Great Expectations Retention Workshop2
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Transcript of Great Expectations Retention Workshop2
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1
Great Expectations:Retaining Existing Customers & Engaging New Ones
Derek F Martin
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2
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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3
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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4
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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Everyone makes mistakes, not everyone apologizes…