In our recent study with Hanover Research, Trends in Manufacturing, we found that the inability to understand which customers are at risk of churn is one of the top challenges that manufacturers are facing as they look to grow their businesses.
Why is understanding customer churn so important? Because it costs much less to keep a customer than to find a new one. In fact, the cost of acquiring a new customer is five to six times higher than retaining an existing one. Not to mention, in an extremely competitive market like manufacturing, you don’t want to miss out on your market share.
In this post, we’ll look at why manufacturers struggle to retain customers, what they can do to keep them — thereby beating out the competition — and how PROS can help.
Taking a Closer Look at Churn
Why do customers churn?
When asked why they canceled orders, buyers answered that it was due to:
- Price increases (39%)
- Finding a cheaper supplier (30%)
- Order mistakes (29%)
- Bad service experience (27%)
- A more convenient supplier (26%)
- Finding a faster supplier (24%)1
This data shows that if customers feel like you’re priced too high, they will go elsewhere.
You want to be priced competitively with the market so customers feel that you're charging a fair price. Most of the time, manufacturers have long-term contracts with distributors that have special price agreements. However, they also can have spot quotes for one-time purchases — and that’s where accurate, timely pricing that reflects the market becomes key.
Here’s how you can do just that.
4 Things Manufacturers Need to Do to Beat the Competition
So, how can manufacturers go about learning customer trends and beating out the competition?
- You need to price competitively
Your business needs AI-powered dynamic pricing tools that can meet the demands of the ever-changing digital marketplace. By considering market factors while pricing ensures pricing is fair and profitable, allowing your sales teams to eliminate over-discounting, reduce inconsistencies, and avoid high variability in your prices. This way, you can keep up with — and beat out — the competition.
- You need visibility into purchasing patterns
For manufacturers, there is often a lack of visibility into customer purchasing patterns and buying behaviors. In fact, most manufacturers often rely on historical data to see trends which — in a fast-moving and ever-changing industry — can be problematic. Old patterns and insights no longer apply.
Your sales team needs to be able to understand buying patterns and spot potential customer dissatisfaction early. This can help them reach out and remedy any issues before they lead to lost business.
- You need to identify cross-sell and upsell opportunities
By understanding the likelihood or need of a customer to upgrade and add products to your contracts, your sales team will have a better idea of when to upsell and/or cross-sell your customers and what those upsell items might be.
- You need to personalize offers for every customer
Businesses can help reduce customer churn with prompt, proactive, and personalized service that truly supports the customer. Draw on data and metrics to customize product offers and pricing while engaging in the channels specific to each customer.
In doing these four things — pricing appropriately, speeding up your quoting process, fixing quoting errors, and providing a great customer experience — you can combat all the reasons that customers churn.
How PROS Helps with Customer Churn
Wouldn’t you like to have a crystal ball to see the future? Well, you’re in luck.
PROS Smart Configure Price Quote provides you with the insights you need to identify areas of margin opportunity and which customers are at risk of churn.
To identify declining purchase behavior and revenue, PROS Smart Configure Price Quote uses a churn algorithm that provides the sales team with early notice of potential customer dissatisfaction. It also identifies customers who have large variations in the timing and quantity of purchases.
How does this work? The solution uses an outlier algorithm to identify activity that is beyond a typical or expected outcome. This buying pattern alerts the sales team when they need to look for opportunities to strengthen the customer relationship and eliminate inconsistent buying. It also takes out seasonality, reducing the potential for false positives.
PROS Smart Configure Price Quote also delivers AI-based cross-sell and upsell recommendations for existing customers to expand their share of wallet, drive customer satisfaction, and safeguard themselves against the competition.
Additionally, through connection and consistency algorithms, your sales team can identify products a customer’s peers are buying that they have yet to purchase, allowing them to instantly bring relevant new product suggestions to the customer.
All these AI recommendations are automatically delivered to Microsoft Dynamics 365 or Salesforce, so the sales team can instantly review and take relevant action directly in their CRM. The solution first presents the top opportunities, and then continues to replace them as action is taken, making it easy to see at a glance where opportunities lie.
Are You Ready to Take Your Business to the Next Level?
PROS Smart Configure Price Quote gives you the ability of a crystal ball to identify areas of improvement, spot customers at risk of churn, and act immediately before losing them. Ultimately, this can help you improve your customer retention rate, which can have a huge impact on your bottom line. After all, with just a 5% increase in retention, you can lift profits by 25% or more.
1 Source: 2020 Hanover Research Study of 210 global purchasing professionals, commissioned by PROS