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Staying In Droves: How to Win the Customer Retention Revolution (Full eBook)


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Full version of the eBook is now available. It is suggested you use "view full screen" option.

Includes a Step-by-Step System, and 58 Ideas, Strategies, Trends, Examples and Tips to Help You Retain More Customers and Emerge Triumphant From the Recession.

How secure are your best customers? How sure are you?

Whether you realize it or not, you are in an all-out battle for your customers. A battle the likes of which hasn’t been seen in decades. Just like any army would prepare for battle, you need a plan of attack.

What if there were a system that was specifically designed to strengthen your customer relationships? Imagine a customer base so loyal that:

- Virtually no amount of pricing discounts would lure them away
- They couldn’t wait to refer their friends and associates to you
- They would forgive you when you made a mistake

Published in: Business, Education
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Staying In Droves: How to Win the Customer Retention Revolution (Full eBook)

  1. 1. HOW TO WIN THE CUSTOMER RETENTION REVOLUTION Includes a Step-by-Step Customer Loyalty System, and 58 Ideas, Strategies, Trends, Examples and Tips to Help You Emerge Triumphant From the Recession By Ed King • 1
  2. 2. I.  Introduction………………………………………………..Page 3 II.  10 New Rules You Must Know to Survive and Thrive in This Economy..............................................…Page 4 III. Layers of Loyalty:™ A 4-Step System to Winning CONTENTS Customer Loyalty in Any Economy……..........Page 8 a)  Step One – Assess………………………………Page 20 b)  Step Two – Adopt……………………………….Page 23 c)  Step Three – Advance…………………………Page 28 d)  Step Four – Affirm………………………………Page 42 IV.  Bonus! 30-Day Action Plan and 15 Low/No Cost Action Items To Put in Use Today………………..Page 47 2
  3. 3. There was no shot heard ‘round the world. There was no announcement in the Wall Street Journal. There was no declaration from Capitol Hill. Sometime during this recession, however, a fundamental economic shift has occurred. Customer retention suddenly became more important than customer acquisition. “Stop selling and start servicing” should be the mantra in every boardroom and business meeting. (OK, you shouldn’t stop selling, but you get my drift.) INTRODUCTION Defending and protecting your customer base should be job one in these challenging economic times. Yet, companies still spend 10 to 20 times (or more) on acquiring new customers as they spend on keeping existing ones. In case you haven’t noticed, customers have taken control of the exchange of goods and services. If this phenomenon hasn’t hit your industry yet, brace yourself. It’s coming. If your company is stuck in the ways of the past (unwilling to relinquish control, taking customers for granted, putting short-term profits ahead of your reputation), you’d better line up for your bailout. The perfect storm has arrived, and most companies are unprepared. Companies are shifting some spend from top-of-the-funnel demand creation to customer retention (from 5% of overall program spend on average to 10% of program spend). 3 (source: SiriusDecisions)
  4. 4. You Must Know to Survive and Thrive in This Economy 4
  5. 5. We are living in a changed world. Corporate fraud, technology, outsourcing and a deep global recession are rapidly changing consumer attitudes. The business practices of the past (like way back in 2008) will no longer suffice. A new business charter is in order. There is a new set of rules. I’ve outlined ten of them for you here. 1.  Employee Engagement is Vital – It’s a proven fact that happy, engaged employees create happy, loyal customers. It’s impossible to expect loyalty from your customers without first receiving it from your workforce. 10 NEW RULES Why You Should Care: Each customer’s decision to grant you the gift of their loyalty hinges on the interactions she has with your front- line employees. 2.  Word-of-Mouth is Winning - Word-of-mouth is quickly replacing traditional advertising as the primary purchase influencer. Why You Should Care: A positive customer experience can amplify your reputation and bring new waves of customers your way. Similarly, a negative experience can have them leaving in droves. 3.  Trust is King - Massive mistrust in corporate America has led to customers harboring unprecedented cynicism for virtually every company and deep skepticism for every business interaction. Why You Should Care: Reputation is just as important as value is, as a main purchase driver. Protect your reputation – especially at the point of service. 5
  6. 6. 4.  Customers Demand Transparency - Companies who have relied on manipulation and illusion as their main ways of getting and keeping customers are in for a huge wake-up call. Why You Should Care: The Internet and social networks are yanking down the curtain in almost every industry, baring your business practices and secrets for all to see. Promoting transparency throughout your company and to outside audiences will quickly become the norm. 10 NEW RULES 5.  Customers Seek Out Meaning – Customers are looking for meaning in their purchases, and will jump ship in a heartbeat when they don’t find it with their current provider. Why You Should Care: In a society where we now can logically (and affordably) buy anything to satisfy a need, the value bar has been raised. Customers now want to see that they are doing business with a company who shares their value system. They want to contribute to a greater cause by purchasing your product. 6.  Old Competitors Are Growing Desperate – As new business dries up, desperate competitors will stop at nothing to steal marketshare. Why You Should Care: Your customers are going to get bombarded with offers and specials (many of which are loss leaders) which will tempt all but only the most ardent loyalist. 6
