Churn Better to Whip Up Sales

A principle of good business is to keep customers coming back for more. Yet there are businesses providing services in which success is defined by high churn. Current customers leave, and the business continually solicits new customers to take their place. Effective weight loss and smoking cessation programs aim to cure bad habits for the long-term. Reputable attorneys, surgeons, psychotherapists, and chiropractors discharge the client when the presenting problems are resolved.
     These situations qualify as positive churn. The satisfied customers serve as a resource for referring the next prospective group of clients. In contrast, negative churn occurs when the reasons people don’t consider returning is that they were dissatisfied. Then they’re likely to criticize the business to others, depressing engagement with new prospects even further.
     To be sure, the major cause of negative churn is insufficient service effectiveness. Researchers at Ludwig-Maximilians-Universität München and Kühne Logistics University find this is often due to inaccurate expectations about what the client is to contribute. Services businesses require varying degrees of client effort.
     The context in which the researchers explored this was on-line dating. The effort expected of the client was sending messages and compliments to prospective matches who has posted profiles. In the data analysis, it was found that clients of the service who sent out many more messages than they received were less likely to show positive churn and more likely to show negative churn. However, those who received many more messages and compliments than they sent out were neither more nor less likely to show either positive or negative churn. There also was no evidence that a client’s self-rated attractiveness influenced the results.
     The implications for online dating services are to encourage clients to send out many messages, train clients how to improve the odds of receiving responses to messages, and set realistic expectations for response rates. The implications for high-churn services businesses in general are to be clear about what will be required to get the best from the service and to provide ways to make participation as easy as possible.
     Then consider better ways to transform positive churn into repeat business. Job search customers could be encouraged to continue their subscriptions to stay current on what’s available as they plan their next career move. Matchmaking services might appeal to shoppers looking for a succession of dating companions rather than settling into a search for the one best marriage partner.

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