The document discusses developing an effective customer win-back strategy. It notes that win-back strategies are often built on misconceptions and that not all existing customers are profitable. It recommends understanding customer lifecycles and costs to effectively target customers. Companies need to build operating models and analytics to master the entire customer lifecycle. Developing a successful win-back strategy involves framework development, initiative alignment, operating model design, prioritization, and KPI establishment.

1. DEVELOPING A CUSTOMER WIN-BACK STRATEGY
September 12, 2014

2. CUSTOMER WIN-BACK STRATEGIES ARE ALL TO OFTEN BUILT ON
MISCONCEPTIONS
• Not all (existing) customers are profitable and it might be better to lose unprofitable
• Some customers leave due to ‘natural’ reasons caused by changes in the business
2
“It is more
profitable to
keep existing
customers”
“All sales drive
profitability”
“Targeting
departing
customers is the
only focus”
customers
and therefore their retention might not be cost-effective
• Understand costs: customer acquisitions and other transaction costs
• Future revenue: products taken, duration, likelihood of switches or cancellation,
upsell opportunities
• Understanding the customer lifecycle allows more effective targeting of customers
before they decide to depart vs. accurate predictions of leaving customer numbers
“It is more
expensive to
acquire new
customers”
• Retaining departing customers can be expensive if they have already decided to
leave
• Understanding the correct spend to acquire new customers drives profitability and
limits over-spend in terms of opportunity costs (e.g. marketing or acquisition spend)
“Individual
contact points
provide the
solution”
• Customer churn is dependent on customer experience across the journey, not only
single points of contact
• To ensure full impact of churn reduction, there is a requirement for integrated
solutions across the different parts of an organization

3. TO SUCCEED, COMPANIES WILL NEED TO BUILD OPERATING MODELS AND
ANALYTICAL CAPABILITIES THAT DRIVE MASTERY OF THE ENTIRE CUSTOMER
LIFECYCLE
3
Clearly defined Customer
Management Operating Model
Master Customer Engagement Across the
Entire lifecycle
Channel Strategy
& Marketing Mix
Customer
Management
Operating Model
Customer Management
Processes & Structures
Sales Force
Effectiveness
Customer Insights
& Analytics
Data, KPI’s, and
Performance Reporting
Customer Win-Back Value Proposition

4. CUSTOMER WIN-BACK STRATEGY PLANNING
1. Develop framework to communicate the overall strategic objectives for a customer win-back
program
2. Build the portfolio of initiatives and align to the strategic framework
3. Design a blueprint for the future-state Customer Operating model – how does this all fit
together?
a. Initiative interdependencies across customer lifecycle
b. High-level Structure, Process, Accountability, and Systems
4. Prioritize and sequence the initiative portfolio
a. Business Impact (requires definition of initiative measures)
b. Ease of Implementation (requires understanding barriers to implementation)
5. Baseline KPIs and develop benefits case for each initiative
4
1
2
3
4
5

5. DEVELOP FRAMEWORK TO COMMUNICATE THE OVERALL STRATEGIC
OBJECTIVES FOR A CUSTOMER WIN-BACK PROGRAM
5
Objectives for Customer Win-Back Program?
Overall objective is to…improve retention, reduce cost-to-serve…
Customer Lifecycle Management
Strategy Acquisition Conversion Management Measurement
1
Adopt a customer
level P&L that
changes the way
Customers are
acquired and
managed…
Deliver highly
targeted marketing
campaigns that
improve customer
yield and
retention…
Refine treatment
strategy and
develop new value
propositions for
select segments…
Improve the quality
and management
of the Sales
Pipeline to…
Measure the
customer...

