No matter how excellent your financial service is, churn risk never takes a holiday. To keep boosting revenue, small lenders and credit unions prefer to acquire new customers instead of upselling existing ones. And this is the biggest mistake that most SMEs make, resulting in customer attrition.
In this article, we deliberate dire consequences of customer churn overlooking and prove that customer retention increase is a more effective marketing tactic than soliciting new clients. We’ll share the most effective strategy for financials to turn your users into loyal customers and show that AI and ML approach is the way to make your business a leader in the market.
Why prioritize customer churn prediction?
Can you imagine losing ten percent of your customers every month? Well, the number seems acceptable. Other business types might meet one-fifth to one-third customer churn. So, if you lose over 30% of your customers, something’s wrong with your marketing. Such customer attrition will grow and might reach 50%. Not so good anymore, right?
Churn prediction software allows forecasting which customers are likely to abandon, calculating the value of potential losses, and creating retention plans to overcome or reduce customer attrition. The software can identify which clients are willing to pay more for premium services and when it’s a perfect time to offer more services to try.
According to a widely-known rule, customer acquisition costs five times more than customer retention.
- By increasing customer retention rates by 5%, you can boost profit by 25% to 90%.
- The probability of selling to loyal customers is 70% and only 5%-20% to new ones.
That’s exactly what can happen if you reduce bad customer experience with your bank. Even if people trust your company and love your products, 59% of U.S. customers will walk away after several bad experiences, and 17% after just one negative experience.
According to Brian & Company, churn starts when a customer meets problems with, for example, banking app installation or ordering a credit card. Such small issues open a churning funnel and make our client wonder if it’s worth it. If a customer can’t solve an issue and other interactions only build frustration, a user gets root causes to go to the competitor’s side. And this is perhaps the last chance to keep a client. The next few events will be a tipping point that predisposes a customer to churn. After that, our client finds out about competitors and their advantages, for example, from friends or just stumbles upon advertising on the network.
Yet when customers feel appreciated and connected to dedicated online services, they are more likely to return for more, endorse a company on social networks, and sign up for promotions. What is more, customers are more likely to try additional services or products from companies providing a superior experience. So, a great customer experience is a guarantee of a customer churn reduction and an increase in loyal users. To deliver such an experience, you need to acquire AI and ML in your marketing.
How can AI refine your marketing?
If you believe that your customer experience is superior enough, you might be among 80% of CEOs who think the same, yet only 8% of their customers agree. To get out of this, companies utilize AI tools allowing them to predict customer behavior, reduce onboarding time, and deliver more personalized and engaging service.
Utilizing AI, banks can predict customer needs within the next twelve months and present services to them, the importance of which they have not yet thought. For example, if a bank knows that a client has a ten years old child, it might help users realize that it’s time to start planning and saving money for a college education. However, the AI approach only comes when customers are willing to share their personal data with a company (such as age, location, lifestyle, purchase history, etc.). According to Pega, only 28% of respondents are uncomfortable with a business that uses AI. While 63% of respondents would be more willing to share their data if the service is truly valued.
AI technologies let you know your customers, understand the stages of their customer journey, and have a personal touch with everyone. It’s not a single advantage of artificial intelligence for business and customer experience. Let’s discover all the benefits of modern AI-based software for your financial company.
Predicting Customer Churn
AI software can help collect data about customers who had a bad experience with your services and products. Besides, churn prediction machine learning can gain experience from its mistakes and improve the work collecting historical data. This allows us to recognize the value of each customer, calculate future expenses and income, and understand where to apply most of our marketing efforts.
For example, banks use AI to classify their borrowers according to churn risks. Having analyzed historical data, the app predicts with high accuracy which customers will say goodbye or won’t pay off loans. With these data, sales managers might offer more favorable credit terms or reject an application.
Using personalized data like demographics and purchase history, AI can decide what offers will most likely encourage customers to stay. Modern technologies can predict for the following months which services will be interesting and which customers are concerned about upgrading certain products. Marketers can determine what actions and interactions will reduce customer churn and lead to the higher lifetime value of all customers.
Knowing the purchase history of a customer who takes loans periodically and stops abruptly, we might consider providing more attractive credit terms. This can help to retain a borrower and gain loyalty.
Customer Behavior Insight
As was mentioned, AI needs personal customer data to make their churn prediction more effective. For that, AI can ask customers and website visitors to provide feedback on purchased products, a website’s navigation, consultation’s work, and others. With these insights, a company can optimize its work, update a website, and train customer service.
Collecting feedback from customers and users, financial organizations can find holes in their marketing and services. For example, AI can show website issues like customers who can’t apply for a credit card online. As a result, they leave the website and go to a competing bank. The faster you find and eliminate friction, the smaller churn rates you have.
Know Your Social Customers
Understanding which brands, products, and services your customers follow on social networks can be beneficial for your company. AI software can analyze social activity, purchasing preferences, and advertisements engaging your customers. It’s mainly useful for businesses promoting the company on social networks. It allows for developing more effective marketing campaigns and knowing your customer better.
Social network activity shows which advertisements engage customers the most and which products they want to buy. With this information, banks and financials can target an audience with relevant loan terms to buy a car or a fashion bag, for example.
Powerful Email Marketing
Predictive AI can be used for personalized emails, campaigns, or social messages based on customer behavior. It allows making more targeted email campaigns with reduced spending and efforts. Having integrated an AI tool with your CRM, you can schedule messages, create customer groups, and send messages at scale. Email marketing based on individual customer needs increases the effectiveness of such an approach and gives customers a feeling of personalized attitude.
Having analyzed customers, banks can divide them into categories and create personalized email marketing campaigns. For example, knowing the age of your clients and marital status you might assume if they need a mortgage. On this basis, we can send advertisements about favorable loans for home purchase, check what percentage of customers read the mail, followed the link, and borrowed money.
24/7 Online Connection
Chatbots and virtual assistants reduce human interaction in the working process. Obviously that you can’t offer fast day-and-night consultations to your customers. However, AI software can communicate with users instead of people. Immediately after a request, it can navigate customers within the website, advise which products and services will be preferable for them, and schedule calls with real specialists if needed.
Imagine that a potential borrower is looking for detailed information on bank deposits. In such cases, users can contact the support team, but hardly they will be online at 3 a.m. To stop losing customers, banks create AI chatbots that can either help customers navigate the website or to schedule a call with a support manager for further discussion.
Why predicting churn with AI
Companies must run ultra-personalized marketing campaigns to optimize their customer relations and gain more loyal clients. To do so, they need to enable their salespeople and customer support to gain information on users and train to get right with all customers.
Integrating AI into all your business processes such as customer onboarding, marketing, analytics, sales, and others is significant to engage clients and win their trust. AI-driven customer churn prediction software powered with ML and smart data helps companies know their customers and understand their needs. It is a must solution to assist each user on its customer journey. Fast working, user-friendly, and self-learning tools increase good experience and urge customers to come back for more.