Great Expectations Retention Workshop2


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Skills based workshop on Customer Retention. Why its important, how to measure it, and the tactics to drive a defensive and offensive strategy designed to optimize customer loyalty and revenue.

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  • When Apple l eapt past Microsoft in market cap, Steve Ballmer brushed it off saying , "I am still pleased that 94 times out of a 100 somebody picks a Windows PC." That's true, but if you step back and look at the bigger picture, Microsoft only has 70% of the share of the two most important computing devices -- smartphones and PCs. If you look at estimates for smartphone and PC sales for 2011, Microsoft will only have 50% share of those devices.
  • Great Expectations Retention Workshop2

    1. 1. Great Expectations: Retaining Existing Customers & Engaging New Ones Derek F Martin
    2. 2. Introduction: Derek F Martin <ul><li>Director Customer Engagement, Sales & Retention, World Service, American Express </li></ul><ul><li>Board of Directors, ATA </li></ul><ul><li> </li></ul><ul><li>Next Conference: “Sales vs Service” Loyalty USA in Las Vegas, October 2011 </li></ul>
    3. 3. Ice Breaker <ul><li>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,…). </li></ul><ul><li>What reasons drove you to leave? </li></ul><ul><li>Has the new merchant/service met your expectations? </li></ul>
    4. 4. Agenda <ul><li>Why Retention? </li></ul><ul><li>How Bad Is It? </li></ul><ul><li>How Did It Get To This? </li></ul><ul><li>What Can We Do About It? </li></ul><ul><li>Retention Tactics </li></ul><ul><li>The Best Defense is a Great Offense </li></ul><ul><li>Open Dialogue </li></ul>
    5. 5. 1. Why Retention? <ul><li>ROI – Customers are Assets 1 </li></ul><ul><li>Cost of acquiring new customers is up to 5X cost to retain current customers </li></ul><ul><li>2% increase in customer retention = cutting costs by 10% </li></ul><ul><li>A 5% reduction in attrition rate can increase profits by 20-100% </li></ul><ul><li>The customer profitability rate tends to increase over the life of a retained customer </li></ul>Sources: 1. &quot;Leading on the Edge of Chaos&quot;, Emmett C. Murphy and Mark A. Murphy
    6. 6. 1. Why Retention? (continued) <ul><li>COMPETITION – Growth and Market Share </li></ul><ul><li>The average company loses 10-15% of its customers each year 2 </li></ul><ul><li>Competitive advantages – maintain market share, customer feedback, reduce “detractors” </li></ul><ul><li>Acquisition $’s are for growth </li></ul><ul><li>BRAND </li></ul><ul><li>Brand Impact of Promoters vs Detractors </li></ul>Sources: 2 American Association for Quality, 2011
    7. 7. Impact of Retention rate on Customer Lifetime Value (CLV)* *Source: Sunil Gupta, “Managing Customers as Investments,” Wharton 2005 CLV Rate of Retention r 1+ i – r { } CLV = m m = margin or profit from a customer per period r = retention rate i = discount rate
    8. 8. 2. How Bad Is It? <ul><li>Who is Leaving? </li></ul><ul><li>How Fast? </li></ul><ul><li>Cost of replacement? </li></ul><ul><li>To Which Competitor? </li></ul>
    9. 9. Who is Leaving? Top 10 Things You Want to Know about Attriting Customers <ul><li>How Many: Attrition Rate & % total Customers </li></ul><ul><li>% of New Acquisition : Attrition/Total Customers </li></ul><ul><li>Estimated Customer Value: CLV Customer Lifetime Value = m(r/1+i-r) </li></ul><ul><li>Customer Tenure: # of years or repurchases </li></ul><ul><li>Voluntary vs Involuntary : % Involuntary </li></ul><ul><li>How Many Were Saved? Save Rate </li></ul><ul><li>Why did they Leave? Voice of Customer, Verbatims, Social Forums </li></ul><ul><li>What are they Saying About You? Net Promoter </li></ul><ul><li>Where Did They Go? Competitive Marketshare </li></ul><ul><li>What Would It Take To Win Them Back? Competitive Marketshare </li></ul>
    10. 10. 3. How Did It Get To This? <ul><li>Diagnostic Metrics </li></ul><ul><ul><li>Voice of the Customer </li></ul></ul><ul><ul><li>Production and Delivery Metrics </li></ul></ul><ul><li>Competitive Positioning </li></ul><ul><ul><li>Value Proposition (Utility & Price) </li></ul></ul><ul><ul><li>Brand Deterioration/Mismatch </li></ul></ul><ul><li>Service Delivery </li></ul><ul><ul><li>Efficiency Metrics </li></ul></ul><ul><ul><li>Process & Service Breakdowns </li></ul></ul>
