Customer Retention Summit Integrated Insight V1

Integrated Insight Strategy for Customer Retention Tony Mooney Customer Retention Summit, London 14 th Oct 2009

Agenda

What do we mean by ‘integrated insight’?

Steps to Success

Examples and Summary

For retention, two important domains need an integrated, insight-driven approach Product Acquisition Customer Experience Differentiated Propositions Customer Journey Brand What is ‘integrated insight’? Legal Policies Processes Competition Channel Financials Customer Behaviour Business Behaviour

Insight techniques need to be integrated in the right sequence Insight is a business process supported by technology What has changed ? Why? What to do about it? What is customer behaviour Vs organisation behaviour or process? What will happen? What is important? What is ‘integrated insight’? Propensity Modelling Scenario Modelling | Forecasting | Segmentation Portfolio Dynamics Analysis and Reporting Financial Sensitivities | Profiling | Segmentation Market Research | Exit Interviews | Internal Reference Customer Process Mapping | Policy Analysis | Portfolio Analysis Insight Technique

Right-time Decision support for multi-channel marketing Not ‘some-time’ analytics ‘ Offline’ ‘ Online’ What is ‘integrated insight’? Creative Develop Review Plan Optimise Execute Business & Product Strategy Customer Strategy Planning Decision Management Analytics Data Acquisition Data Management

Strategy

Product

Proposition

Offer

Base Data Optimisation Reporting & Profiles Opportunity Discovery & Data Mining Value & Performance Improvement Strategies Campaign Evaluation Campaign Reporting Analytical Domain Operational Domain Response Capture & Management Candidate Propositions Budgets Targets Operational Constraints Creative Requirements Rapid Insight Scenario Build Model Build & Maintenance Build Plan Third Party Data Purchase Report & review last cycle, define next steps Optimisation & Iteration Plan Specification Define new inputs, requirements, assumptions Scenario Optimisation Real-time Assignments Decisioning & Optimisation Deployment Creative & Content Management Timing is key

Issue: IT has not delivered for Marketing Increasing demand for integrated technology from marketing “ Marketing vs. Technology is a cage-fight between ignorant marketing people who expect technological miracles immediately and the propeller-heads who talk only about the benefits of some coding philosophy that no-one this side of the Klingon Empire really understands.” CMO Magazine What is ‘integrated insight’?

Agenda

Steps to Success

Examples and Summary

Establish Customer Metrics using financial modelling, profiling, predictive modelling and segmentation Potential Value Current Value Low High Low Low High Retention High High Predictive Modelled = Customer Lifetime Value Steps to Success

The Washing Machine Customer portfolio dynamics must be understood and mapped Product Y Customer Base Product X Customer Base .. by recognising customers as individuals & tracking and measuring customer behaviour better value evaporation Voluntary Churn Compulsory Churn Migrations (soft churn) Migrations/downgrading Inactivity Revenue Pool New Revenue New Revenue Voluntary Churn Upgrading Steps to Success

Select and focus on material, addressable areas of churn that offer best chance of success Strategy will also have to recognise that some drivers of churn will not be addressable Net Churn pa Goal ?% ? pa Target Churn reduction ? New customers At renewal At Home move Re-acquired customers Est Materiality pa Price Rise Channel mis-selling Focus areas Universe illustrative Competitor offer Steps to Success

Sequenced and integrated, closed loop consumer experience - for decisions and data capture across all channels Uninterested & rejecters Interested Enquirer On boarding Subscribe Establishment In Life Nursery Renew or Cancel Ex Customer Suspect-prospect-customer journey Value-based acquisition Actionable measurement of consumer dynamics Informed Interactions: Recognise, Remember, Value Differentiated propositions and flexible, reactive consumer strategies 4 1 3 2 Marketing ‘with memory’ Steps to Success

Customer Lifecycle Management requires Multi-dimensional, dynamic segmentation Underlying Drivers Lifecycle state Triggers & Events Product Holding Payment Exit Routes Affordability Value for Money Fraud Channel Miss-selling New not paid New in contract New 12-14 mths Winback <14 mths Renewal <14mths 14-24 mths 2-4 years Over 4 years Homemove Price Rise Service Problem Competitive Offer Offer End Churn Attempt One Product Multiple Products Bundle Premium Product Regular Failed Once In 12 mths Failed multiple In 12 months Call-to-cancel Cancel Payment 1 2 3 4 5 6 Compulsory Churn Direct Debit