  7. 7. 7.  New Competitors Are Getting Savvy - Barriers to entry have come crumbling down unleashing countless lean, business-model-shattering competitors…who have your customers squarely in their sights. Why You Should Care: Customers are being lured away by startups who offer more efficient, cheaper, easier-to-work-with, better designed products and services than you offer. 8.  Service Bar Is Being Raised - Service expectations are rising every day in every industry, and if you’re not looking at constantly raising your 10 NEW RULES service bar, you can bet your competitors are. Why You Should Care: Customers convert today’s positive customer experience into tomorrow’s service expectation. 9.  Customers are the New Currency - Lack of available cash and credit leaves a company’s customers as their most valuable resource for growth. Why You Should Care: Last time I checked, you can’t go to your local credit union and borrow some customers to get you through the month. Money can be borrowed. Customers must be saved. 10. Investors Have Brainwashed Companies - Investors have unrealistic growth expectations, which have forced public companies to put all available resources toward acquiring new customers…at the expense of cementing the relationship with their current customers. Why You Should Care: At a time where competitors are desperate for growth through acquisition, you can grow through retention. 7
  8. 8. A 4-Step System to Winning Customer Loyalty in Any Economy 8
  9. 9. You answer the phone, and you discover that one of your best customers, without warning, has left for your rival competitor. “How could this happen?” you say to yourself. Every survey the customer has ever taken always indicated that she was satisfied. So what went wrong? Although it’s a fictional situation, it’s an all-too-familiar story for many businesses today. In today’s challenging business climate, retaining customers is absolutely vital. Competitors have reached a new level of desperation and they’re pulling out all the stops to try to steal customers… from you. INTRODUCTION How secure are your best customers? How sure are you? Whether you realize it or not, you are in an all-out battle for your customers. A battle the likes of which hasn’t been seen in decades. Just like any army would prepare for battle, you need a plan of attack. What if there were a system that was specifically designed to strengthen your customer relationships? Imagine a customer base so loyal that: •  Virtually no amount of pricing discounts would lure them away •  They couldn’t wait to refer their friends and associates to you •  They would forgive you when you made a mistake Don’t think it’s possible to create that kind of loyalty? Just read about the voraciously loyal fans of USAA Insurance, T-Mobile, Apple, Enterprise Rental Car, Costco, and Singapore Air. Not to mention the thousands of local dry cleaners, bakeries, nurseries and couriers who have created strong, virtually unbreakable bonds with their customers. 9
  10. 10. You may not realize it, but companies like these have developed very deliberate systems to ensure intense customer loyalty. I’ve assembled some of these strategies, ideas and systems into a simple-to-follow, four-step formula I call Layers of Loyalty.™ Using my Layers of Loyalty™ system will help you win the Retention Revolution. LAYERS OF Picture each of your customers with a force field surrounding them. The thinner the force field, the more prone they are to leave you for a “better LOYALTY deal.” The thicker the force field, the more loyal they are to your company. How thick (or thin) is the force field surrounding your customers? What if there were a way to build up your customer force field? To strengthen your customer relationships by adding layers of protection between your customer and a competitor trying to swipe them away? This is the concept behind Layers of Loyalty.™ The system is designed to consistently give each customer multiple reasons (layers) to stay with you, and resist being lured away by enticing offers elsewhere…in other words, to build a stronger force field. Before we begin to add Layers of Loyalty™ to your customers, however, it’s important to understand what’s going on in their heads. …Maslow style. 10
  12. 12. Similar to Maslow’s Hierarchy of Needs, customers have levels of attitudes… toward your company and its products, services and people. LAYERS OF Resistance, the lowest, most highly undesirable LOYALTY: customer attitude, is literally off the charts. Reserved for only the worst situations such as HIERARCHY monopolies where there are truly no other options available in the marketplace, Resistance doesn’t OF CUSTOMER even make (or deserve) a spot on the pyramid. The rest of the levels include (bottom-up): ATTITUDES Indifference Acceptance Preference Allegiance The base level, Indifference, is a mindset adopted by customers who feel that your company is indifferent to whether she remains a customer or leaves for a competitor. Moving up the pyramid, the customer who possesses an Acceptance mindset sees your company as sufficiently satisfying his need, but nothing more. The next level up on the Hierarchy of Customer Attitudes pyramid is Preference, where the customer has developed a habit of using a company because it’s “the one I know” vs. “the one I don’t know.” The Allegiance level -- the peak of the pyramid-- is reserved for those customers who feel your company truly has their best interest in mind. This customer responds with their loyalty and ongoing referrals. Finally, 12
  13. 13. LAYERS OF LOYALTY Now, associate a customer at each of these levels. The higher he or she is on the pyramid, the more Layers of Loyalty™ he or she possesses. Your goal is to insulate 13 and fortify your customer with more layers…move him or her up the pyramid.
