharmaceutical company. He is an innovator and is not afraid to take risks. He is a very good communicator and likes to share his perspectives and expertise by regularly publishing articles on LinkedIn and specialized magazines. He is highly selective and only buys from brands referred to him by his friends/family/colleagues; however, he also spends quite some time looking for more feedback on these brands on forums. He is very keen on buying from well-established, specialized brands and is sensitive to awards and other proofs of best value. He looks for good value for money but is also a fierce negotiator and so does not like to pay a lot for extra services or fees.
This psychological investigation will form the backbone of your customer experience analysis. Following this, you can segment your customers into groups according to what matters to them, and build models and personalized journeys according to their intrinsic motivations, to identify areas of improvement.
When it comes to identifying customer personas from large sets of data, the focus would typically be on percentages. However, these “customer persona buckets” can also be viewed from a different angle, with customers grouped according to their behaviors. Such analyses would not only save time by speeding up Exploratory data analysis (EDA) and improving feature selection but would ultimately provide business insights faster, helping generate longer-term value, loyalty, and revenues.
Understanding the Mechanics of Customer Churn
Let’s take a step back now and go over the mechanics of customer churn, with the help of some behavioral models, to better understand why such an approach to segmentation would work better.
According to B. J. Fogg, the creator of the Fogg model, behavior (B) is a combination of motivation (M), ability (A), and triggers (T), giving us the equation B=MAT. If we want the recipe for the likelihood of customers taking the targeted action, we would showcase the convergence of each of these ingredients: Core Motivators (Motivation), Simplicity Factors (Ability), and the Types of Prompts.
As explained earlier, motivation helps you assess if your users are sufficiently and adequately stimulated to engage in the desired behavior.
Ability refers to whether your users think the targeted behavior is going to be easy/hard to perform. Going back to our example of the gym subscription, if, for instance, Camilla says that she never manages to finish a single training session at your gym center, she will probably conclude that the difficulty level of your gym class is too high for her, and will likely discontinue her subscription.
If this is not the case, but she does not regularly visit your gym, she will need incentives to renew her subscription. T his is where the “trigger” (or “prompt”) plays a role, ensuring that users take the action at a particular moment in time (in our case, when it is time to renew). The idea is to engage them through an occasion so, for example, you could reconnect with inactive customers during one of their main “moments of life” / milestones, such as the purchase of their first apartment, their first job, their first time moving in with a significant other, a wedding, the birth of a child, retirement, and so on.
Now let’s consider another model introducing the notion of habit alongside motivation. The Hook Model, explored in Nir Eyal’s “How to Build Habit-Forming Products” (2014), relies on a four-step process that subtly encourages customers to stay engaged through consecutive “hook cycles” (or loops) of trigger, action, investment, and reward. The author believes that to be successful, brands should design their experiences in a way that connects their customers to their product / service with enough frequency to form a habit. Indeed, as Eyal explains, “through consecutive hook cycles, successful products reach their ultimate goal of unprompted user engagement, bringing users back repeatedly, without depending on costly advertising or aggressive messaging”.
So how does this work?
Triggers ensure that users take action at a particular moment in time. These can be external (e.g., emails, alerts, links, etc.) but also internal: by cycling continuously through these hooks, users begin to form associations with existing behaviors and emotions, and feel “triggered” every time they feel the same way, which leads to routine behaviors. For example, seeing a picture on Facebook of themselves completing a marathon might be a trigger for a customer to take action and return to the gym.
After taking this action, consumers expect a reward. For instance, if Jimmy goes to the gym, he will appreciate some coaching expertise to help him achieve his fitness goals; otherwise, he is likely to lose interest and will not feel like returning to the gym.
Last but not the least, to encourage consumers to create a habit, you also need to provide them reason(s) to come back. Consumers need to invest in your service to ensure future use and guarantee a lasting relationship. This investment implies an action that improves your consumer’s subsequent experiences with your brand. It should be leveraged to make the trigger more engaging, the action easier, and the reward more exciting with every “Hook” cycle. In our case, if Jimmy does not know how to get feedback on his improvements, he is likely not to invest in and renew his gym subscription next year.
A final important factor to remember: it is equally important to learn what forms and maintains habits as what can break them. Brands are often led by the wrong notion that customers are static and that the approach taken one day can be replicated in the future. Customers evolve and change, and so do their needs. To keep being “hooked”, customers need triggers, investments, and rewards updated to their evolving needs. A good way to anticipate this would be proactively thinking about different lifecycle roadmaps, and creating several possible “paths” that customers can follow with your product or service.
From Insights to Efficiency
Addressing customer churn can add tremendous value for businesses, and analytics, if done intelligently, can be a valuable resource in the long run. Whether through smarter segmentation, accurately learning from past behaviors, proactively identifying unhappy customers to put them on the path toward recovery, or by linking triggers to desired behavioral outcome, analytics can prove itself useful in defining strategies that will work best to re-engage customers further and improve performance
Further, as most efforts to reduce churn are costly, brands should focus on prioritizing efforts. While maintaining a balance between quick wins and long-term investments to enlarge customer bases, the next step would be to link costs and efforts to the expected generated value as well as with the time it is going to take to see results. Choosing a priority target is not a small challenge … but that is a different story for another time.