6. ALIGN THE PORTFOLIO OF INITIATIVES TO THE FRAMEWORK
6
Strategy Acquisition Conversion Management Measurement
Customer Treatment
Strategy NPS Surveys
Leads routing
to Sales
Customer Segmentation
Customer Lifetime
Value Model
Customer
Profitability Model
Propensity
Model
Competitive
Intelligence
Alignment to
overall growth
strategy
Enhanced Treatment
Segments
Proactive Retention
Triggers
Operationalize
Propensity Model
Alternative Service
Propositions
Discounting &
Subscription Sales
Contracting Policy and
Mechanisms
Auto-renewal
90 Day Rolling
Contracting
“Call only”
contracting
Key Account
Management
Planning
Marketing
Services
Pay-as-you-go
Sales Policy &
Commission
Enhance
Commission with
quality metric
Marketing Effectiveness
Measure read/open
rates on Push Data
Segmented
Prospects
Database
Targeted
Campaigns
Improved Bedding
In Process
Commission on inside
sales handover to
Acct. Mgmt. Team
Optimize Acct. Mgmt,
Resource Allocation
Customer Lifecycle Management
Leads Scoring
Methodology
IT Initiatives on critical path to execution
Migration of Product
Tech stack to new
architecture
…
… …
2
Payment policies by
Segment
1
2
3
4
5
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A B C D E

7. BUILD A BLUEPRINT FOR THE FUTURE STATE OPERATING MODEL
7
Invest and
apply
analytics
Carefully
Segment
Your
Customer
Base
Develop
Customer /
Account
Journeys
Embed /
Onboard
Customers
Develop
Proactive
Retention /
Win-Back
Triggers
3

8. CUSTOMER JOURNEY MAP SHOW THE MINIMUM CONTACT POINTS
THAT CUSTOMERS CAN EXPECT TO HAVE WITHIN A YEAR
8
3
Each wheel represents a different customer contact strategy,
split by the age of customer.
• First year, high value customers have the most contact
throughout their 12 month term, as they are the highest risk
accounts.
The journeys are split into three stages, these are:
• welcome (blue)
• engagement (green), and
• renewal (pink)

9. PRIORITIZE AND SEQUENCE THE INITIATIVE PORTFOLIO
9
Pillar # Initiative Owner Lever Ease of Impl. Bus. Impact
Critical
Dependency?
Operational
KPI
Priority
Customer
Strategy
1 CLTV Model
2 Profitability Model
3 Customer Segmentation
4 Competitive Intelligence
5
Alignment to overall
Growth Strategy
Customer
Acquisition
6
Customer Scoring
Methodology
7
Segmented Customer
Database
8 Targeted Campaigns
Customer
Acquisition
9 Leads Routing to Sales
10
Discounting &
Subscription Sales
11
Enhance Commission
with quality metric
12 Payments Policy
13
Commission on
Telesales Handover
14
Key Account
Management Planning
15 Auto-renewal
16 “Call Only” Contracting
17 90-Day Rolling Contracts
Customer Mgmt 18
Enhanced Treatment
strategies
19
Improved Bedding-In
Process
20
Optimized AM Resource
Allocation
21
Operationalize
Propensity Model
As a first step in the process, capture for each initiative:
• Owner
• Improvement Lever
- e.g. Process, Policy, Structure, Systems etc
• Ease of Implementation: High/Med/Low
- e.g. IT dependencies
• Business Impact: High/Med/Low
• Critical Dependency?
- e.g. IT Platform, CLTV Model etc
• Impact KPI
- Operational KPI: Conversion, Yield, Y1 Renewal etc
• Use the above to generate an overall priority
4

