Accenture maximizing-customer-retention


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Accenture maximizing-customer-retention

  1. 1. Maximizing Customer RetentionA Strategic Approach to Effective Churn Management
  2. 2. Companies can achieve better retention rates,reduce acquisition costs and boost market share byaddressing the root causes of customer attrition andapplying targeted treatment strategies that involveall service channels and functions in an end-to-endeffort to improve the customer experience.Page 1
  3. 3. The ChallengeToday’s customers want it all—com- Accenture’s most recent globalpetitive pricing, value for money, and research exposes the scale of theabove all, high quality service. What’s challenge. Despite a small overallmore, they won’t hesitate to switch decline in switching levels, two inproviders if they don’t find what three customers have changed provid-they’re looking for. Even in industries ers in the past year in at least one ofwhere satisfaction is relatively high, the industries covered in the researchloyalty levels are declining. And thanks because of dissatisfaction with serviceto social media—the ultimate in word- levels (see Figure 1). Consumers,of-mouth communication—individual moreover, perceive few barriers toswitching decisions can have rapid and switching in their constant quest forwidespread consequences. differentiated offerings (see Figure 2).Figure 1: Percentage of Customers Who Switched by Industry Due to Poor Customer Service 26%Retailers 40% 18% 22%Banks 33% 15% 19%Internet Service Providers 25% 15% 17%Wireless/Cell Phone Companies 24% 13% 16%Home Telephone Service Providers 19% 14% 13%Cable/Satellite Television Service Providers 20% 9% 10%Life Insurance Providers 18% 6% 10%Hotels 15% 6% 9%Utility Companies 9% 9% 8%Airlines 12% 6% Global 4% Emerging MarketsAnother Type 3% 5% Mature MarketsSource: Accenture 2010 Global Consumer Research Page 2
  4. 4. Figure 2: Perception of Providers Offerings and Shopping Behavior Companies are the It’s too much of a hassle I consider shopping same in terms of to switch providers around for better deals offerings and services Disagree Agree Disagree Agree Disagree AgreeTravel and Tourism 44% 11% 61% 8% 12% 53%Life Insurance Providers 33% 18% 28% 28% 33% 26%Consumer Goods Retailers 40% 13% 63% 7% 11% 51%Consumer Electronics Manufacturer 39% 11% 55% 8% 11% 50%Retail Banking Providers 33% 20% 32% 28% 34% 27%Internet Service Providers 34% 15% 27% 27% 28% 29%Cable/Satellite Service Providers 33% 19% 28% 29% 33% 26%Landline Phone Service Providers 35% 17% 27% 30% 34% 22%Wireless Phone Service Providers 34% 20% 37% 26% 30% 31%Gas and Electric Utility Providers 27% 30% 25% 42% 47% 20%Global Average 35% 18% 38% 24% 28% 33%Source: Accenture 2010 Global Consumer ResearchSwitching varies by industry, but • Few organizations are masters of The upshot: Unhappy customers whocustomer churn is plainly a universal retention marketing. The ability too often suffer the consequences ofproblem—a cause for concern since to deploy highly targeted offers organizational processes optimizedthe cost of acquisition is always in-market across multiple channels to deliver operational efficiencies,significantly higher than the cost of at speed; to learn which offers work instead of positive customer experi-retention. Indeed, our research find- most effectively, and scale them; and ences—poorly executed product orings suggest that most companies to take full advantage of customer- service launches, erratic or conflict-with large and diverse customer or initiated contacts in order to make ing experiences across multiple chan-subscriber bases are struggling to highly-targeted retention offers. nels, and inadequately trained andretain customers. Yet few understand • Loyalty programs are often equipped employees.exactly why customers leave them— inconsistently executed; and incen-and fewer still know what to do tives for front-line employees areabout it. frequently misaligned with overall• Many organizations lack the tools retention goals. to identify the drivers of churn. • Many companies lack cohesion across The ability to correlate churn to their customer interaction channels— actionable customer segments, for Web, call centers, retail stores—or fail example, is critical to retaining to implement incentives for front-line customers by proactively addressing employees that are aligned with their needs. overall retention goals.Page 3
