Great Expectations Retention Workshop2

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Great Expectations:Retaining Existing Customers & Engaging New Ones

Derek F Martin


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Introduction: Derek F Martin

Director Customer Engagement, Sales &

Retention, World Service, American Express

Board of Directors, ATA

http://BetterBusinessBanter.blogspot.com

Next Conference: “Sales vs Service”

Loyalty USA in Las Vegas, October 2011


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Ice Breaker

Turn to the person next to you and share an experience

where you consciously moved your business from one

company to another (merchant, supplier, restaurant, airline, credit

card or bank,…).

What reasons drove you to leave?

Has the new merchant/service met your expectations?


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Agenda

1. Why Retention?

2. How Bad Is It?

3. How Did It Get To This?

4. What Can We Do About It?

5. Retention Tactics

6. The Best Defense is a Great Offense

7. Open Dialogue


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1. Why Retention?

ROI – Customers are Assets1

Cost of acquiring new customers is up to 5X cost to retain current customers

2% increase in customer retention = cutting costs by 10%

A 5% reduction in attrition rate can increase profits by 20-100%

The customer profitability rate tends to increase over the life of a retained customer

Sources: 1. "Leading on the Edge of Chaos", Emmett C. Murphy and Mark A. Murphy


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1. Why Retention? (continued)

COMPETITION – Growth and Market Share The average company loses 10-15% of its customers

each year2 Competitive advantages – maintain market share,

customer feedback, reduce “detractors” Acquisition $’s are for growth

BRAND Brand Impact of Promoters vs Detractors

Sources: 2 American Association for Quality, 2011


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Impact of Retention rate on Customer Lifetime Value (CLV)*

*Source: Sunil Gupta, “Managing Customers as Investments,” Wharton 2005

$0

$100

$200

$300

$400

$500

50% 60% 70% 80% 90%

CLV

Rate of Retention

r 1+ i – r {

}CLV = m

m = margin or profit from a customer per periodr = retention rate i = discount rate


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2. How Bad Is It?

Who is Leaving?

How Fast?

Cost of replacement?

To Which Competitor?


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Who is Leaving?Top 10 Things You Want to Know about Attriting Customers

1. How Many: Attrition Rate & % total Customers

2. % of New Acquisition: Attrition/Total Customers

3. Estimated Customer Value: CLV Customer Lifetime Value = m(r/1+i-r)

4. Customer Tenure: # of years or repurchases

5. Voluntary vs Involuntary: % Involuntary

6. How Many Were Saved? Save Rate

7. Why did they Leave? Voice of Customer, Verbatims, Social Forums

8. What are they Saying About You? Net Promoter

9. Where Did They Go? Competitive Marketshare

10. What Would It Take To Win Them Back? Competitive Marketshare


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3. How Did It Get To This?

Diagnostic Metrics Voice of the Customer Production and Delivery Metrics

Competitive Positioning Value Proposition (Utility & Price) Brand Deterioration/Mismatch

Service Delivery Efficiency Metrics Process & Service Breakdowns


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Diagnostic Metrics

Voice of the Customer Feedback Survey

Social Media & Forums

Mystery Shopping

Focus Groups

Customer Metrics (a sampling)

Satisfaction

Net Promoter Score

Repurchase or Retention Rate

Referral


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Diagnostic Metrics

Production and Delivery Metrics Open & Available

Accurate

On Time

Request/Issue was solved (FCR)

Defect Queue


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Competitive Positioning

Value Proposition: Product Utility & Price

Brand Deterioration / Mismatch


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Service Delivery Efficiency Metrics: what matters to your Customers?

Process & Policy BreakdownsSource, JD Powers 2010 Credit Card Satisfaction Survey


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Pricing Sensitivity from Servicing Attributes

Source: Harvey N Schycon, “Measuring the Payoff from Improved Customer Service,” Prism 2001. Study of 25 attributes impact on pricing, 2,000 businesses surveyed

Pricing Sensitivity for Plastic Laminates

Price Increase

Product Attribute 2.0%

Product Line Scope 1.4%

Consistent Quality 0.4%

Finishing capabilities 0.2%

Service Attributes 4.4%

Accuracy of shipment to order 2.4%

Carrier Capability 0.8%

Handling of Rush Orders 0.6%

Problem Solving Helpfulness 0.4%

Notification when Shipment Delayed 0.2%

Value Attributes 0.6%

Reasonable payment time 0.6%

TOTAL PRICE IMPACT 7%


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4. What Can We Do About It?

Segment your Customer base by CLV to

Prioritize Treatment

CLV, $

# C

usto

mer

s

LOW MED HIGH

Don’t Save Save no Offer Save w Offer

Step One: Triage: Save the best opportunities first


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Step Two: Address issues that most upset customers

Identify & Eliminate Friction Points


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5. Retention Tactics: A Continuum

Demonstrate Competence

• Error Free Service

• Easy to Use

• Private, Secure, Compliant

Recognize

• Friction/ Hassel Free Service

• Customized Recognition

• Value based treatments

Reinforce

•Intuitive Service

• Profile Based Recommend-ations

• Remind & Encourage Use

Reward

• Usage Based

•Tenure Based

• Pre-Attrition

Beg & Cajole

• Fee Free

• Loss Leader Offers

•“Handcuff” Contract Terms

Passive Active Desperate

Covered in this workshop


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Reinforce

Ask for the Business

Features Vs Benefits

Do The Math: spell out the Value Proposition to your customer

Right Product vs Most Profitable Product


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Rewards Relevant

Commensurate: CLV Strategic

Drive Desired Customer Behavior: Old ATM fees Starbucks

Hassle Free: The dreaded Flight Voucher “Free” Magazine Subscription

Rapid Rewards: $’s Spent NOT Miles Traveled

20 = 110 = 1 $100 = $1

15 Stars /1 free coffee1 star per purchase vs per cup


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6. The Best Defense - Is a Good Offense

Product Value

Customer Focused Organization

Set & Meet Expectations

Feed The Meter

Constant Innovation & Competitive Disruption


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Customer Focused Organization

Balanced Scorecard

Shared Goals

Respect and empower customer service

Customer Council


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Set & Meet Customer Expectations

Be consistent

Manage the truth, not avoid it

Keep your promises and apologize when you don’t


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Feed The Meter

Understand when and how key

Relationship Stages occur

Actively engage your customer when

or even before these stages occur

Customer Lifecycle (Time or # repurchases)

Welcome Educate Engage Value Prop

Reward

Entice Encourage Usage Excite Recognize

Purchase RePurchaseProspect Loyalty

Product Complexity


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Questions and Open Dialogue


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Attrition Assessment Form Back


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2010 JD Powers Credit Card Industry


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Everyone makes mistakes, not everyone apologizes…

Documents

Great Expectations Retention Workshop2