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Reducing Churn in a Downturn


Reducing Churn in a Downturn

How do leading organizations mobilize to protect their most important customers during economic downturns?

Countless studies have demonstrated that organizations that invest in growing during a downturn come out ahead, but for most leaders, this strategy is easier said than done. Short-term cashflow and profitability priorities often overshadow long-term strategic investments, causing organizations to stagnate until economic clouds pass.

In Level5’s experience, when facing a negative economic outlook, industry leaders shift their investment stance to one of ruthless prioritization. They free up cashflow from lower ROI or higher risk projects and re-invest the resources in short- and medium-term efforts to protect and grow their most critical target segments.

Successful prioritization requires a temporary interrupting of traditional planning and decision-making processes, which are built for longer cycles and payback periods, in favour of more targeted and sprint-oriented efforts against a tighter mandate.

Our methodology to catalyze this cultural shift follows for simple steps: analyze, ideate, prioritize, and execute.

Step 1 – Analyze

The first step an organization must take is to aggregate all relevant and available information on segment performance and understanding. The goal of this stage is to have a clear understanding of one simple question: what matters most to our highest value customer segment?

For larger transformation efforts, we would typically suggest fielding a discrete workstream to collect new data, however, when speed and budget are limiters it’s often more efficient to work with data the organization can readily access.

A key to success at the Analyze stage is to quickly identify and collate all available data to support the prioritization of customer segments and understand what drives their purchase decision.

Root causes are often best understood when pain points and moments of truth are viewed through three lenses: customer experience, internal process, and supporting technology.

Customer data in isolation is messy and incomplete – by considering all three lenses we can quickly understand what is underpinning the problem (or opportunity), and what scale of effort is required to address it.

After looking outward and building an understanding the target segment, it is prudent to look inward and assess your organization’s readiness to execute.

Level5 uses its proprietary customer-centricity maturity diagnostic tool to understand an organization’s customer-centricity maturity and readiness for action. This self-directed diagnostic guides our clients through an evaluation of their business along seven dimensions of customer-centricity. The analysis of the data helps leaders to identify the strengths and areas of immediate opportunity for their organization and can inform strategic priorities in the short- and long-term.

Once the answer to what matters most to our highest value customer segment is clear, it’s time to ideate solutions.

Step 2 – Ideate

Successful ideation requires subject matter expertise across a variety of functions and departments within an organization. This allows for improved creativity, while reducing the change burden required to implement a new customer solution.

Design thinking ideation exercises can be a very efficient and effective way to generate pragmatic solutions quickly. Informed by the data collected in step one on target segment pain points, framing a short series of ideation sessions can yield an extensive list of possibilities.

During the ideation stage, there should be no evaluation of the suggestions, only categorization. The purpose here is to fill the top of the funnel with as many viable solutions as possible that fit the segment’s needs, categorized by whether they are people, process, technology, or cultural changes.

Step 3 – Prioritize

Once the working team has generated a broad list of improvement initiatives, prioritization becomes the focus. The simplest method for prioritization is to evaluate initiatives in terms of effort (i.e., resources, investment, etc.) vs. return (i.e., expected ROI). The goal is to get down to a short-list of viable opportunities to consider, and whether further business casing is required for the level of effort considered.

While the temptation will be to fill the team’s plates with initiatives, real success is determining the #1 concept that can be resourced and executed in such a way to drive value in-year.

Step 4 – Execute

Once priorities are set and alignment is achieved, it is time to execute. In a downturn, time is of the essence. Driving speed-to-value requires investment, prototyping and rapid iteration, and accountability mechanisms.

Often, successful execution relies on creating an implementation cadence and approval process that is distinct from the typical project governance. This can help reduce the risk of stall-outs and scope creep.

The “progress over perfection” mindset is crucial for the team to adopt. The objective is to get a new solution to market quickly, collect customer feedback, and iterate from there. In many industries, particularly in technology/software, customers understand that first version of a product is never the final one – that updates and improvements will be released in a timely manner. Use this to your advantage and prioritize progress and speed over polish and perfection.

In summary, effectively navigating economic downturns requires adaptability and a disciplined focus. When seeking to reduce churn during downturns, successful organizations prioritize and invest strategically to protect their highest value customer segments. By following a structured approach that emphasizes analysis, creativity, prioritization, and action, companies can respond effectively to changing market conditions and emerge resilient.

If you’d like to learn more about how Level5 can help you increase retention, connect with us.


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