Which sectors top the customer churn index, and why?

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By: Wise Marketer Staff |

Posted on February 20, 2007

Switching suppliers - in almost every industry sector - has become a national habit costing British businesses over 5 billion a year, according to the latest BMC Churn Index, and the problem appears to be getting steadily worse.

While 97% of consumers surveyed said they have changed up to four suppliers at some time in the past, almost two-thirds (64%) said they have changed two suppliers in the past six months alone.

And this trend is expected to continue, with 21-34 year-olds switching twice as often as people aged over 55, and white-collar workers in the south of Britain switching twice as many suppliers as blue-collar workers in the north.

What would nurture loyalty?
Professor Robert East, an expert on consumer behaviour at London University's Kingston Business School, explained: "The BMC Churn Index shows that we are a nation of switchers. It's a terrible waste for 97% of consumers to be switching when 98% say they want to stay loyal if only they were treated right. Switching wastes consumers' time and damages company profits."

Consumers said they resent being kept in the dark. In fact, being kept in the dark about faults or service problems is the biggest predictor of churn identified by BMC. Customers who switched suppliers on this basis had a 32% higher churn rate than those who did not switch for this reason.

Fully 81% of consumers said they would be more loyal if a supplier was more proactive about informing customers about what they were doing to resolve their service problems. This figure increases to 89% for customers of online services. And 60% said they would be more loyal if the supplier provided a self-service facility that allowed them to create their own service requests and avoid having to use a call centre.

Top reason for switching
While poor fault handling is the biggest predictor of churn, the number one reason (49%) for switching suppliers is not rewarding customers for staying. In fact, 98% of consumers said they would be more inclined to stay if they were rewarded for doing so (rising to 100% for online customers).

When asked to name the one thing that a supplier could do to encourage them to stay, (57%) said suppliers should "make sure new discounts are automatically applied to existing accounts rather than just being given to new arrivals", while 54% cited a slight variation: "rewards for staying rather than rewarding others for joining".

Worst sectors for churn
Utilities are still a problem: British consumers can't wait to leave their gas and electricity suppliers, with one in five having done so in the past six months, and three times that number (over 60%) having done so at some point in the past. But insurance companies topped the churn index with 28% of insurance customers switching suppliers in the past six months.

Mobile phone providers also have cause for concern, as they moved into fourth position in the index with almost one in five customers reported they had switched providers during the past six months.

Although only 10% of people switched banks in the past six months (because it is more complicated to do so), more than half of bank customers (51%) admitted to making negative recommendations about their bank.

According to Peter Armstrong, corporate strategist and creator of the BMC Churn Index, "Some people might have expected the offshore call centre to be the top churn enemy, but this research shows that British consumers just want to be treated like individuals and not left in the dark. People will move for money but it's clear that it's service issues that trigger the desire to move."

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