Stop Using These 2 Common Retention Tactics
When companies try to stop customers from leaving, they usually try one of two tactics: hostage-holding or surrender. Neither works well. If businesses want to overcome modern consumers’ lack of loyalty, they must treat their offboarding processes with the same level of gravity as they treat prospecting and customer service.
Understanding Hostage-Holding Tactics
When customers decide to cancel over price, service, or a bad experience, companies unknowingly face a test that determines whether they keep the customer, lose the customer for a little while, or lose the customer for life.
The first bad tactic, hostage-holding, virtually guarantees that a customer will never willingly return. Companies that use this tactic attempt to trick customers into abandoning their attempts to cancel by placing as many obstacles as possible in their way. Deliberately obtuse phone trees, excessive requirements for documentation, in-person only cancellation policies, and similar processes fall under this banner.
Hostage techniques rarely provide long-term benefits. Companies may frustrate some customers into resignation, but others will redouble their efforts in the face of resistance. When those customers finally break free, they tell their social circles about the difficulties they faced, badmouthing the brand to anyone who will listen. Unless they have no other options, customers who encounter hostage situations rarely return to the companies that treated them so poorly.
According to research from our new report, The State of Customer Cancellations 2020, around 30% of consumers report having a difficult or very difficult time cancelling services. In these cases, customers probably encounter hostage tactics, where companies seek higher difficulty ratings under the mistaken belief that retention by any means necessary is a winning move.
That is not the case. Hostages make bad customers, and bad customers rarely benefit the businesses that keep them. They may pay a few more billing cycles, but when former hostages find freedom, they will always remember their experiences as prisoners.
Surrender Is No Better
Surrender, the opposite of hostage-holding, doesn’t help either. Where a company might use a hostage strategy to trap customers, surrendering companies roll out the red carpet to make it as easy as possible for customers to cut ties. With a single button, customers can unsubscribe from all emails, cancel all services, get full refunds, and walk away without a second thought.
When companies don’t give themselves a chance to make things better, they do both themselves and their customers a disservice. Customers who initiate the cancellation process may be willing to stay for a better price, an apology for a major issue, a promise to expand services, a small upgrade, or any number of other concessions. By surrendering at the first sign of tension, businesses give up a golden opportunity not only to retain customers but to win their favor by being helpful.
Our research found surrender to be a much more common tactic than hostage-holding. Customers who canceled or changed services said the experience was easy or very easy much more often than difficult or very difficult. That can be good in the right context, but when companies make it too easy to cancel, no one wins.
Designing a Better Offboarding Experience
Despite their obvious disadvantages, hostage-holding and surrender continue to make up the core philosophy of many companies’ offboarding strategies. Rather than rely on outdated and inefficient tactics, more businesses should think about how to design an offboarding experience that makes customers feel heard and appreciated.
According to our research, nearly one in five customers who cancels only gets a single option regarding cancellation method. Some businesses force customers to call and speak to a representative. Regimented communication like this can be difficult for people who work 9-to-5 jobs or people who don’t like speaking on the phone. We also found that nearly 10% of respondents spent more than an hour attempting to cancel, a clear sign of hostage-holding tendencies.
Instead of holding on too tightly or letting go too easily, companies should think of the offboarding process as a firm handshake. Give customers a few options, make it as easy as possible, and offer potential solutions. Never shut the door on a relationship that could rekindle down the road.
For example, many subscription services now allow customers to pause deliveries instead of cancelling entirely. Reduced frequency, and therefore reduced pricing, can entice customers to stay.
Some people only respond to discounts. Be careful before turning discounts into the default, though. Customers may appreciate the deal, but if they have to call in constantly to get a better rate, they will view any prices above the discount as exploitative.
During any offboarding process, ask customers about their problems and see if the company can help. Phone reps can do this, but so can short online questionnaires. A customer who experienced a certain issue may simply want that issue resolved and feel frustrated by early attempts by customer service to do so.
Even if customers choose not to stay, ask for permission to maintain contact. Allow customers to unsubscribe from specific email lists, like promotions, but remain subscribed to others, like updates. Someone who cancels a gym membership because of an inconvenient location may be interested to hear about the opening of new locations in the future.
Customer cancellations are a fact of life, but they don’t have the be the death of relationships with the brand. By practicing smarter offboarding and ditching bad habits, companies can maintain positive lines of communication and boost retention rates without resorting to drastic measures.
Haven't seen the full report? Download The State of Customer Cancellations 2020