How many customers are lost simply because they were sold the wrong package? In this article, we look at three metrics used in advanced sales analytics and how each helps service providers serve the "right size" offer and reduce customer churn. 

For service-providers, matching the right package with the right customer is important in order to increase the likelihood that a prospective customer will complete a purchase. It also establishes a proper foundation for the customer relationship, which maximizes the potential customer lifetime value.

Yet for many communications firms, “right-sizing” customers to get them into the right package at the point of sale can be a challenge. This can be for a range of reasons. For example, aggressive upsell can leave a customer feeling overcharged, making them less likely to advocate for a brand, more prone to exploring competitive offers, and more likely to be an early tenure churn risk.

Alternatively, underselling can lead to customer dissatisfaction due to unmet service needs, which can facilitate a perception of poor product quality, leave revenue opportunity on the table, and can also increase the likelihood of churning.

Right-Sizing with Sales Analytics

Since overselling and underselling both result in poor outcomes for service providers and their customers, sales analytics should be designed to identify these types of right sizing issues. Right sizing effectiveness can be evaluated by tracking a number of performance metrics across the sales and customer lifecycle. 

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Performance Metric 1: Conversion Rate 

Conversion rates measure how effectively sales channels convert leads into customers. Leads from different sales and marketing channels typically have different conversion rates due to the types of customers they attract and the level of qualification that is achieved by marketing.

For example, an inbound call generally has a higher likelihood of converting than a click on a web ad due to a higher initial level of customer engagement. Within a sales channel however, low conversion rates relative to industry peers can be indicative of a range of problems including:

  • Inappropriate lead offers presented to customers
  • An inability to properly qualify customer needs and present an appropriate set of products
  • Confusing product messaging or descriptions
  • Failure to clearly articulate the value of products

If any of these problems are occurring, then there’s likely a failure to right size certain customers. And when prospective customers do not believe their needs are going to be met, or if they feel that the process to get there will be long and painful, they are highly likely to abandon the process and begin considering competitors.

Performance Metric 2: Pre-Activation Cancel Rate

Right sizing issues can persist past the point of sale. A subset of potential customers who place an order will typically change their mind and cancel it. There are a range reasons why this happens, but one of the most common is poor right sizing.

These new customers committed to purchasing products and services, but something didn’t feel right afterwards. Maybe the price was too high and they felt as though they agreed to buy more than is necessary. Alternatively, maybe they aren’t convinced that their purchase will solve all of their problems. This unease quickly turns into buyer’s remorse, which can motivate newly acquired customers to begin looking at alternatives to see if there’s a better option.

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Performance Metric 3: Early-Tenure Churn Rate

The best indication of whether or not a customer was sold the right set of products is their level of satisfaction with the activated service. In many cases, a customer won’t be aware that their purchase wasn’t aligned with their needs until it’s activated, or until they receive their first bill.

For this reason, communications firms should closely track early tenure churn trends, as they can help determine whether something isn’t working in the sales process.

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Improving with Analytics

Sales analytics covering the three metrics discussed – conversion rates, pre-activation cancel rates, and early tenure churn rates – can provide valuable insight into problems in the sales process. Small improvements that incrementally raise conversion rates or reduce pre-activation cancel rates can have a large impact on overall sales volumes. Similarly, reducing early tenure churn through improved customer needs alignment can reduce short-lived customer relationships, increasing average customer lifetime value.