  14. 14. “I HATE you guys. I can’t wait to leave, and tell all my friends and associates how horrible you are!” RESISTANCE 14
  15. 15. “You are a commodity and nothing more. I’m just looking for the lowest price. Period.” INDIFFERENCE 15
  16. 16. “I’m here because it’s convenient and I don’t really have time to look for alternatives.” ACCEPTANCE 16
  17. 17. “I like you guys, and know what I will get, so I’m content.” PREFERENCE 17
  18. 18. “I LOVE this company and can’t wait to send my friends and associates your way!” ALLEGIANCE 18
  19. 19. Step One – Assess Assess your customers to measure their propensity to defect, then categorize them into groups. You can do this yourself using the altered Net Promoter Score system I have provided on the following pages, or you may ASSESS choose to hire a marketing analytics company to create a much deeper formula for segmenting your customer base. ADOPT Step Two – Adopt ADVANCE This step is the most important step, and it’s the step most overlooked by organizations. Getting to the strategies and tactics before adopting the right AFFIRM operational mindset in your organization can spell disaster for you. Even worse than not having a customer retention strategy in place, is promising 4-Step your customers that they are important to you, and then failing to live up to the promise…because you failed to adopt and operationalize a retention guide to mindset inside your organization. customer retention Step Three – Advance Customers may enter the pyramid at all levels. Your goal here is to advance each customer toward loyalty. In the case of the Hierarchy of Customer Attitudes, it means moving each customer toward the peak of the pyramid – Allegiance. Step Four – Affirm Once you have a loyal customer, the goal is to maintain their loyalty. So, as you can see, the customer retention formula isn’t complicated. Many companies may embrace a few of the strategies on the following pages, but the real value is in the synergy that is created by enacting all the strategies. 19
  20. 20. A 4-Step System to Winning Customer Loyalty in Any Economy STEP 1 - ASSESS 20
  21. 21. To begin your customer retention journey using the Layers of Loyalty™ system, I recommend assessing your customers using a simple, one-question profiling tool. Net Promoter Score (NPS) is a loyalty metric developed by Fred Reichheld, consisting of a single question: “How likely are you to recommend us to a friend or associate?” I recommend you use the same question to profile your customers. However, you’ll use a slightly different scoring system than Reichheld does. Reichheld’s formula uses a 10-point, 3-tiered system, which renders a score for your company as a whole. Number of “promoters” (9s and10s) minus the ASSESS number of “detractors” (0s through 6s) = your Net Promoter Score. Step 1 Because we are interested in gauging your customers’ mindset rather than your company’s NPS score, I recommend a more thorough, 10-point, 5-layer system. The 5 layers are: 1. Allegiance Layer (score of 9-10) 4. Indifference Layer (score of 3-4) 2. Preference Layer (score of 7-8) 5. Resistance Layer (score of 0-2) 3. Acceptance Layer (score of 5-6) This simple scoring system will give you an idea of how loyal your customers are, and will give you a starting point for improving customer retention across the board. This is not a scientific process. It’s simply one tool you can use to categorize your existing customer base. The survey can be administered via email, over the phone, or in-person. Depending on your industry and the size of your customer base, you should consider surveying all of your customers. The goal is to get at least a 25% response rate. Once assembled, you will have 5 categories of customers. 21
  22. 22. Allegiance Score = 9-10 PROFILE YOUR CUSTOMERS Preference “On a scale of 0-10, Score = 7-8 how likely would you be to recommend us Acceptance to a friend or Score = 5-6 associate?” Indifference Score = 3-4 Resistance 22 Score = 0-2
  23. 23. A 4-Step System to Winning Customer Loyalty in Any Economy STEP 2 - ADOPT 23
  24. 24. The second step in the Layers of Loyalty™ customer retention process is Adopt. This second step is the most important step, and it’s the one most overlooked by organizations. Now that you’ve assessed and categorized your customers with the single-question survey, it’s time to fortify your organization with a foundation of customer-centricity. Developing strategies and tactics before adopting the right operational mindset in your organization can spell disaster for you. ADOPT Even worse than not having a customer retention strategy in place, is promising your customers that they are important to you, and then failing to Step 2 live up to the promise…because you failed to adopt and operationalize a retention mindset inside your organization. There are three strategies I recommend at this stage in the process: 1.  Establish a Culture of Accountability and Empowerment 2.  Train Relentlessly on Service Consistency 3.  Ask For Customer Feedback…And Act on It These three powerful strategies will help set the tone for the rest of the process. 24
  25. 25. Retention Strategy #1: Establish a Culture of Accountability and Empowerment It’s human relationships that make companies great. World-class organizations understand this. They hire for personality over experience. They treat employees like valued human beings. They give their people the tools to succeed. They train them…a lot. They reward and recognize them on the right things. And, they empower them to solve customer problems on the spot. Astonishingly few companies get this one right. One amazing example of this, however, can be found in the state of Georgia’s Department of Consumer Affairs. Yes, I said government was providing amazing customer ADOPT service. Step 2 In 2006, Governor Sonny Purdue instituted a Customer Service Initiative to help citizens of Georgia to get their questions answered faster, friendlier and easier. They started at the root of the problem…government employees had little trust in management, little pride in their work, and were not held accountable for lackluster service. Through transforming the culture, finding quick wins to celebrate (such as reducing the wait time at the Department of Driver Services from an average of two hours to six minutes), fixing broken processes, and rewarding great service, the state of Georgia is now ranked among the service elite among any organization, not just government entities. •  74% customer satisfaction (only 6 points below Nordstrom) •  72% employee job satisfaction (above the national average) •  96% caller satisfaction What factors do you think contribute to your company’s current culture? “ 25 “ We spend all our time on people. The day we screw up this people thing, this company is over. — Jack Welch
  26. 26. Retention Strategy #2: Train Relentlessly on Service Consistency If you only follow one strategy in the Layers of Loyalty™ system, this is the one because it will have the biggest impact on retaining more customers. Many companies try to run before they can walk. In other words, they develop product bundles, institute new IT systems, start an ad campaign and anything else they can think of in an effort to grow the business. The problem is, because they haven’t yet mastered the basics of servicing the customer, these initiatives often end up alienating more existing customers (and their entire social network) than bringing in new ones. Do I have your ADOPT attention, all you credit card, cable and telecommunications companies? Step 2 The solution is a simple one. Institutionalize service consistency in your organization first. Service consistency should be the primary focus in your company. Not the primary focus of the customer service department, or one of the metrics on the customer service surveys. The primary focus throughout your company. Ritz Carlton takes training seriously. Their employees get 200-300 hours of training per year! Retailer J.C. Penney introduced a CustomerFIRST program in 2008 after realizing that merely satisfied customers were no more loyal than unsatisfied customers. They knew they had to elevate service to create highly satisfied customers. So, they retrained all 150,000 employees to put a stronger focus on front-line autonomy and accountability to better service the customer. Stocking associates now “drop everything” to help a customer when asked. J.C. Penney discovered that highly satisfied customers make 20% more trips to the store and make 11% more purchases. 1.  Discover what your customers want at every service interaction with your company. 2.  Show all your employees what the customer wants and expects at these critical touch points. 26 3.  Make it job one to meet or exceed these expectations 100% of the time.