  5. 5. The Solution Consider, for example, the case of one bottlenecks and take pro-active steps North American telecommunications to remove them. Success also requiresA few companies are winning the provider, which boosted incremental cultural change and commitment tobattle for customer share. The margin by $1 million a month as a result a permanent business model thatsecret of their success: Combining a of a 10 basis point improvement (e.g. that may challenge the organization’stop-down, enterprise-wide retention moving from 0.5 percent to 0.4 percent) beliefs about who owns customerstrategy with sophisticated analytics in its customer churn rate (see Success relationships.that enable them to “micro-segment” stories sidebar for other examples). 2. ecognize that not all customers Rtheir customers. are the same. Customer value and Guiding Principles of SuccessfulLeading players have established a profitability are key elements of the Churn Managementcompany-wide culture of accountabili- company’s retention tactics.ty for churn management across chan- In many markets, growing the custom- er base has been all about the acquisi- 3. uild a new set of capabilities. Bnels and organizational siloes, with tion of new customers and retention Acquire a detailed, fact-based under-the core tools to support integrated marketing has typically come a distant standing of customers’ intentions andexecution. As a result they have been second in terms of senior management what makes them switch; get offersable to reduce customer attrition, attention and resource allocation. to market swiftly, using a rapid “test,improve customer loyalty, and increase To reverse this legacy mind-set and learn, and scale” mode; deploy real-both revenues and profitability. manage customer attrition effectively, time treatment tools across customerAccomplishing this goal requires organizations need to adhere to three interaction channels that will ensuresignificant and simultaneous changes fundamental principles: the right retention decisions byin many areas of the organization, as weighing customer churn propensitieswell as a committed leadership team. 1. Ensure the support of senior against customer value.But even relatively small improve- leaders, and a strong governance structure. Accountability requires Organizations with the commitmentments in churn can pack a punch on the ownership of fully engaged to adopt these principles can focusthe bottom line. stakeholders with the confidence and on building an appropriate operating authority to challenge organizational model to manage churn. Page 4
  6. 6. The Operating Model Figure 3: Churn Management Operating ModelIt’s essential that any operating model Churn Command Centertake an end-to-end approach to churnmanagement—from overall program Program Managementmanagement, through analytics andretention marketing, to the manage- Multi-segment Decisioningment of channels (see Figure 3). Customer Insight & Analytics Multi-dimensional Analytics- Closed Loop Feedback Closed Loop Feedback (Customer, Behavior, Value) Retention Marketing Channels Retention Interactions Customer Lifecycle Interactions Assisted SMS, Mail, Assisted, Self Service, Self Service, E-mail Face-to-face Channels Face-to-face Channels Copyright © 2011, Accenture LLP, All rights reserved.Page 5
  7. 7. CAR—Driving Success Our patented Customer Analytic Users can benefit from fast and Record (CAR)1 database includes cheap experimentation to developwith the Right Data thousands of variables and customer-targeting models in justHow do you know what data uses proprietary methods built a few hours. And because CARreally matter to your business? over years of experience to pinpoints the data that matter,There are thousands of pinpoint those variables that it significantly outperformscustomer attributes that one will be useful in a particular traditional approaches to raisingcould potentially collect, and situation. The CAR provides a sales campaign closure rates.determining the most important single view of the customer foris not straightforward. use in analytics and modeling. It also provides a framework forAccenture tackles the challenge standardizing and automatingby constructing a comprehensive analytic processes, as well asview of the customer and the reducing the effort involved ininteractions with the customer scoring different segments.and the company acrossall channels.The Churn Command Center: necessary cultural changes, including the customers value to the companyAn Integrated, Cross-Functional the introduction of new performance in terms of both current and futureApproach metrics and incentives. And because revenue and profitability, as well asThe Churn Command Center is the its decisions affect the enterprise as their influence on other customers.nerve center of a successful churn a whole, it’s vital that the company’s They also infer the drivers of churnmanagement program. Spanning senior leaders are involved in setting by using multi-dimensional analysisorganizational boundaries and central- the direction and governance of in novel ways. Correlating churn withizing churn improvement decisions, the churn management program it the interactions a customer has hadit streamlines the end-to-end churn coordinates. with the company can trigger reten-reduction process—across analytics, tion treatments, as well as identifyingmarketing, channels, IT and finance— Customer Insight and Analytics: areas where the customer experienceand drives swift and timely course Understanding Why Customers needs to be improved. This may soundcorrections based on a closed-loop Churn straightforward, but it requires thefeedback around the effectiveness of Retention strategies based on cus- ability to build a service interactionexisting treatments. tomer value and profitability are