The Building Blocks of Retention (2)
I speak to many brands – particularly in the consumer services space (telco, utilities, insurance, finance, media…) for whom customer retention is a major lever in their P&L.
Most of these businesses have the concept of a renewal point or contract lapse in their customer lifecycle, yet surprisingly have not put in place all the building blocks to optimise performance of such a critical area of their business.
Here is part 2 on the building blocks of Customer Retention. Alongside getting clarity on performance and insight (Part 1), I now reflect on the most common changes that I’ve helped brands make to lift retention performance. It’s no coincidence that all the enablers are affected across People, Process and Technology.
Organising around KPIs.
I talked in part 1 about the constituent parts of the retention KPI. When brands are still early in their retention strategy thinking, or need to drive change quickly, focus and accountability is key.
In both operational and commercial areas of the business you must create a clear understanding of who is focused on which subset of activity in the middle management layer. Call it RACI or RAPID if you want but it needn’t be complicated! Who is driving which KPI – developing the plan, presenting in governance and tracking risks?
Getting the right operating model and skills creates focus and makes it a lot easier to get the following activity blocks in place.
It clearly depends, but please don’t fall into the trap of automatically thinking they must have <insert industry x> experience. Some of the best people I’ve worked with have bought in new thinking from other industries. If you put “must have x years experience in this industry” on a job description, then guess what – you’ll get more of what you already have.
It’s also worth mentioning – if you don’t have a lot of experience in hiring a certain type of role, find a partner to help. A recruitment fee pales into insignificance compared to the commercial value returned in these types of roles.
Don’t leave it until last minute.
Retention can be one of the toughest areas to manage. Customer retention is a true reflection of your brand. Why? Because retention (and your brand) is the sum of customer experiences across all touchpoints. Customer retention is affected by a screwed-up delivery, a customer service call handled badly, or affinity for your latest TV advert.
As a leader of retention you can put in place insight that creates a reason for other areas of the organisation to be interested in retention. But also important is that you are thinking holistically about retention levers within your own remit.
Many brands – particularly in the utilities or insurance space, are guilty of acquiring on a discounted price, leaving the customer largely alone and then trying to push through a price rise when it’s time at the end of year 1. Unsurprisingly, first year churn in high. Not great when a customer might not payback acquisition costs until year 2!
Don’t leave building brand salience until its time for the customer to make a decision about whether to recommit to your brand. Net Promoter Score and churn driver insight can help define exact strategy, but broadly speaking in-life engagement falls into following categories
Announcing features. If you can see in your data that gym members have not been for 3 months, guess what is going to happen when their contract lapses. Do they know about new classes, equipment and services? Have they seen the new timetable? Do they know there is now an off-peak option? (etc)
Reinforcing service quality. Particularly in low touch categories, but relevant to all, it is important to reinforce why the customer chose you in the first place. In mobile for example, we pushed network quality statistics, investments and ranking (locally relevant wherever possible). Knowing that this was a major driver of NPS, it also made it less likely that come decision time – the customer was less likely to be open to other network brands.
Create a valuable reason to engage. Traditionally low touch categories such as insurance and utilities need not be so. Many brands are creating value added extension to their value propositions (think AA Rewards, British Gas Rewards, O2 Priority).
The model used by some brands makes sense. By securing unused capacity (think Compare the Market 2 for 1 cinema tickets on Mondays and Tuesdays) they can offer customers something of good perceived value at very low cost. In return participating partner brands get access to a customer base, and also benefit from add-on purchases from a customer visit. The customer comes away from the relationship more likely to stick – both from a rational (don’t want to lose the benefit) and an emotional perspective (feeling valued and recognised).
Service recovery. Sometimes it goes wrong. You need to have insight into customer journeys to understand when a customer has gone through a poor experience, and become a churn/detractor risk. A well recovered poor experience can result in higher NPS than average! It doesn’t have to be expensive gifts – sometimes acknowledgement and a sorry is all that is needed.
Win back. All businesses lose customers. The best ones however are set up to understand why customers left, and then focus on winning them back – for example 12 months after an insurance switch or 24 months after a mobile contract loss. Think back to the gym example – could an 18 month contract leaver default to a ‘pay as you go’ option, meaning the brand can stay engaged with a customer, benefit from a smaller amount of money – but have the chance to regain the customer when circumstances change.
Technology as an enabler
You need good Martech to deploy campaigns and customer journeys.
Many sectors however can also benefit from ‘decisioning’ technology to manage margin and guide investment. This has been long recognised in telco and media that invests substantial amounts of money in subsidised handsets and TV boxes upfront. Imagine handing £500-£1000 to a customer service retention agent – and telling them they can use that money to persuade the customer to stay, but offering them no sophistication or guidance on how!
The telco model varies but enables an agent to package up a ‘deal’ in a basket within the parameters set (cost, CLV, churn risk). It gives data-driven decisioning to the agent and allows reporting and alignment of incentives off the back of it.
Other sectors are behind. But the approach could be easily adopted more widely. Financial services and insurance have the concept of a range of product levels and pricing flexibility, but often manual processes to help agents make the right decisions, manage adherence to (basic) policies, and drive performance.
Customer journey optimisation and personalisation
These areas are articles in their own right. However, what’s key is not about getting it perfect initially. The challenge is building process (and technology/data) that gives you a test & learn capability. The complexity of planning tests across different things, and measuring them quickly, is not to be underestimated.
If you have this, then dreaming up retention offers, creative, copy, and channels to test seems easier!
There’s a lot to chew on here, but with the right people in the right roles, everything else will follow.
Think through customer retention and loyalty in a holistic sense. Build brand salience with ongoing engagement programmes, and recover when things go wrong. In consumer services business, make getting the retention conversation at renewal point a tightly managed experience. The results will follow!