  27. 27. Retention Strategy #3: Ask for Customer Feedback…and Act On It Customer feedback comes in two forms: solicited and unsolicited. Solicited feedback is a good way to “keep score” especially when it comes to customer service. The shorter the survey, the better. We’re looking for as big a cross section of your customers as possible. While a miniscule 1.7% response rate to a 6-page survey isn’t useful for building a massive, loyal following, customers are likely to answer one simple question. I suggest using the one-question survey as an ongoing practice. (“How likely ADOPT would you be to recommend us to a friend or associate?”). Studies have proven this question to be the single best indicator of customer loyalty. The Step 2 real appeal is that this “survey” can be administered over the phone at the point of service, which will give you a considerably higher response rate. While the one-question survey is great, unsolicited customer feedback is the Holy Grail. This feedback can come in the form of a comment made to one of your service professionals. Or it may be non-verbal feedback, perhaps your customer’s expression or body language at the point of sale. These unsolicited gems are real, intuitive feedback indicating your customer’s true feelings. Create a system to capture these bits of genuine customer feedback. Lastly, be sure you act on the feedback you get. Lots of companies are data- rich, and action poor. Don’t be one of them. Dedicate a team that follows up immediately with customers who offered negative feedback and resolve their issues quickly. Also create a team that interprets the feedback and offers improvement ideas in the service process. The best customer ideas should be put into place as soon as possible. According to Gartner, 95% of companies surveyed collect feedback from customers, 27 but only 35% of them use the insight, and only 10% actually use it to improve.
  28. 28. A 4-Step System to Winning Customer Loyalty in Any Economy STEP 3 - ADVANCE 28
  29. 29. The third step in the Layers of Loyalty™ system is Advance. This is where you deliberately put strategies and actions into motion which are specifically designed to increase retention – one group of customers at a time – and advance them up the pyramid. Depending where they are on the pyramid, customers want and expect different things from you. The best way to proceed is to take each group and move them up toward the peak of the pyramid. ADVANCE You learned about the three strategies in Step 2 (Adopt). Now, let’s look at each group and the rest of the retention strategies you’ll learn about: Step 3 A.  Resistance Layer Strategies (The only strategy for this group is damage control) B.  Indifference Layer Strategies 4. Demonstrate Differentiated Value 5. Connect Customers To Each Other 6. Establish a Win-Win Pricing Structure C.  Acceptance Layer 7. Keep in Touch When She Least Expects It 8. Add a Personal Touch to Every Interaction D.  Preference Layer 9. Recognize and Reward Loyal 10. Encourage Use of Multiple Products E.  Allegiance Layer (You’ll learn about strategies to maintain this group’s loyalty in the last step, Affirm) 29
  30. 30. Mindset: “I HATE you guys. I The Resistant Customer literally hates your company and, justified or not, can’t wait to leave, holds deep resentment for your brand. and tell all my friends Behaviors: and associates how This type of customer will spread negative word-of-mouth whenever she can. horrible you are!” Given the plethora of social networks today, a small group of resistors can take down a company’s reputation quickly. Whether it was a severely negative customer service experience, a defective RESISTENCE product or an action your company took that offended her, she took it personally, and is now looking for revenge. The very minute this type of customer gets the chance, she will defect to a competitor (or another option available in the marketplace). Loyalty Layers: Zero Propensity to Defect: Extremely High (Don’t count on saving this group) Proactive Retention Strategy: Your strategy for addressing this type of customer is usually damage control. It’s highly unlikely that she will stick around – even by offering something for free. You simply want to reach out with an honest apology and reasoning behind whatever decision you made that offended her. Do not get into an argument with her. Doing so will merely fan the flames, and create even more negative comments directed your way. It’s too late. Just let her go. According to Forrester's CXEO Playbook 2008 study, 30 71% of executives said they do not meet with customers regularly.
