An increasingly pressing concern among e-commerce businesses of all types, churn refers to the inability of firms to maintain a consistent, longtime, loyal relationship with their customers. More specifically, churn is the turnover of a customer base as customers allow their accounts to lapse or switch to competitors' online products and services. Churn is usually quantified as the percentage rate at which customers are lost. It is one of the chief obstacles to companies' efforts to realize profits from their extensive investments in establishing and maintaining an online presence.
Churn is particularly problematic for firms for several reasons. First, the inability to maintain customer loyalty makes for poor public relations. More immediately, customer churn simply is expensive. Customer acquisition and account set-up and maintenance all cost money, and the higher the level of churn, the lower a firm's overall profit margin is likely to be.
Broadly speaking, the remedy for churn is "stickiness." Sticky services are those designed to hook a customer, who will find the service too valuable to easily give up. Firms implement strategies such as greater personalization of services, bundled services, or other perks to create this stickiness whereby customers are induced to build loyalty to the company. Differentiation is another tactic. In their efforts to simply get Web sites up and running, firms often fail to take the time to create an online presence that distinguishes itself from those of others, thus making it very easy for customers to switch without feeling any negative impact.
Online banks were among the hardest hit by customer churn. The New York-based research firm CyberDialogue reported churn rates for Web banking as high as 49.2 percent in mid-1999. Efforts to create stickiness seemed to pay off, however, as Cyber-Dialogue estimated a drop to just 9.8 percent a year later. While this represents a vast improvement, that figure was still exceptionally high. Essentially, the dilemma of online churn has intensified customer out-reach programs. In order to assure the most valuable online experience and avoid churn, firms need to familiarize themselves with exactly what their customers want, expect, and value, and then tailor their services toward those ends.
Kreitter, Dana. "Controlling ISP Churn: Borrowing from the Telco Model." Telecommunications. November, 2000.
Monahan, Julie. "In the Out Door." Banking Strategies. November/December 2000.
Schneiderman, Carla. "Managing Churn at the Core." Telecommunications. July, 2000.
Verton, Dan. "Churn." Computerworld. February 5, 2001.
SEE ALSO: Loyalty
churn / chərn/ • n. a machine or container in which butter is made by agitating milk or cream. • v. 1. [tr.] (often be churned) agitate or turn (milk or cream) in a machine in order to produce butter. ∎ produce (butter) in such a way. 2. [intr.] (of liquid) move about vigorously: the seas churned | fig. her stomach was churning at the thought of the ordeal. ∎ [tr.] (often be churned) cause (liquid) to move in this way: in high winds most of the lake is churned up. ∎ [tr.] break up the surface of (an area of ground): the earth had been churned up where vehicles had passed through. 3. [tr.] (of a broker) encourage frequent turnover of (investments) in order to generate commission. PHRASAL VERBS: churn something out produce something routinely or mechanically, esp. in large quantities.