Brand Strategy

Detecting Customer Red-Flags To Reduce Defection

Posted 01 Jun 2021

In its simplest form, growth of an organization requires an interplay of gain and retain. That is, the continual acquisition of new customers (gain) and consistent focus on delivering to existing customers to ensure they remain, well… customers (retain).

And while the craft of designing a retention program may be the ‘ugly cousin’ compared to the shine of developing a creative brief or brand re-positioning agenda – the ROI of a happy customer is a far more appealing, and economically advantageous focus. At Forethought, we take a science-driven approach.

Supported by consumer insights, defection can be dissected into a hierarchy of problematic customer experience elements, and even identified before-the-fact, arming organizations with a red-flag style system to detect those customers at high risk of defection. This enables early intervention to alleviate risk of a dwindling customer base.

A case in point: Under the hood of defection

In partnership with a leading financial services provider Forethought had a longitudinal perspective of key performance metrics for the brand including Loyalty, Retention, Satisfaction.

With this historical perspective and using Survival Analysis, Forethought identified the leading indicators that were most predictive of customers’ future defection. Survival Analysis is a modeling approach that factors in both regular explanatory variables as well as time, to predict when an event of interest occurs. In this case, we explored how a customer’s tenure impacted their likelihood to defect and if there were other factors that influenced their defection (e.g. Loyalty, Retention, Satisfaction). CRM data which identified if members had churned or not was also integrated into modeling.

The modeling indicated that the best leading indicator of defection was the Retention business outcome question[1]. Our modeling found that defection risk reduced by 18.5% for every one-point increase in the Retention score.


Probability of defection x Retention score

A focused game plan on stemming defection

By understanding the magnitude of its defection problem – and how to influence it via raising retention - the financial services provider was armed with an evidence-based business case for investment.

These insights informed a new direction for the annual CX measurement program, with ongoing results informing strategic direction and management focus to achieve retention objectives (and in turn, defection targets). Specifically, management was keenly interested in understanding the hierarchy of drivers of retention to efficiently guide investment and attention on those aspects of the experience which were most negatively impacting customers’ experience and ultimately the organization’s bottom line.

Commercial benefits for stemming defection

Further along the journey of overcoming defection challenges, another of our partners in the Fast Casual Dining category applied a similar approach to stem defection. In this example, a leading U.S. brand reduced defection by 2%, leading to an estimated $57.9 million in recovered revenue.

Only with an understanding of the hierarchy of drivers leading to retention, can business leaders make informed decisions on where to direct investment and focus in the customer experience to achieve the organization’s retention objectives.

[1] Retention question: In the next 12 months, how likely would you be to retain your 401k / income stream / pension with this fund?