  31. 31. Mindset: “You are a commodity The Indifferent Customer sees your company / product / service as nothing more than a commodity. and nothing more. I’m Behaviors: just looking for the This type of customer will almost always try to get you to lower your prices lowest price. Period.” to the point of near zero margin. They will promise you volume, or “more business in the future” but see little unique value in your offering. He usually holds the position of strength in the negotiation. He is willing to INDIFFERENCE walk away from the deal, as he has several other available options in the marketplace. Loyalty Layers: One Propensity to Defect: Very High (This group should be your highest priority as they may leave at any time) Proactive Retention Strategy: Your strategy to move him to Acceptance…you must first fix your perception problem in his eyes if you want any shot at keeping him. He must think of you as more than a commodity. To do this, you must build in differentiated value into your offering. Next, you must connect him with other (preferably more loyal) customers so that he sees the value other customers are getting from your offering. Thirdly, you must establish a win-win pricing structure. This should only be after you’ve put into practice the first two strategies. It may mean re- establishing a value-based pricing model, or creating new payment terms. 31
  32. 32. Retention Strategy #4: Demonstrate Differentiated Value Offering something the competition doesn’t (or can’t) is a wonderful way to retain the Indifferent Customer. In fact, according to a recent Accenture study, the ability to deliver a differentiated experience was the leading factor in maintaining customer loyalty. Take Amazon’s One-Click ordering system as an example. Once the customer has input his information, he can activate One-Click ordering and not have to go through the pains of inputting his personal information such as delivery address and credit card number. This patented ordering system is designed INDIFFERENCE around the customer’s ease of use, and has paid big retention dividends. Les Schwab Tires are a chain of tire stores mainly in the western United States. They make it a practice to run out to greet you at your car when you arrive in the parking lot. This, of course, sets the tone for the rest of the interaction, and subconsciously tells the customer that they will hustle throughout the entire interaction. Les Schwab is a loyalty leader in their industry. Best Buy won the battle of electronics retailers by focusing on creating a better experience for the customer…on all levels. They did this through training its associates (and empowering them to constantly improve service…on their own), creating a better online experience to better educate customers on their impending purchase, and purchasing Geek Squad to better serve customer post-purchase. How could you bring much-needed innovation to your industry? Brands that grow differentiation have about a 50% higher operating margin 32 on average than those which allow differentiation to decline. — BrandAsset Valuator®
  33. 33. Retention Strategy #5: Connect Customers To Each Other A strange thing happens when you start introducing your customers to each other. Since your company is the common ground, you become the center of their attention. Is it possible (gasp) they may say something negative about your company?! Might they try a coup and leave en masse?! The humanity! Relax. As long as you aren’t operating on a business model of illusion and manipulation to “trap” customers into doing business with you, you shouldn’t worry about a few negative comments. If you’re doing things right, the upside of the exchange of positive stories should far outweigh the INDIFFERENCE negative ones. For instance, my wife and I have a favorite Italian restaurant in the Atlanta suburbs called diPaolo. In the 10 years we have been going there (at least 2-3 times a month), we’ve gotten to know several other couples (we usually eat at the bar and chat it up with other couples). Should the restaurant be concerned that we have talked about how sometimes the scallops are too salty? Or, should the restaurant be thrilled to know that some of their regular customers have become friends and actually dine there more often because they look forward to seeing each other? Another way to create a customer community is to create an online forum for customers like Circus Ponies Software has done. This has been a winning strategy for many software companies. Users help each other through forum postings. Which means happier customers, less calls to your technical support staff, and a more profitable bottom line. How can you better connect your customers to each other? “ 33 “ The way of the world is meeting people through other people. – Robert Kerrigan
  34. 34. Retention Strategy #6: Establish a Win-Win Pricing Structure For the Indifferent Customer group, it may be necessary to revisit your pricing model. It may mean lowering some prices, or it could be a more creative solution like changing the terms. Many world-class companies are finding it necessary to lower prices and offer incentives previously reserved for deep discounters. Even prestigious auto brands like Bentley (sales down over 25%), Aston Martin, and Mercedes have had to take a hard look at pricing strategies. INDIFFERENCE Although pricing your products and services appropriately in a down economy is important, other factors surrounding pricing strategy could be equally important. Because of a few bad apples, customers are growing weary of monthly, recurring charges on their credit cards or checking accounts. It may be better to send quarterly invoices, to put customers back in control of their spending. Changing the game in an industry can add considerable perceived value to your customer’s purchase decision. Take Hyundai for instance. In early 2009, Hyundai brought differentiation to an industry ripe for innovation. Their Assurance Plus program offered to pay up to three of your car payments, or buy your car back if you lost your job in the first year after purchase. What a great way to break down the barriers to purchase. Not to mention the loyalty (and fantastic PR) they are creating by keeping their customers’ best interest at heart…during a deep recession. How can you creatively restructure your pricing to better serve customers? 42% of executives say their product or service is not worth the price they charge. 34 — Strativity's Global Experience Management Benchmark 2008 study
