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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5. 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
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Sources: 1. "Leading on the Edge of Chaos", Emmett C. Murphy and Mark A. Murphy
6. 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
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7. Impact of Retention rate on Customer Lifetime Value (CLV)*
r m = margin or profit from a customer per period
{
CLV = m 1+ i – r } r = retention rate
i = discount rate
CLV
$500
$400
$300
$200
$100
$0
50% 60% 70% 80% 90%
Rate of Retention
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as Investments,” Wharton 2005
8. 2. How Bad Is It?
Who is Leaving?
How Fast?
Cost of replacement?
To Which Competitor?
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9. 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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10. 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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11. 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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12. Diagnostic Metrics
Production and Delivery Metrics
Open & Available
Accurate
On Time
Request/Issue was solved (FCR)
Defect Queue
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13. Competitive Positioning
Value Proposition: Product Utility & Price
Brand Deterioration / Mismatch
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14. Service Delivery
Efficiency Metrics: what matters to your Customers?
Source, JD Powers 2010 Credit Card Satisfaction Survey
Process & Policy Breakdowns
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15. Pricing Sensitivity from Servicing Attributes
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%
Source: Harvey N Schycon, “Measuring the Payoff from Improved Customer Service,” Prism 2001. Study of 25 attributes
impact on pricing, 2,000 businesses surveyed
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16. 4. What Can We Do About It?
Step One: Triage: Save the best opportunities first
Segment your Customer base by CLV to
Prioritize Treatment
Don’t Save Save no Offer Save w Offer
# Customers
LOW MED HIGH
CLV, $
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17. Identify & Eliminate Friction Points
Step Two: Address issues that most upset customers
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18. 5. Retention Tactics: A Continuum
Passive Active Desperate
Demonstrate Recognize Reinforce Reward Beg &
Competence Cajole
• Error Free • Friction/ •Intuitive Service • Usage Based • Fee Free
Service Hassel Free
Service
• Profile Based •Tenure Based • Loss Leader
• Easy to Use • Customized Recommend- Offers
Recognition ations
•“Handcuff”
• Private, • Value based • Remind & • Pre-Attrition Contract
Secure, treatments Encourage Use Terms
Compliant
Covered in this workshop
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19. 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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20. Rewards
Relevant Rapid Rewards:
$’s Spent NOT Miles Traveled
Commensurate:
CLV
Strategic
10 = 1 20 = 1 $100 = $1
Drive Desired Customer Behavior:
Old ATM fees
Starbucks 15 Stars /1 free coffee
1 star per purchase vs per cup
Hassle Free:
The dreaded Flight Voucher
“Free” Magazine Subscription
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21. 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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22. Customer Focused Organization
Balanced Scorecard
Shared Goals
Respect and empower customer service
Customer Council
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23. 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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24. Feed The Meter
Understand when and how key
Relationship Stages occur
Actively engage your customer when or
even before these stages occur
Welcome Educate Engage Reward
Complexity Value Prop
Product Entice
Encourage Usage Excite Recognize
Prospect Purchase RePurchase Loyalty
Customer Lifecycle (Time or # repurchases)
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25. Questions and Open Dialogue
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