Some Perspective on High Churn Rates

Are small businesses really churning from search packages in droves surpassing 60 percent per year? That’s the contention of a recent report, and it has important implications (i.e., that the value-added reseller industry isn’t sustainable). To learn more, we talked with leaders from G5 Search Marketing, Marchex, Matchcraft, WebVisible and Yodle.

Highlights from our discussions have been issued in a client report for The Kelsey Group’s Interactive Local Media program. But all agree that the industry has been given a black eye by overly aggressive sales tactics and poor follow-up.

But they also report real progress in engaging their customers. And unless Google and others find a way to sell these accounts on their own — and they haven’t — these companies feel like they’re in good shape.

“At the end of the day,” notes WebVisible CMO Kevin Ryan, “what [advertisers] want to know is how many leads they got; the cost of media; how many people watched videos on their site; how many people got text messages. Actions that have a chance to turn into conversions are the true quantifiable return for the SMBs.”

Marchex President John Keister notes that churn is an issue, but the churn numbers decrease as advertisers “move up the transparency chain. Different advertisers will respond to different things,” says Keister. Ultimately, it is all about selling them “transparent” advertising  that clearly bring in ROI. “They all want to see the transparent value. And that doesn’t always mean ‘clicks and search.’ ”

For Yodle CEO Court Cunningham, there is little doubt that value-added resellers like Yodle add value to SMBs. But only if they get a chance to be educated about the value they bring.

While churn rates are very high at first for the entire industry, after six months, Yodle’s churn rate is just 1 percent more per month, or 12 percent per year. By that point, it has had a chance to educate the customers, and they will have seen the value for themselves. “We’re dealing with a marketplace segment where 40 percent still don’t have a Web site,” he says.

This Post Has 3 Comments

  1. Michael Taylor

    What sales organizations fail to realize about online products in particular is that SMBs have not moved to the loyalty stage of engagement. Most SMBs are still in the trial phase and need reinforcement and assurance that they made a wise investment. As all five companies have reinforced, the ongoing value of the program needs to be reinforced with reports showing clicks, calls and ultimately leads. Some sales organizations are reaching out more frequently to their online advertiser base to not only report the figures but also to help SMBs understand what the numbers mean and how to more fully leverage the results to build their business and add more leads.

    The sales formula is not rocket science: determine the online needs of the advertiser, match the value of the product to meet the need, and reinforce a wise purchase decision so the SMB wants to renew or even increase its program.

    Online sales teams need to understand the advertiser loyalty cycle to know that advertisers move from trial to comfort to satisfaction and ultimately to brand loyalty. Too often salespeople fail to realize the nurturing required to build brand loyalty, and sales organizations fail to build support systems to fully manage and develop these kinds of relationships.

  2. Max Kalehoff

    Hi Peter,
    Are you going to make this report public? Would love to read it and add to the conversation.
    Warm regards,
    Max

  3. Peter Krasilovsky

    This came in from Dick Larkin….

    This is a very real and difficult problem for online advertising firms that distribute ads on search engines.

    SEM requires significant monthly recurring expenses to be meaningful. When cash flow is tight, it’s an easy expense to suspend.

    SEM requires a lower commitment than advertising in a publication printed annually.

    There is very low pain associated with canceling an SEM program and restarting it later.

    The SEM providers need to create a real benefit to the advertiser who continues his program and a real loss for the advertiser who does not continue his program.

    In the print Yellow Pages, ads are usually paginated with largest ads first, then oldest ads coming ahead of other ads of the same size.

    This has historically been a huge retention tool and it discourages advertisers considering reducing the size of their ad or not advertising for a cycle.

    Success in local online media hinges on owning your destination site and making it so compelling that an advertiser sees value in maintaining position.

    This is not only about the leads per dollar generated.

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