Survey: Customer Churn Rate Rises by 15 Percent

Britain is customer defection capital of the West finds Group 1 Software research

Pitney Bowes Group 1 Software has released new research which found that customer defection rates in key UK consumer industries have risen from 19.1% in 2005 to 22% in 2007 – an increase of 15%.

Having studied the phenomenon of customer defection, or ‘churn’ in Britain across the last four years, the 2007 edition of the Pitney Bowes Group 1 Software Customer Churn Report decided to collect data which compare and contrast the situation in key European economies and in the United States. A representative sample of over 1,000 consumers in each country was interviewed by email and telephone questionnaire. They were asked (1) whether they had switched supplier over the previous year in each of a number of sectors, (2) how likely they were to switch over the coming year, and (3) what the principal reason for switching was/is.

The overall results toppled a number of pieces of received wisdom. The primary findings of the research are as follows:-

• Britain is the customer defection capital of the West (22% churn per annum), possibly because of its crowded geography, its national wealth per capita, and its high levels of deregulation across all sectors studied.
• The industries experiencing the highest levels of growth in customer defection rates since 2005 are Supermarket and General Insurance providers, with both seeing a 7.6% point increase in churn rates.
• Mobile Telecoms retain the highest average customer churn at 38.6% (33.4% in 2005).
• In Retail Banking, where most assumed sub 10% annual defection rates, is now in the league of one in five European customers defecting each year, rising to one in four in the US.
• The three key reasons why people change supplier are consistent across Europe and the US. They are:-
1. not being recognised as a valuable customer (all countries average – 55%)
2. unhelpful staff (all countries average – 47%)
3. ineffective call centres (all average – 42%)

The findings indicate that the UK consumer is becoming more mobile and that companies’ retention strategies need to improve to deal with this phenomenon.

Andrew Greenyer, VP International Marketing, Pitney Bowes Group 1 Software comments, “The world is becoming generally more mobile and less loyal. Back in 2003 – the first time that we commissioned research on the subject (in the UK only) – the British all industries average customer defection rate was 16.9% per annum. By 2005 our annual average had risen to 19.1%. In 2007 it stands at 22.0%. No wonder marketers are becoming obsessed with retention strategies. Yet despite all the effort and investment going into customer retention and loyalty, the effective strategies implemented by well known success story companies are not yet the norm.

“The publicly quoted companies who are the main players in the industries studied in this report, are under particular pressure to measurably grow their customer bases, exposed as they are to market sentiment and shareholder scrutiny. Strategies to stem defection are therefore critical to growing the customer base for the lowest possible investment.

“As churn rates continue to grow across all industries, it is clear that we are seeing a polarisation between companies successfully adopting the techniques and technology associated with customer retention, and those who are not. The more successful organisations are prioritising customer profiling to identify the habitual switchers and high value customers, implemented data-driven marketing techniques to deliver relevant and timely customer communications, and drawn customer information from across the enterprise and out of legacy systems.”

-Ends-

Notes to the Editor

For more information, or a copy of the management summary, contact:
Dina Morton (dina@lindsellmarketing.com)
or Josephine Ornago (josephine@lindsellmarketing.com)
Tel. 020 7402 0510

Research methodology

Research Base 6,000+ consumers in US, UK, Germany, France, Italy, Spain
Research Period July/August 2007
Research method Telephone and Email Individual Survey, Market Analysis

Primary research, plus corroborative secondary analysis, was conducted amongst consumers in the six main economies of the Western world.

This research covered the following areas:-
1. Annual customer defection rates
2. Projected defection rates over the next twelve months
3. Reasons for defection
4. Responsive campaign standards, across direct mail, direct email, telemarketing and cross-selling/retention campaigns through existing customer communications (bills, statements, correspondence, etc)
5. Database marketing and analysis standards
About Group 1 Software
Group 1 Software (www.g1.com) turns data into results, providing innovative software solutions that enable our clients to better understand and connect with their millions of customers, prospects, and partners. Group 1 Software helps over 3,000 organizations maximize the value of customer data to improve profitability, increase effectiveness, and strengthen customer relationships, through consolidating, cleansing and enriching corporate data, and generating personalized business documents for multi-channel delivery, customer care and efficient business processing. Our comprehensive Customer Communications Management (CCM) solutions span from database to delivery, adding value to every aspect of communication and allowing clients to integrate intelligence throughout their mailstream. As part of Pitney Bowes (NYSE: PBI), a $5.6 billion company, Group 1 Software’s solutions are utilized by leaders in the insurance, financial services/banking, GIS/mapping, government, mail services, retail, telecommunications, utility, and other industries, including Entergy, ING, L.L. Bean, MapQuest, Microsoft, Safeco Insurance, Wal-Mart and Wells Fargo.