  35. 35. Mindset: “I’m here because it’s The Acceptance Customer expects your company to provide the minimum of what’s asked, and nothing more. convenient and I don’t Behaviors: really have time to This type of customer doesn’t think of your company until absolutely look for alternatives.” necessary, and uses you only because it’s become a habit – or has become the most convenient choice. She may be aware of other, better options in the marketplace, but she simply hasn’t made the effort to pursue these options. ACCEPTANCE Loyalty Layers: Two Propensity to Defect: High (Customer expectations are outpacing what you are providing) Proactive Retention Strategy: Your strategy for moving this type of customer up the loyalty pyramid is two-fold. First, you should keep in touch with her when she least expects it. This will help move your company from the subconscious and into the conscious in her mind. This way, she will begin to further associate your brand with filling a specific need. Second, you should add a personal touch to every interaction you have with her. She will not expect this type of behavior and will find it refreshing that you actually see her as more than a business transaction. These two simple strategies are likely to move this customer up the pyramid from Acceptance to Preference. 35
  36. 36. Retention Strategy #7: Keep in Touch When She Least Expects It What do these industries have in common: homeowners insurance, mattresses, appliances, realtors, flooring manufacturers, lawyers, carpet cleaners, chimney sweeps and tire stores? The answer is purchase infrequency. Industries like these usually offer things customers don’t think about very often, and are thought of as commodities. Many times, this leads one to make a quick, uninformed, spur- of-the-moment decision that leads customers in the direction of a competitor. ACCEPTANCE A great way to ensure that a one-time buyer will become a repeat buyer is by keeping in contact with the customer (and offering something of value – not just a newsletter)…when she least expects it. It could be something as simple as a reminder postcard to flip your mattress every six months with a discount coupon on a mattress for her guest room. Out of sight, out of mind. Many businesses feel that simply sending an invoice once a quarter counts as four “touches” with a customer. Ummm… not so much. Take Arrow Exterminators for instance. Annually, they send us an invoice for just under $400 for termite treatment. Aside from that invoice, one annual inspection and the occasional hangtag on our door after treatment, we never even hear from them. Arrow’s tagline is “Beyond the Call.” They have that part right, but they need to walk the talk. How about some proactive mailings throughout the year? Maybe a quarterly report of termite infestations in our neighborhood. Maybe a package of tea saying something like, “here’s a little something to help you relax…with Arrow, termites are one less worry in your life.” “ 36 “ The single biggest problem in communication is the illusion it has taken place. — George Bernard Shaw
  37. 37. Retention Strategy #8: Add a Personal Touch to Every Interaction Only when your people are consistently meeting and exceeding expectations during a service opportunity, should you enact this strategy. Walk before you run, please. Whether you’re selling $12 cosmetics to soccer moms like Mary Kay does, or servicing $1,000,000 software for Fortune 500 clients, at the heart of the interaction is a human being. Treating him or her like a human being (and not a statistic…or worse an interruption) is important, but often overlooked. ACCEPTANCE In world-class organizations, serving others is considered a privilege. That’s why I call any interaction a customer has with your company a “service opportunity.” It’s an opportunity to help someone else, and it’s an opportunity to help cement your relationship. Sometimes it’s as simple as mentioning an important event in the customer’s life like a wedding anniversary, or it could be more proactive in nature. For instance, in casual conversation at a business meeting, my wife mentioned the fact that she liked black jellybeans. (I personally think black jellybeans are disgusting, but I digress) A week later in the mail was a jar of black jellybeans with a personal note thanking her for a referral. How many additional referrals do you think she’s given him since? Sometimes, it means adding your personality to the interaction. Southwest Airlines encourages flight attendants to add their personal “signature” to the usually dry flight announcements. Check out “Flight Attendant Raps” on YouTube. No cost. Effective. Brilliant. “ 37 “ It's the little things you do that can make a big difference. What are you attempting to accomplish? What little thing can you do today that will make you more effective? You are probably only one step away from greatness. — Bob Proctor
  38. 38. Mindset: The Preference Customer has grown to like your company, and tends to “I like you guys, and understand the unique value that you provide. know what I will get, Behaviors: so I’m content.” Many companies make the mistake of making Preference the top of their customer loyalty pyramid. These are the same companies who measure their customer’s satisfaction using a pass/fail scale. The customer who has reached preference, when given a choice, will PREFERENCE probably continue to use you. However, this group of customers is very aware of industry trends, and can surprise you by defecting to a competitor when you have overlooked him, or when you haven’t continued to raise the bar in customer service or innovation. Loyalty Layers: Three Propensity to Defect: Somewhat High (Still has a very good possibility of defecting for a competitor) Proactive Retention Strategy: There is a 2-part strategy for moving this type of customer up to Allegiance. First, reinforce their decision to remain with you by recognizing and rewarding their loyalty. Build a “membership has its privileges” mentality. Second, encourage him to use multiple products. You’ve already impressed him with one or two offerings. You can really cement his loyalty by providing equally great experiences across the portfolio of your offerings. 76% of CMOs say they are not fully realizing the potential of their existing customers. 38 (source: the CMO Council)
  39. 39. Retention Strategy #9: Recognize and Reward Loyalty One of the easiest (and worst!) things to do in business is to take your Preference Customer for granted while putting the majority of your company’s efforts toward obtaining new business. Instead, shift a bit of your focus and resources toward preserving and strengthening the relationships you have with your current customers. One of the best ways to do that is through recognizing and rewarding your loyal customers. PREFERENCE I’m not talking about many so-called “loyalty programs” like flimsy airline miles programs that are designed more to deceive customers into loyalty rather than truly rewarding them for continued patronage. I’m talking about genuinely thanking customers. Sometimes, that’s all it takes. Take Irving Pet Hospital in San Francisco for example. They offer multiple pet discounts for common services like nail trims. They even send a Harry & David gift basket to their best customers every Christmas. Some companies have started implementing a system where, when a customer calls, the customer service professional will start the conversation by saying, “thank you for being a 10-year customer.” Simple gestures like this go a long way toward retaining customers. When is the last time you personally thanked your best customers? 80% of companies believe they deliver a superior customer experience. 8% of customers agree. —Bain and Company, 2005 study 39