10. COMPANIES OFTEN STRUGGLE TO DEFINE AND OPERATIONALIZE THE RIGHT
KPIS ACROSS THE CUSTOMER LIFECYCLE
10
WAYS TO MEASURE CHURN PROS AND CONS OF USING METRIC
REVENUE / VALUE
DRR CRR x Decrease
in value %
of month ( - MRR
end of month ( ) MRR of /
= MRR beginning
- ( ))
of month CUSTOMER VOLUME
at end ( - New customers
=
Revenue
Churn
upgrades
MRR beginning
=
One method in isolation will not tell the whole story or give a complete understanding of
the business
• Includes CRR but adjusts for
revenue decrease %
• Useful when focus is on
revenue
• Includes upgrades,
downgrades, new sales etc..
• Focus on re-occurring revenue
• MRR existing standard
reporting metric
• Focus on customer retention:
each acquired customer has an
associated cost
• Simple metric focused on
customer churn
• Focus on absolute number
• Value could increase even if
losing customers
• Lack of focus on customer
retention, low value could have
important implications
• Variations in items included in
MRR: e.g. one-off fees
• Challenges in underlying MRR
calculation: e.g. dates used for
revenue
• Variations in time period used
and definitions of customer
• Does not take into account
value of customers
• Different denominators used
(start , end, average)
• Variations in periods and
calculation methods
• Does not take into account
relativity
%
recurring
value
%
recurring
value
%
Customers
Retained
%
Customers
Lost
#
Customers
Lost
CRR Customers
acquired ) / Customers at
beginning
X 100
Churn
Rate
Customers
at beginning ( - Customers
at end ) / Customers at
beginning
= X 100
PROS CONS
Dollar Revenue Retention (DRR) – Revenue from Existing Customer Renewal
Revenue Churn – Monthly Reoccurring Revenue (MRR)
Customer Retention Rate (CRR) – Percentage of customers who renew
Customer Churn Rate – Attrition Rate
Churn / Attrition
Number of cancellations in a period
5

11. REDUCE THE NUMBER OF UNPROFITABLE CUSTOMERS
ACQUIRED
11
Customer
Strategy
CLTV
Profitability
Operationalized
Propensity
Operationalize
Segmentation
Customer Scoring
Strategy
Optimize treatment strategies to reduce cost-to-serve on these
accounts
Recommendations

12. EMBED OPERATIONALIZED SEGMENTATION & PROPENSITY
ACROSS THE CUSTOMER OPERATING MODEL
12
Customer
Strategy
CLTV
Profitability
Operationalized
Propensity
Operationalize
Segmentation
Customer Scoring
Strategy
Embed Operationalized Segmentation & Propensity across the
Customer Operating Model
1
Acquisition
• Prospect database
• Marketing Campaigns
• Leads Routing
2
Conversion
• Discounting
• Commission on Quality
• Payment methods
• Handover – IS to KA
3
Management
• Improve bedding in
• Enhanced treatment strategies
• Trigger based retention
4
Measurement
• Operational KPIs
• Customer Surveys
1
4
3
2
CLTV
Profitability
+
Propensity
Model
=
Operationalized Segmentation
(Customer Score)
Recommendations

13. IMPROVE QUALITY OF LEADS
13
Customer
Acquisition
CLTV
Profitability
Operationalized
Propensity
Operationalize
Segmentation
Customer Scoring
Customer
Segmentation
Marketing
Prospects
Database
Targeted
Channel
Marketing
(PPC, SEO, PR, Print,
Events,)
Purchased
Lists From
3rd Parties
Lead
Routing
Based On
Customer
Score
Marketing
Web-To-
Leads
Targeted
Database
Marketing
(email)
Acquisition
Online Form
Inbound Call
To Telesales
Zoe (SIC code driven,
Camp. Code WIP)
(~200k Contacts)
1
1 2
3
4
• Augment existing prospect database to have good data on the 30-40K best targets
• Use customer strategy to optimize lists purchased from 3rd parties
2
• Use the customer strategy to improve targeting and segmentation of the existing prospects
database
3 • Use the LTV learnings to target the most profitable customers through online and offline
campaigns
• Marketing is planned to target higher value customers using the LTV models
• Optimize marketing mix and customized messaging 4
5
• Leads are rapidly categorized and routed through best channel/advisor
4
Recommendations
Recommendations

14. IMPROVE QUALITY OF THE SALES PIPELINE
14
Key
Accounts
Telesales
Handover to
Account
Management
1 2 3 4
Discount &
Subscription
Sales Policy
Commission
Type: Quality
Metric
Contracting:
Auto-Renew,
Call Only, 90
Day
Segment
Payment
Policy
CLTV
Profitability
Operationalized
Propensity
Operationalize
Segmentation
Customer Scoring
Conversion
Lead
Routing
Based On
Customer
Score
Customer
Conversion
1
• Discounts aligned to profitability/LTV of different segments
• Policy clearly defined and enforced
• Set subscription floor to ensure all customers are inherently profitable
2 • Optimize the payment policy to minimize account suspensions for high risk segments
3
• Refine commission plan to have tiers based on projected customer lifetime value:
o Higher commission for growth accounts
o Low/No commission for customers with projected low LTV
4 • Robust key account planning processes supported by LTV and profitability segments
5
• Full commission does not get paid unless a full account profile is completed
• Process is clearly defined and compliance is measured
5
Recommendations
Recommendations

