Churn, more than ever, continues to be the source of business profit and drive in contemporary society.
Turnover of paying customers to one's books means showing an increased customer portfolio, no matter how temporary this increase can be. Inducing them to use your services or buying your products can mean offering some interim concession, creating some excitement in the joining experience or differentiating your offer from your competitors.
This can be in passing on discounts in prices or rates. It may be linking access to frequent flyer rewards, providing nicely packaged gifts or increasing credit card points. In the past, this was reinforced by hiring a team of effective communicators in person or in adverts to push the package. It is sad these days that many on line offers involve interacting with just software - something is lost in this process but business costs are reduced and a new rising generation of potential customers may prefer it this way.
In having a high churn, shareholders and business owners are pleased to receive the eventual outcome, that is profit margin multiplied by the number of transactions. What simple common sense this can be. What has been neglected inevitably is that once a customer opts in, the level of engagement and service from the business invariably declines.
Once you lock in with an insurance policy, wealth management product or gym membership, do you feel increasingly neglected? However, if a customer actively changes providers for utilities, telecommunications and subscription services, the incumbents may chase you intensely like forsaken lovers with emerging inducements you were not told of before.
It is all a game as old as human history. Commerce used to make profits on a single transaction, but today's financial markets thrive on benefiting sellers with trailing commissions as if they possessed imtellectual property. Hence we are not surprised that in unethical cases, fees are still charged long after the initial primary transaction.
Churn can be seen in the frenetic reporting by media of even small changes in prices, whether of currency, options or man made instruments. Churn is the vitality of gambling, churn can be creating value out of nothing at all. Churn thrives on sentiment, speculation and movement. Churn is betting on change and making money out of it. The fast paced and more responsive internet enables the better managing of faster and larger transaction universes. The day trader is only a simple example of the utilisation of churn, which underlies all the financial centres of this world.
To the ordinary individual, better managing churn is the key to better purchasing decisions. The seller need not have a monopoly on making a buck out of churning. It is all a game beyond haggling and bargaining. Understand why sellers like churning.