How to Use Data to Lower Customer or Member Attrition Rates

by Sarah Morris

A lot of our customers today are saying they have no idea why attrition is happening among their customers and members, and aren’t quite sure how to stop the process. Most banks and credit unions focus a substantial amount of their efforts on expanding relationships with existing relationships. So, being able to understand when and why attrition is happening at your financial institution is important to make informed decisions that can help you lower attrition rates and build loyal customers.

So, how exactly can you use your data to lower attrition rates? First, you must answer these questions:

  • How can I calculate my attrition rate?
  • Where is churn happening?
  • When is churn happening?

Answering these questions will help point to any gaps in your customer experience - so how do we address these questions?

Calculating Your Attrition Rate

You can learn from your data by looking at growth and churn to evaluate the overall health of the products and services your financial institution offers. To create this analysis, you must focus on a specific period of time in order to see any fluctuations in active and closed accounts. We recommend reviewing your individual product growth and churn once a month so you can properly manage customer satisfaction and attrition.

Once you have selected the period of time you wish to evaluate, focus on the following metrics:

Net Change

You can quantify your net change over a given period of time by calculating the difference between the number of Active Accounts at the start of the time period you’re evaluating and the number of Active Accounts at the end of the time period. Be sure to only look at accounts that were already open and active prior to the date range you’re evaluating because accounts that were both opened and closed during the set period will skew your data.

Growth Rate

Your growth rate will then be the percentage of increase of your active accounts during the given time period. This metric can easily be calculated by taking the Net Change metric above and dividing it by the total number of Active Accounts at the beginning of the time period.

Churn Rate

With the previous metrics, we can calculate our churn rate. To do this, you’ll take the number of accounts closed or lost during your set time period and divide that by the number of Active Accounts at the start of the time period.

Looking at all accounts across all products initially is good for seeing your financial institutions overall attrition rate - but in order to get more specific and narrow down where exactly the churn is happening, you’ll need to take it one step further.

Where is Churn Happening?

Identify where churn is happening among your customers or members. Is it an issue within a single branch? A few select branches? Is it an institution-wide attrition problem? Is attrition associated with a specific product or does it span across multiple products?

You can use the same metrics we discussed above to focus on churn rate within a specific service and at a specific branch. If you notice a high attrition rate associated with a certain product your bank or credit union offers, maybe you should consider offering better rates or better services along with it in order to compete better with other financial institutions. If you notice a high attrition rate associated with a specific branch, maybe there are issues with the customer service or account opening process at that specific branch.

You may also notice a low attrition rate or high growth rate within a specific product or certain branch and be able to dive deeper into that data to see what a specific branch is doing that works really well and how you can adopt that at your other branches. Or see how well a specific product you offer is performing to understand your specific competitive advantage.

Using and analyzing your data can offer all kinds of insights into the success of your FI and identify areas for improvement.

When is Churn Happening?

Narrow your data down one step further to find out when churn is happening with these lost relationships so you can specifically pinpoint the issues with a specific product or service and identify your areas for improvement. At what point during the account lifecycle are you losing relationships? Day 60? Day 90? Day 365? You can learn this by looking at the difference between account close and open dates in order to find out how long people have an account before churning.

A strategy for determining the cause of attrition, depending on what you find, is to send a satisfaction survey right after account opening, right before the time in the life cycle most people are leaving, and following account closures. This survey should be simple - an NPS that allows them to rate your institution on a scale of 1 to 10, and an open text field where they can offer ways they think your bank or credit union can improve.

Analyze your data monthly using these metrics to clearly see any areas of success and improvement and use what you learn to effectively lower your attrition rates. If you are a current Core iQ customer, you already have easy access to this report that you can quickly pull on a monthly basis to evaluate and address your attrition rates. Interested in learning more about how Core iQ can help you lower your attrition rates and boost customer retention? Contact us today at info@onovative.com.