Integrated

Sequenced

Operationalised

Timely

Customer-centric

Steps to Success illustrative

Retention strategy will under-perform without creating differentiated propositions for key customer states Tenure Churn Risk High 5 years + New kit £XX offer Sample premium Free Product Free Product Product deal Service DD migration On-line Extra kit Full price Service Service Service Service Tenure Based offer Service Service Tenure Based offer Tenure Based offer Service Service Sample premium Sample premium Product deal Extra kit Full price Extra kit Full price Extra kit Full price Sample premium New kit £XX offer New kit £XX offer New kit £XX offer On-line Product upgrade Extra kit offers Pay up front 3,6 months Free content Replace Old equipment Optimised upgrade offer 2 Optimised upgrade offer Optimised upgrade offer 3 Free content (14 days, free) Free content Weekend (free) BOGOF content Sample DVD Mid tier Sample CONTENT £5 for x months CONTENT £5 for x months Extra kit offers Extra kit offers Free Product Free content Product upgrade Existing proposition New – product based New – Sample based New – pre payment New – anniversary Low Sample DVD BOGOF content BOGOF content Free content Free Product Optimised upgrade offer 2 Optimised upgrade offer Optimised upgrade offer Optimised upgrade offer 2 Replace Old equipment Fairly well covered, but only with introduction of new propositions (green) Steps to Success illustrative

Strategies for Customer Acquisition & Retention must be joined up Need for New Customers Need to Keep Existing Customers Financials Customer Expectations Customer Understanding Marketing Techniques Metrics

Scale economies/market position

Return against CLV/Payback

Set by Marketing & Sales Promises

Researched

Assumptive

Interruption advertising to all

Offers, incentives, discounts

Volumes

Costs

Market position

Retained volume/value at lowest cost

Set by experience

Transactional

Behavioural

More targeted communications

Offers, incentives, discounts

Volumes

Values

Costs

Steps to Success

Agenda

Steps to Success

Case Study and Summary

An integrated insight approach transformed churn management Delivering the solution

Success in growing its customer base but it came at a price – an increasing customer churn problem

Internal analytical teams and other consultancies had been tasked with solving the problem, but none of them were able to tell the executives what was really driving churn

Focus on diagnostic, hypothesis-based approach

Concentrating only on the material issues

Capability to enable analysts to deliver rapid profiling

Development of portfolio analysis

Impact analysis of organisational policies and processes

Interpretation and synthesis to turn insight into a coherent strategy

Scenario modelling

New churn strategies and policies implemented

Automated portfolio dynamic reporting

Propensity Modelling based on strategy objectives

Proactive retention programme

Optimisation of retention budgets

Case Study: Integrated insight for Churn Management Starting Point Building on success

Key dynamics were identified and remedial initiatives implemented and measured Key Trends Identified Growing instability in client base Damaging “offer culture” Churn risk from basic channels High churn from winbacks Falling quality of acquisitions Main Initiatives Offer “Washout” Saves & Winback Proactive Retention Winback Optimisation Acquisition Survival Targeting Churn “Deep-dives” Benefits Increased % of stable customers in the base Lower churn calls as % of base Better profile of acquisitions Optimised Winback activity Case Study: Integrated insight for Churn Management Profiling & Segmentation Dominant Insight Technique Modelling & Targeting Reporting & Evaluation

The rewards for getting it right were considerable.. Churn was reduced by 25% - £100m in retained revenue Actual (Disguised) Example Integrated Insight Programme Case Study: Integrated insight for Churn Management

Integrating insight and making it actionable Key messages for improving retention performance Create customer value metrics and align to P&L sensitivity Integrate and operationalise prospect-customer journeys that manage customer state Drive differentiated customer propositions not just different-coloured envelopes Put more science into acquisition strategy Be clear on materiality and let this guide where you focus efforts Understand portfolio dynamics and the impacts on enterprise value 1 2 3 4 5 6 Summary

Thank you