criti- history across all interaction chan- cal to success—hence the importance nels—retail, contact centers, WebThanks to its cross-functional of analytics. and Integrated Voice Response (IVR)structure, the Command Center systems (see CAR sidebar).eliminates the inefficiencies caused By leveraging a diversity of data—by organizational bottlenecks, thereby demographic and behavioral (products, Once a churn “hot spot” has beensignificantly accelerating the time- usage, interaction), as well as identified, and its churn driversto-market of retention treatments. value-related—retention analytics can inferred, the right retention treat-It is also responsible for driving any predict just when and why customers ments can be developed and tested. are likely to churn. They determine Page 6
  8. 8. Success Stories • A major European wireless • A French telecommunications operator reduced churn by operator leveraged churnBy taking the strategic, 53 percent—thanks to a analytics and churn predictionsystematic and holistic approach micro-segmentation strategy models to develop bothto customer retention embodied that revealed the distinct inbound and outboundin the Churn Management characteristics of high-risk marketing campaigns—and asOperating Model companies customer segments and a result realized a 250 percentworldwide have been able to thus enabled a targeted and increase in campaign responsereduce churn and boost revenues: differentiated marketing and a 23 percent improvement• A leading US wireless provider campaign. in customer lifetime value. was able to cut churn by • An Asian telecommunications 15 percent in six months, company with multiple retain more than one million customer segments reduced subscribers and generate churn by between 10 percent hundreds of millions of dollars and 30 percent—thanks to deep in incremental net OIBDA—all analytic insights into both thanks to analytics-driven customer behavior and average customer segmentation, and revenue per user. the company’s commitment to the creation of a cross- functional Churn Command Center dedicated to driving customer lifetime profitability.Retention Marketing: Accelerating Maximizing campaign return while in finding innovative offers and treat-Speed to Market, Cross Channel and minimizing risk depends on a rigor- ments. Campaign analytics should alsoat Minimal Risk ous, test-and-control approach. Many evaluate the performance of retentionAn effective retention marketing companies launching retention cam- programs throughout their lifecycle,capability focuses on three key paigns evaluate their effectiveness via combining this data with informationoutcomes: traditional marketing metrics (the take around incremental revenue and costs rate, for example) without comparing to come up with a true campaign ROI.Speed to market is critical to the treated customers to a controlmaximizing the impact of analytics. Operational reporting of key group—an approach that can end upThe competitive environment means metrics. Churn is a lagging metric boosting churn and/or costs because itthat many churn “hot spots” are often that may take six to twelve months treats customers with no intention ofshort lived. And unless a company to show improvement, depending leaving. Campaign analytics, by con-can implement insights quickly, much upon the timing of treatment in the trast, tell companies just what theirof the potential retention benefit customer lifecycle. It’s important churn rates really are. They evaluatewill be lost. Companies can shorten during the test-and-control phase to test offer effectiveness in terms oftheir offer development cycle, and closely monitor such leading indicators such indicators as size of treatedminimize the handoffs and bottlenecks of campaign effectiveness as list pen- population and contract renewal ratesthat cause delays, by employing a etration and offer-take-up rates. There across multiple dimensions—channel,cross-functional team of resources are several ways to monitor success or customer segment and offer vari-in analytics, marketing, finance and failure—but in our experience, opera- ant—and then use the information tochannel support. In our experience, tional level reporting should occur inform scale decisions and select thesuch a cross-functional approach at least weekly to identify execution treatments to be continued. Our expe-can cut cycle times by as much as 50 issues quickly and allow mid-pilot rience suggests that companies shouldpercent to 70 percent. campaign adjustments. This approach expect 10 percent to 20 percent of will accelerate the scaling of treat- treatments not to be scaled; indeed, ments that work, and rapidly eliminate a lower proportion indicates that the those that are underperforming. marketing team is taking enough riskPage 7