  40. 40. Retention Strategy #10: Encourage Use of Multiple Products The more products your customers use, the less likely they will be to migrate to a competitor. Overcoming the hurdle to change one thing in their life is easy. Overcoming the hurdle of changing four things in their life is a bigger challenge. USAA is a perfect example of this strategy. They are an auto / property insurance company who also offers financial products such as retirement savings, credit cards and checking accounts. When on the phone, their service team suggests other appropriate products to members. Notice I PREFERENCE deliberately didn’t use the term “upsell” here – these guys are so good at service, members sell themselves. If a competing insurance company came calling to an existing USAA customer and offered a slightly lower rate, what are the odds the customer will leave? Slim to none is my guess. It’s simply easier to have all insurance and financial products in one place. Not to mention the exceptional service USAA consistently provides. “We know what it means to serve.” Brilliant. Small business Internet provider, Cbeyond has made it a priority to engage customers in multiple products. Their average customer now uses seven applications and spends an average of $750 per month. It’s no surprise that their net customer growth was well over 20% last year. Having customers who use multiple products reinforces in your customer’s mind that he has made a smart decision. Especially if you shine at every interaction with you customer. By 2020, 84% of marketers agree that building customer trust will become marketing's primary objective, and 82% agree that collaboration with customers will prevail over marketing. 40 — 1to1 Media survey of the 1to1 Xchange panel, April 2008
  41. 41. A 4-Step System to Winning Customer Loyalty in Any Economy STEP 4 - AFFIRM 41
  42. 42. The last step in the Layers of Loyalty™ customer retention system is Affirm. Up to this point, you’ve assessed and categorized your customers’ loyalty leanings, you’ve transformed your company’s culture and operations to be more customer-centric, and, by adding Layers of Loyalty™, you’ve methodically and deliberately moved each group of customers toward the point of Allegiance, the peak of the pyramid. Through your determination and commitment, you’ve encouraged many AFFIRM customers to reach the summit. Your work here is not done, however. You must now concentrate on keeping these precious referral-generating Step 4 customers at the top of the pyramid. The last retention strategies: E. Allegiance Layer Strategies 11. Prioritize Premium Customers 12. Continuously Innovate Around Core Customer Needs and Wants Once you get a good percentage of your customers to the summit of the pyramid, you have truly reached world-class status – reserved for only the most successful brands. 42
  43. 43. Mindset: “I LOVE this Allegiance is the pinnacle of a customer relationship. She truly loves your company and can’t company and would (almost blindly) buy anything you offer. She literally can’t get enough of you. wait to send my friends and associates Behaviors: your way!” The customer who offers her Allegiance tells everyone she knows about your company. She mentions how delighted she is – even in casual conversation with friends. ALLEGIANCE You have become part of her life, and she finds personal meaning with your brand and the cause you represent. Customers who offer their allegiance are literally worth their weight in gold because they do more to grow your business than any ad campaign ever could. No kidding. Loyalty Layers: Four (virtually impervious to competitors) Propensity to Defect: None. Proactive Retention Strategy: Just keep doing what you’re doing. The best thing to do to ensure her continued allegiance is, first, prioritize her as a premium customer. Whatever you do, don’t take her for granted. Be sure that you’re offering your allegiance customer the same (or better) offer than what you’re offering new customers. Second, constantly innovate around this group’s core needs and wants. She will be happy to tell you her opinion of what your next product release or model should be. 43
  44. 44. Retention Strategy #11: Prioritize Premium Customers I can hear some of you now…“We treat everyone like gold, Ed!” I highly doubt that. And, if it’s true, you’re probably taking your best customers for granted. Of course, I’m not suggesting you service your non-premium customers poorly. I am suggesting that you look for opportunities to deliver ridiculously exceptional service to select clients. A friend of mine, Darrin, is a financial advisor, and one of his best clients is an elderly woman. In a conversation at his office, she told Darrin that she wasn’t looking forward to driving across town to her bank to make a ALLEGIANCE transaction. He offered (and obliged) to drive her back and forth to the bank. I imagine she will not only be a customer for life, but she will be a walking, talking billboard for Wealth Enhancement and Preservation of Georgia. Harrah’s Casinos have figured this one out better than anyone. Using deep customer metrics, they have developed 90 distinct segments of guests. Surprisingly, they also determined that high rollers weren’t nearly as profitable as guests who only spent between $100 and $500 per visit. These “casual” guests represent only 30 percent of the gamblers but 80 percent of revenue and almost 100 percent of profits. How might this information alter where Harrah’s spends its customer retention dollars? Another example of prioritizing premium customers is American Express who grants its Gold customers 24x7 access to an exclusive 800 number, where they speak with its most seasoned customer service professionals. How can you serve your best customers so well, that they talk about   your business at their next dinner party? “ A customer is the most important visitor on our premises, he is not dependent on us. We are dependent on him. “ He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so. 44 — Mahatma Ghandi
  45. 45. Retention Strategy #12: Continuously Innovate Around Core Customer Needs and Wants The best definition of success that I’ve heard is this: “Success means you know what used to work.” There is one constant in business. Change. The best way to innovate is to create new products and services (or update old ones) around the needs and wants of your core customer base. Take Amazon’s Kindle e-book reader. The updated version of the product arrived in 2009 including many user-suggested changes like increased speed, better battery life, a better screen and more storage capacity. ALLEGIANCE Sure, asking for feedback and ideas from your customers is a good idea. But, real breakthrough innovations come from knowing your customer so well, you anticipate what they don’t even know they need or want. Take the iPod. Apple was smart enough to anticipate the desire for a sexy, sleek, portable MP3 player from their core customer base – people who see themselves as creative, hip and technologically savvy while insisting on beauty and simplicity in their lives. If you don’t already have one, create an innovation initiative in your organization. Really get to know your core customers. Is there a challenge that keeps them up at night? Maybe something you can help them with? Take into consideration industry trends and societal trends. What would you say the next breakthrough idea in your industry would be? Can you develop a product or service that’s on the leading edge of the trend? “ “ 45 If you do build a great experience, customers will tell each other about that. — Amazon Founder, Jeff Bezos
