Challenges in Customer Relationship Management

Question: Discuss the churn rate and biggest challenges in costomer relationship management? Answer: Introduction Any company in an industry spends significant amount of money to acquire customers (Gerdemen, 2013). But what is proving to be even more difficult is the consumer retention. Churn or attrition of consumers is a growing problem. In this case study, HubSpot was developed by Brian Halligan and Dharmesh Shah based on the theory of inbound marketing which they found was the most effective marketing method for small and medium enterprises with the traditional marketing methods becoming obsolete these days. With the idea of inbound marketing, the company would be able to attain new consumers and develop a more thorough relationship with them. With HubSpot, they aimed to provide best-practice guides, materials, training and software tools and support and produced product suites tailored for marketing for small, medium and large companies. They acquired their own customers by the inbound marketing technique. The company, when it began losing customers for the first time in the year 2007 disre garded the issue considering it not life threatening instead of analyzing the core of the problem which led to the issue rising during the recession and to the point where it is now. The main of this essay is to analyze the concept of churn with regards to HubSpot and estimate the biggest challenges faced by the company and come up with recommendations that would enable the company to fare better in its customer relationship management. Churn rate and Biggest Challenges Churning is basically the number of consumers who drop out of a particular subscription in a month. In case of HubSpot, their service is based on Saas (Software as a Service) which was as opposed to the idea of a one-time fee model was introduced as a subscription model. The marketing activities offered by the software concentrated mainly on SEO (Getting found) and help companies increase the traffic to their sites. Companies subscribing to the tool were happy with the results as their sales leads and traffic jumped to new heights. But once the results were achieved, the companies decided not to spend anymore on maintenance mode and as the desired results were already obtained, cancelled the subscriptions. While their customer satisfaction was absolute, they had this huge problem of consumer attrition after initial subscription and with a crash in economy in the year 2008, the churn rate increased and spiked to 7% in early 2009. The first challenge for the company was to provide the companies with more value for their money that they were providing. The SEO tool in its maintenance mode wasnt worth the $250 or $500 the companies were paying. On deeper analysis, they deduced that the smaller companies were more likely to cancel the subscription with the B2B companies being more loyal than the B2C companies. To tackle this, the company came up with a customer happiness index (CHI) and compared them to the churn rates to predict the attrition of consumers with their happiness. And the company came up with a weekly mail feature and many other ideas which backfired. Recommendations The biggest problem with HubSpot was that they focused on predicting the churn likelihood of their customers but failed to concentrate on the customers overall profitability and address the reason for the attrition. The company had devised CHI index to predict the likelihood of consumers who would drop out and offer them more detailed service and offer incentives to those who are at the higher level of index. The company must concentrate on maximizing profits along with reducing the churn (Gerdemen, 2013). Offering incentives to consumers who are more likely to leave may not be very beneficial to the company. While offering the consumers an incentive, the company must also take into account the spending profile of the company and the likelihood that they would probably react positively to the offer of retention as compared to the cost incurred by the company in making the offer. In a broader sense, it would be best if the company concentrated on the higher end users who are likely to stay and offer them the incentive which would also result in profit for the company. The concept of uplift can be applied to group consumers into four categories, persuadables, sure things, lost causes and sleeping dogs wherein the persuadables represent those consumers with incremental gain potential (Surrey, n.d.). The company needs to look into having more insight on to why customers were actually leaving. Once the reasons are identified and the high risk consumers who are about to unsubscribe are identified, the learning from the analysis can be used as leverage to lower the churn rate. Help customers with whatever their problem is to keep them from leaving. The software can also be improved to make it better for the customers and the company can increase relationship with consumer by effective, increased communication with them. The company needs to concentrate on keeping the profitable consumers happy and satisfied through better consumer engagement. The consumers need to be made aware of the benefits of the product through an effective onboarding process that helps them learn the significance of the product simply and thoroughly. The onboarding process also requires constant testing and optimization based on the requirements of the current trends (Lemmens and Gupta, 2013). Motivators for individual customer retention are different and the business needs to be understanding and proactively act upon individual consumer needs (Surrey, n.d.). Different consumers have different values and its important that the company capture the difference. It has been found that the B2B companies are more loyal as compared to the B2C companies. HubSpot was developed and aimed at B2B companies primarily and hence it would be wise for the company to concentrate more on the B2B companies. But as compared to selling to a single consumer, serving a business unit as whole is slightly complex (SearchCRM, 2008). The company thus would look at value in terms of not just the sales leads but also the other variables like development. HubSpot must really concentrate on making tailored products for their companies rather than trying to find consumers for their products. References Bozeman, B. and Rogers, J. (2001). A churn model of scientific knowledge value: Internet researchers as a knowledge value collective. School of Public Policy, Research Value Mapping Program, Georgia Institute of Technology, Atlanta. Gerdeman, D. (2013). A Smarter Way to Reduce Customer Churn. [online] Forbes. Available at: https://www.forbes.com/sites/hbsworkingknowledge/2013/11/11/a-smarter-way-to-reduce-customer-churn/ [Accessed 25 Jun. 2015]. Lemmens, A. and Gupta, S. (2013). Managing Churn to Maximize Profits. Harvard Business School. Mozer, M., Wolniewicz, R., Grimes, D., Johnson, E. and Kaushansky, H. (2000). Churn Reduction in the Wireless Industry. In S. A. Solla, T. K. Leen, K.-R. Mueller (Eds.), Advances in Neural Information Processing Systems 12, pp.935 - 941, Cambridge, MA: MIT Press. SearchCRM, (2008). How should a B2B company build customer value and customer trust? [online] Available at: https://searchcrm.techtarget.com/answer/How-should-a-B2B-company-build-customer-value-and-customer-trust [Accessed 25 Jun. 2015]. Surrey, P. (n.d.). The secret to reducing churn Leveraging analytics for better customer insight. WHITE PAPER: COMMUNICATIONS, Pitney Bowes Software. [online] Available at: https://www.pitneybowes.com/content/dam/pitneybowes/us/en/legacy/docs/us/software/industry-pages/Telecommunications/churn-management/PDFs/The-Secret-to-Reducing-Churn_WP.pdf [Accessed 25 Jun. 2015].