    11. 11. Diagnostic Metrics <ul><li>Voice of the Customer </li></ul><ul><ul><li>Feedback Survey </li></ul></ul><ul><ul><li>Social Media & Forums </li></ul></ul><ul><ul><li>Mystery Shopping </li></ul></ul><ul><ul><li>Focus Groups </li></ul></ul><ul><li>Customer Metrics (a sampling) </li></ul><ul><ul><li>Satisfaction </li></ul></ul><ul><ul><li>Net Promoter Score </li></ul></ul><ul><ul><li>Repurchase or Retention Rate </li></ul></ul><ul><ul><li>Referral </li></ul></ul>
    12. 12. Diagnostic Metrics <ul><li>Production and Delivery Metrics </li></ul><ul><ul><li>Open & Available </li></ul></ul><ul><ul><li>Accurate </li></ul></ul><ul><ul><li>On Time </li></ul></ul><ul><ul><li>Request/Issue was solved (FCR) </li></ul></ul><ul><ul><li>Defect Queue </li></ul></ul>
    13. 13. Competitive Positioning <ul><li>Value Proposition: Product Utility & Price </li></ul><ul><li>Brand Deterioration / Mismatch </li></ul>
    14. 14. Service Delivery <ul><li>Efficiency Metrics: what matters to your Customers? </li></ul><ul><li>Process & Policy Breakdowns </li></ul>Source, JD Powers 2010 Credit Card Satisfaction Survey
    15. 15. 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 2.0% Product Attribute 0.6% Reasonable payment time 0.2% Notification when Shipment Delayed 0.4% Problem Solving Helpfulness 0.6% Value Attributes 0.8% Carrier Capability 2.4% Accuracy of shipment to order 0.2% Finishing capabilities 0.4% Consistent Quality 1.4% Product Line Scope 7% TOTAL PRICE IMPACT 0.6% Handling of Rush Orders 4.4% Service Attributes Price Increase
    16. 16. 4. What Can We Do About It? <ul><li>Segment your Customer base by CLV to Prioritize Treatment </li></ul>Step One: Triage: Save the best opportunities first CLV, $ # Customers LOW MED HIGH Don’t Save Save no Offer Save w Offer
    17. 17. <ul><li>Step Two: Address issues that most upset customers </li></ul>Identify & Eliminate Friction Points
    18. 18. 5. Retention Tactics: A Continuum <ul><li>Demonstrate </li></ul><ul><li>Competence </li></ul><ul><li>Error Free Service </li></ul><ul><li>Easy to Use </li></ul><ul><li>Private, Secure, Compliant </li></ul><ul><li>Recognize </li></ul><ul><li>Friction/ Hassel Free Service </li></ul><ul><li>Customized Recognition </li></ul><ul><li>Value based treatments </li></ul><ul><li>Reinforce </li></ul><ul><li>Intuitive Service </li></ul><ul><li>Profile Based Recommend-ations </li></ul><ul><li>Remind & Encourage Use </li></ul><ul><li>Reward </li></ul><ul><li>Usage Based </li></ul><ul><li>Tenure Based </li></ul><ul><li>Pre-Attrition </li></ul><ul><li>Beg & Cajole </li></ul><ul><li>Fee Free </li></ul><ul><li>Loss Leader Offers </li></ul><ul><li>“ Handcuff” Contract Terms </li></ul>Passive Active Desperate Covered in this workshop
    19. 19. Reinforce <ul><li>Ask for the Business </li></ul><ul><li>Features Vs Benefits </li></ul><ul><li>Do The Math: spell out the Value Proposition to your customer </li></ul><ul><li>Right Product vs Most Profitable Product </li></ul>
    20. 20. Rewards <ul><li>Relevant </li></ul><ul><li>Commensurate: </li></ul><ul><ul><li>CLV </li></ul></ul><ul><ul><li>Strategic </li></ul></ul><ul><li>Drive Desired Customer Behavior: </li></ul><ul><ul><li>Old ATM fees </li></ul></ul><ul><ul><li>Starbucks </li></ul></ul><ul><li>Hassle Free: </li></ul><ul><ul><li>The dreaded Flight Voucher </li></ul></ul><ul><ul><li>“ Free” Magazine Subscription </li></ul></ul>Rapid Rewards: $’s Spent NOT Miles Traveled 20 = 1 10 = 1 $100 = $1 15 Stars /1 free coffee 1 star per purchase vs per cup
    21. 21. 6. The Best Defense - Is a Good Offense <ul><li>Product Value </li></ul><ul><li>Customer Focused Organization </li></ul><ul><li>Set & Meet Expectations </li></ul><ul><li>Feed The Meter </li></ul><ul><li>Constant Innovation & Competitive Disruption </li></ul>
    22. 22. Customer Focused Organization <ul><li>Balanced Scorecard </li></ul><ul><li>Shared Goals </li></ul><ul><li>Respect and empower customer service </li></ul><ul><li>Customer Council </li></ul>
    23. 23. Set & Meet Customer Expectations <ul><li>Be consistent </li></ul><ul><li>Manage the truth, not avoid it </li></ul><ul><li>Keep your promises and apologize when you don’t </li></ul>
    24. 24. Feed The Meter <ul><li>Understand when and how key Relationship Stages occur </li></ul><ul><li>Actively engage your customer when or even before these stages occur </li></ul>Customer Lifecycle (Time or # repurchases) Welcome Educate Engage Value Prop Reward Entice Encourage Usage Excite Recognize Purchase RePurchase Prospect Loyalty Product Complexity
    25. 25. Questions and Open Dialogue
    26. 26. Attrition Assessment Form Back
    27. 27. 2010 JD Powers Credit Card Industry
    28. 28. Everyone makes mistakes, not everyone apologizes…