  46. 46. Congratulations! You are one of the few who have discovered the secret to converting your customers into solidly loyal ambassadors for your company. I’ve studied and consulted with the world’s most successful companies, and the thing they have in common is a very loyal customer base. Throughout this publication, you’ve learned the 10 Things You Must Know to win the Customer Retention Revolution, how to enact the Layers of Loyalty™ customer retention system to promote unheard-of loyalty, and 12 Customer Retention Strategies designed to have your customers Staying In Droves. SUMMARY The concepts are simple, but it takes focus and dedication from the top to make them produce results. And, the results are truly amazing. Will each one of these ideas, tips and strategies ensure that your customers will stay? Not necessarily, but when you put into practice the entire system, it will put you in the best possible position to win the Retention Revolution of the new economy. Thomas Jefferson once said, “a revolution every now and then is a good thing.” I agree. And, so do your customers. Rise to meet the challenge. 46
  47. 47. 30-Day Action Plan and 15 Low/No Cost Action Items To Put in Use Today 47
  48. 48. Week 1 1. Calculate average lifetime value of a customer by determining your key retention metrics : average purchase price, average annual purchase frequency and average years a customer remains a customer. GETTING 2. Assess your employees anonymously to see how engaged they are using STARTED: NPS for employees: “How likely are you to recommend our company as a good place to work?” A 30-DAY 3. Ask your front-line employees if there are any customers of value who ACTION PLAN they think are at risk of leaving. Take the list and call each one personally. Week 2 1. Hold a strategic planning session with your top leaders and develop a customer retention strategy that outlines specific retention goals and an inspiring vision to motivate your employees. 2. Assess and categorize your customers according to the Layers of Loyalty™ Hierarchy of Customer Attitudes. 3. Outline the “moments of truth” in the customer experience, and institute (or update) a rewards and recognition program that reflects what the customer care about most at each moment of truth. Weeks 3-4 1. Roll out customer service training sessions for everyone. 2. Initiate the Layers of Loyalty™ system, starting with the Indifference and Acceptance Groups, then focusing on the Preference and Allegiance Groups. A 5% improvement in customer retention can cause an 48 increase in profitability between 25% and 85%. — Reichheld and Sasser (1990)
  49. 49. 1.  Create a vision for your people that revolves around service consistency. 2.  Create a new reward and recognition program for employees who best exemplify service consistency. 3.  Pick up the phone and personally speak with 5 customers who you think are loyal, and 5 customers you think may not be loyal. 4.  Call your competitors to see what kind of retention initiatives they have. 15 BONUS 5.  Pay attention to companies you are loyal to as a consumer, and copy their techniques. LOW/NO COST 6.  Investigate Net Promoter Score and implement it within 30 days. 7.  Listen in on 15 service calls a week and take note of trends. ACTION ITEMS 8.  Create a “Day-in-My-Shoes” program to immerse every employee in servicing the customer. 9.  Task your sales department to develop 25 new ways to get your customers to use multiple products. 10. Invite a customer to speak personally about a bad or exceptional service experience at your next manager’s meeting. 11. Lead every meeting for the next 30 days with the question, “How can we better service our existing customers?” 12. Look at your budget for acquiring customers, and move 25% of that immediately to customer retention initiatives. 13. Spend an entire day with a few customers to get a feel for what other needs you can help fill for them. 14. Develop 10 creative, outside-the-box ideas to alleviate your customer’s declining financial situation. 15. Initiate a council made up of your best customers and ask them to meet with you quarterly to develop new innovations. Recommendations from family and friends trump all other consumer touchpoints when 49 it comes to influencing purchases, according to ZenithOptimedia. (AdAge, April, 2008)
  50. 50. At this unprecedented time in business, when customer retention is critical, and customers are leaving in droves, Ed King helps companies keep more of the customers they have and garner their long-term loyalty. In addition to converting customers into raving fans, Ed helps his clients enjoy the added benefit of growing their businesses via new customers (and at a much lower cost of acquisition) due to positive word-of-mouth." He has developed creative, yet measurable programs for multi-million up to multi-billion dollar companies, helping them to retain more customers using his skills and experience in:" • Brand positioning and alignment" • Employee communication and engagement " • Customer experience design" • Customer service innovation Ed is available for consulting and speaking. He can be reached at 404.641.9417 or at thegreyeagle(at) 50
  51. 51. One final, personal note. I have never had to fight for the rights I hold so dearly in this country. I hold those who have defended my rights in the highest regard. It's because of the men and women in the armed forces that I'm privileged to live my life in freedom. I think sometimes, in business, we use war terms too loosely. In this document, I have used the terms like ”revolution” and “battle plan.” My intent was to use terms which brought impact to the statement I was making. In no way was their use meant to diminish their real meaning. 10% of the profits generated from the sale of this eBook will be donated to the Wounded Warrior Project, a nonprofit organization dedicated to helping those who have given of their bodies, minds and spirits for the country's freedom. Over $0.80 of every dollar donated goes directly to providing services and programs for our wounded warriors and their families. I am honored to be able to thank those who put their lives on the line to preserve the precious freedom that we enjoy in the United States of America and many places around the world. They give real meaning to the term loyalty. 51