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Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
Great Expectations: Customer Retention Basics
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Great Expectations: Customer Retention Basics

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Workshop of core concepts of Customer Loyalty and Retention. Delivered Oct 2011 at the IQPC Customer Loyalty Conference by Derek F Martin.

Workshop of core concepts of Customer Loyalty and Retention. Delivered Oct 2011 at the IQPC Customer Loyalty Conference by Derek F Martin.

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  • 1. Great Expectations:Retaining Existing Customers &Engaging New OnesDerek F Martin Copyright, all rights reserved. Reprints: derekfmartin@gmail.com 1
  • 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 Copyright, all rights reserved. Reprints: derekfmartin@gma 2
  • 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? Copyright, all rights reserved. Reprints: derekfmartin@gma 3
  • 4. Agenda1. Why Retention?2. How Bad Is It?3. How Did It Get To This?4. What Can We Do About It?5. Retention Tactics6. The Best Defense is a Great Offense7. Open Dialogue Copyright, all rights reserved. Reprints: derekfmartin@gma 4
  • 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 Copyright, all rights reserved. Reprints: derekfmartin@gma 5 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 growthBRAND Brand Impact of Promoters vs Detractors Sources: 2 American Association for Quality, 2011 Copyright, all rights reserved. Reprints: derekfmartin@gma 6
  • 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 Copyright,*Source: Sunil Gupta, “Managing Customers all rights reserved. Reprints: derekfmartin@gma 7as Investments,” Wharton 2005
  • 8. 2. How Bad Is It? Who is Leaving? How Fast? Cost of replacement? To Which Competitor? Copyright, all rights reserved. Reprints: derekfmartin@gma 8
  • 9. Who is Leaving? Top 10 Things You Want to Know about Attriting Customers1. How Many: Attrition Rate & % total Customers2. % of New Acquisition: Attrition/Total Customers3. Estimated Customer Value: CLV Customer Lifetime Value = m(r/1+i-r)4. Customer Tenure: # of years or repurchases5. Voluntary vs Involuntary: % Involuntary6. How Many Were Saved? Save Rate7. Why did they Leave? Voice of Customer, Verbatims, Social Forums8. What are they Saying About You? Net Promoter9. Where Did They Go? Competitive Marketshare10. What Would It Take To Win Them Back? Competitive Marketshare Copyright, all rights reserved. Reprints: derekfmartin@gma 9
  • 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 Copyright, all rights reserved. Reprints: derekfmartin@gma 10
  • 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 Copyright, all rights reserved. Reprints: derekfmartin@gma 11
  • 12. Diagnostic Metrics Production and Delivery Metrics  Open & Available  Accurate  On Time  Request/Issue was solved (FCR)  Defect Queue Copyright, all rights reserved. Reprints: derekfmartin@gma 12
  • 13. Competitive Positioning Value Proposition: Product Utility & Price Brand Deterioration / Mismatch Copyright, all rights reserved. Reprints: derekfmartin@gma 13
  • 14. Service Delivery Efficiency Metrics: what matters to your Customers? Source, JD Powers 2010 Credit Card Satisfaction Survey Process & Policy Breakdowns Copyright, all rights reserved. Reprints: derekfmartin@gma 14
  • 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 attributesimpact on pricing, 2,000 businesses surveyed Copyright, all rights reserved. Reprints: derekfmartin@gma 15
  • 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, $ Copyright, all rights reserved. Reprints: derekfmartin@gma 16
  • 17. Identify & Eliminate Friction Points Step Two: Address issues that most upset customers Copyright, all rights reserved. Reprints: derekfmartin@gma 17
  • 18. 5. Retention Tactics: A Continuum Passive Active DesperateDemonstrate Recognize Reinforce Reward Beg &Competence Cajole• Error Free • Friction/ •Intuitive Service • Usage Based • Fee FreeService Hassel Free Service • Profile Based •Tenure Based • Loss Leader• Easy to Use • Customized Recommend- Offers Recognition ations •“Handcuff”• Private, • Value based • Remind & • Pre-Attrition ContractSecure, treatments Encourage Use TermsCompliant Covered in this workshop Copyright, all rights reserved. Reprints: derekfmartin@gma 18
  • 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 Copyright, all rights reserved. Reprints: derekfmartin@gma 19
  • 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 Copyright, all rights reserved. Reprints: derekfmartin@gma 20
  • 21. 6. The Best Defense -Is a Good Offense Product Value Customer Focused Organization Set & Meet Expectations Feed The Meter Constant Innovation & Competitive Disruption Copyright, all rights reserved. Reprints: derekfmartin@gma 21
  • 22. Customer Focused Organization Balanced Scorecard Shared Goals Respect and empower customer service Customer Council Copyright, all rights reserved. Reprints: derekfmartin@gma 22
  • 23. Set & Meet Customer Expectations Be consistent Manage the truth, not avoid it Keep your promises and apologize when you don’t Copyright, all rights reserved. Reprints: derekfmartin@gma 23
  • 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 RewardComplexity Value Prop Product Entice Encourage Usage Excite Recognize Prospect Purchase RePurchase Loyalty Customer Lifecycle (Time or # repurchases) Copyright, all rights reserved. Reprints: derekfmartin@gma 24
  • 25. Questions and Open Dialogue Copyright, all rights reserved. Reprints: derekfmartin@gma 25
  • 26. Attrition Assessment Form Back Copyright, all rights reserved. Reprints: derekfmartin@gma 26
  • 27. 2010 JD Powers Credit Card Industry Copyright, all rights reserved. Reprints: derekfmartin@gma 27
  • 28. Everyone makes mistakes, not everyone apologizes… Copyright, all rights reserved. Reprints: derekfmartin@gma 28

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