Customer churn is businesses' greatest fear

Customers hopping service providers is costing businesses in the region US$66.32 billion a year, with the figure growing, according to BMC study.

Customer churn costs businesses in the Asia-Pacific region an estimated US$66.32 billion a year.

According to a recent study commissioned by BMC Software, customers switching suppliers is a pervasive problem and a growing one, at that.

Out of some 4,000 respondents surveyed across economies including China, Hong Kong, Japan, Singapore and South Korea, 84 percent have hopped service providers once in the past. And 60 percent of those did so in the last 12 months preceding the last quarter of 2007, showing the problem is current and pervasive.

Furthermore, the survey also identified the power of negative word of mouth--people were 2.5 times more likely to spread negative word than sharing a positive review.

In the Asia-Pacific region, the country with the highest rate of churn was South Korea, with 91 percent of respondents saying they have switched at some point in their lives, and with a high 73 percent who did so in the last 12 months prior to getting surveyed.

Singapore was next, with 82 percent who have switched, and 62 percent who did so within the last year.

The study estimated customer churn in Singapore to cost its suppliers S$568 million (US$411 million) each year.

"It is a trend that is being felt by many businesses, small and large, not only in Singapore but across Asia and around the world," said a BMC statement.

It was found that respondents between the ages of 18 to 35 had a higher churn rate than those above 35.

Chip Salyards, BMC director of Southeast Asia sales, said in a group interview: "It's not as much a pain to switch when you're younger and more savvy."

The industries hit hardest are mobile telephone services, private medical companies, insurance and online travel vendors, the survey found.

On the positive side, three out of five reasons customers stayed loyal was service-related, too. Salyards noted that this opened cross-selling opportunities for customers, where a support personnel could suggest alternative products or services for an individual customer's needs, rather than just fixing the problem at hand.

"This is where we see business service management (BSM) and customer relationship management (CRM) evolving together...which spells more revenue for the supplier," added Salyards.

BSM is a suite of IT service management tools provided by BMC.

The study was conducted by Ciao Research over the last quarter of 2007. BMC did not specify why the surveyed countries in the region were selected.