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Silent Accounts are Clear Sign of Churn Risk

Posted on April 9, 2010 , by wpn-admin

The loudest customers often get the most attention. But the silent majority is very often an ignored asset for most companies.  Let’s explore:
Those that are familiar with Net Promoter (or NPS) tend to think of the 3 customer segments that Net Promoter explicitly discusses – Promoters, Passives, and Detractors.  But in reality there are 4 segments.
One of our SaaS clients has been very proud of their 68% NPS.  And they should be – they have a strong base of loyal customers (~71% of key respondents rate them a 9 or 10 on the Recommend question) with very few Detractors.  More importantly, their business has been growing for some time (as NPS predicts).
But a 2nd question needs to be addressed:  Is the 68% NPS reflective of their customer base?  The answer here is unfortunate as it turns out — the score was provided by only 9.8% of their customers.  So we then looked back at their customer renewal behavior to see how accurate NPS is for their business.  Here’s the punchline:

  • They obtained a 97% (!) renewal rate for customers who responded– regardless of score (whether they were a Promoter, Passive, or Detractor);
  • BUT only a 78% renewal rate for those customers that didn’t respond to their call for feedback.

 [Click image for full -screen view]

silent account churn risk net promoter

Pay attention to the 4th segment – customers that don’t respond – as a source of improved growth

So NPS holds up as a segmentation model and leading indicator of churn.  This company’s need for stronger customer relationships (especially for their strategic customers) is quite clear.  In their case, the Silent Accounts provided clear evidence that although overall scores may be high, account-based insights tell a different story. The majority of customers here are disengaged, and this silence has a history of linking to churn.
The fact is, no matter how much you may believe in a given KPI such as NPS (or CLV, LTV, or any other TLA), a single metric never tells the whole story. And “Customer Coverage Rate” (“representiveness” of the customer base in the survey feedback results) proves once again to be a leading indicator of the leading indicator (the latter being NPS).
We’ve seen this research be proven time and time again – Silent Accounts are up to 14X more likely to churn than accounts that do respond. It makes sense. They are already checked out, why bother to spend the time giving feedback? It won’t benefit them when they’ve switched to your competitor.
I’d be very interested to hear of examples where a single metric provided all the evidence you needed to go forward…?  Or where “coverage rate” worked or didn’t work as thought?

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