Magazines Archives - 2008 April

Asian customers’ habitual brand switch is costing companies billions
Story 1

ASIANS’ habit of switching brands has become a major threat to businesses, which lose approximately billions of dollars annually to customer churn, a study conducted by software company BMC has shown.

The region’s consumers are habitual switchers, with 84% having at some point switched services while 60% have made a switch in the past 12 months alone, The BMC Churn Index Survey for Asia
Pacific revealed.

Based on a sample size of 4,000, the survey, which measured churn rates in the services, telecommunications and utilities sectors, was carried out by Ciao Research in Australia, China, Hong Kong, Japan New Zealand, Singapore and South Korea.

“The average person in the region has made a total of about 12 churns across 4.3 services, showing that some services have been switched more than once,” the survey noted.

“This switching merry-go-round is costing [the] Asia-Pacific business approximately US$66.32 billion per annum when the cost of a single customer is multiplied by the average number of
churns per annum (1.3) and the adult population (524.1 million),” it calculated.

The study placed total losses at US$99.48 billion when other factors like negative word-of-mouth were taken into consideration. It added: “This figure only takes into account switching in the
sectors researched so the true cost of churn will be significantly higher.”

“Further, it is likely to get worse, as it is the young (that is, 18- to 34-yearolds) who are most likely to switch services.

In the past 12 months, [those aged] 18-35 churned over 2.25 times the number of suppliers [for] those over 55 years of age. This is a habit that will cost businesses dearly unless it is addressed
now,” the survey warned.

Banks, mobile-phone companies and insurance companies registered the highest historical churn rates of 57%, 54% and 50%, respectively. The study also noted that the Chinese and South
Koreans recorded the highest churn rate at 73% in the past 12 months.

Price was cited as the top reason for switching. Respondents said low prices and more personalised services could make them more loyal to a company. It also helps if companies proactively keep them informed of problems, they added.

“Consumers in the Asia-Pacific region probably want to stay loyal — only if they are treated right. Smart companies (those which listen to what consumers are saying through the BMC Churn Index) will manage their business services [such] that they are more personal and more proactive,” the study added.