  9. 9. Channels: Delivering the Right managed manually. As the number Organizations need the capabilityExperience to the Right Customer of marketing treatments expands to to correlate churn to any of theseFor better customer retention, orga- cover smaller groups of customers, interactions across any channel (seenizations must improve two types of however, campaign optimization and USAR sidebar). And once the interac-customer interaction: real-time decision-making tools will tions that are root causes of churn be needed in order to provide offers have been analyzed, they must deviseRetention interactions can be either that are effectively differentiated by policies, processes, and tools that sup-proactive or reactive, but in both channel. port the delivery of a better customercases reducing churn hinges on: experience.Expanding the number of self-service Customer lifecycle interactions caninteraction channels in which reten- be root causes of churn as well:tion offers can be made (e.g. Web, • Early life: When the customer issocial media); aligning employee “trying out” a recently purchasedincentives to company churn objec- product or service; a critical momenttives; improving the delivery of in the customer’s decision training material; and • Change of life events: Such asensuring consistent channel processes marriage, divorce, a change ofand system capabilities. Companies profession or geographic location.should also consider providing on-siteexecution support to identify and • Mature life: When a customer isresolve issues early and swiftly. In nearing the end of a contract, or ofthe short term, offers and treatments the useful life of the product theyunder this new approach can be are using. Page 8
  10. 10. USAR—An Integrated churn—especially when customer interaction data records are Approach to Customer usually contained in different Interactions systems that do not communicate with one another and are The root causes of customer collected in varying data formats? churn can be hard to trace. They may lie buried in negative Accenture approaches this experiences associated with any challenge by integrating customer one of multiple interactions. In interactions across multiple order to improve and sustain channels through an asset known customer retention rates over as the Unified Service Analytic time, companies must improve Record (USAR)2. USAR allows the customer experience of all business leaders to identify and these interactions. But in an understand the needs of chronic enterprise where customers customers and repeat contacts; may have millions of monthly identify cause/effect relationships interactions, across a variety between the customer experience of channels, how do you find and churn; identify and address them all? And how can you root-cause behaviors at the agent tell which interactions drive level.Page 9
  11. 11. Summary ReferencesKeeping customers can be challeng- 1. Features of the Accenture CAR maying—but as markets mature, successful be covered by one or more pending orretention strategies are becoming an issued patents worldwide.increasingly essential element of com- 2. Features of the Accenture USAR maypetitive advantage for many different be covered by one or more pending orindustries. Accenture experience issued patents worldwide.shows, moreover, that such strategiescan be developed. They hinge, crucial-ly, on really understanding what moti-vates different customers to churn—acapability dependent on sophisticatedanalytics. They also require the sup-port of senior leadership, strong gov-ernance and the commitment to builda whole new set of capabilities thataccelerate speed to market, maximizecampaign return while minimizingrisk and ensure the right experiencefor the right customer. Equipped withan end-to-end operating model thatoptimizes customer interactions acrossall channels, companies can ensuredelivery of a better experience for alltheir customers. Page 10
  12. 12. About Accenture About Accenture CRM Accenture is a global management Solutions consulting, technology services and Accenture’s Customer Relationship outsourcing company, with more than Management service line helps orga- 223,000 people serving clients in nizations achieve high performance by more than 120 countries. Combining transforming their marketing, sales and unparalleled experience, comprehen- customer service functions to support sive capabilities across all industries accelerated growth, increased profit- and business functions, and extensive ability and greater operating efficiency. research on the world’s most success- Our research, insight and innovation, ful companies, Accenture collaborates global reach and delivery experience with clients to help them become have made us a worldwide leader, high-performance businesses and serving thousands of clients every year, governments. The company generated including most Fortune® 100 compa- net revenues of US$21.6 billion for the nies, across virtually all industries. fiscal year ended August 31, 2010. Its home page is © 2011 Accenture Contact us Stay ConnectedAll rights reserved. For more information about how such Join UsAccenture, its logo, and a Churn Management Operating ModelHigh Performance Delivered Follow Us can help your company minimizeare trademarks of Accenture. customer attrition and achieve high Watch Us performance, please contact: Connect With Us Rob Honts Global Lead, CRM Churn Management Services John Hanson Partner, Accenture Strategy Practice