15. ENHANCE EXISTING CUSTOMER STRATEGY AND JOURNEYS
WITH A REFINED SEGMENTATION MODEL
15
Customer
Management
Grow/Invest
Farm
Park (low contact, renewal)
Intensive
Care
Wi-
Back
Trigger
Unprofitable – “New Proposition”
2
3
Renew or
Winback
Renew or
Winback
Bedding In
Lasts until
adoption or
allocation to
Park or
Unprofitable
segment
1
Enhanced Treatment Strategy
Illustrative
CLTV
Profitability
Operationalized
Propensity
Operationalize
Segmentation
Customer Scoring
Management
Recommendations
1
• Enhance the bedding in process and ensure it is aligned with profitability , CLTV, and
operational segmentation models
2
• Develop further segment overlays on existing Customer Journeys to reflect the profitability ,
CLTV, and operational segmentation models
3
• Refresh the propensity model to be fed with data on regular basis
• A regular (probably weekly/monthly) process of identifying customers whose propensity to
churn has changed
• These red flagged customers to be proactively called if profitable
Recommendations

16. EXPLORE POTENTIAL FOR ALTERNATIVE BUSINESS MODELS
TO TREAT LOW USAGE/PROFIT CUSTOMERS
16
Customer
Management
2 3
Grow/Invest
Farm
Park (low contact, renewal)
Intensive
Care
Retenti
on
Trigger
s
Unprofitable – “New Proposition”
Renew or
Winback
Renew or
Winback
Bedding In
Lasts until
adoption or
allocation to
Park or
Unprofitable
segment
1
Enhanced Treatment Strategy
Illustrative
CLTV
Profitability
Operationalized
Propensity
Operationalize
Segmentation
Customer Scoring
Management
Recommendations
For non-usage customers with
potential to get value, form a
‘Data Lead/Appointment
Generation’ value proposition
• Lower base fee with an outbound Tele-marketing
service offering where company is
paid $x per lead
• Review account at 6 months, and if low/no
usage but profitable, “upsell” the account to
another year at a lower subscription rate
(~2/3’s of current) with the success fee above
For Customer segments with
sporadic usage and high
propensity to churn, develop a
“pay-as-you-go model”
• Pay-as-you-go model
• Maintain a billing relationship through a low
subscription fee, but inertia is high
• Limited or no Account Management
• Move to this at point of renewal or cancellation

17. EXPLORE OPPORTUNITY FOR ALTERNATIVE CONTRACTING
METHODS THAT WILL IMPROVE RETENTION
17
Customer
Management
2 3
Grow/Invest
Farm
Park (low contact, renewal)
Intensive
Care
Retenti
on
Trigger
s
Unprofitable – “New Proposition”
Renew or
Winback
Renew or
Winback
Bedding In
Lasts until
adoption or
allocation to
Park or
Unprofitable
segment
1
Enhanced Treatment Strategy
Illustrative
CLTV
Profitability
Operationalized
Propensity
Operationalize
Segmentation
Customer Scoring
Management
Recommendations
Move to a ‘call-only’
first-time sale,
renewal, and win-back
process
• New sales, renewals, or win backs closed on the
phone (scripted, recorded calls)
• Develop script and mandatory statement (email, T&C’s
etc)
Move to a ‘rolling
contract with 90 day
notice’ renewal
process
Rolling contract with 90 Day notice after Year 1
o Pro: No renewal conversations
o Cons: No lock-in protection against ABI after
year 1

18. LET’S KEEP IN TOUCH
18
Art Hall
Alvarez and Marsal
3424 Peachtree Road Suite 1500
Atlanta, Georgia 30326
(404) 759-9158
ahall@alvarezandmarsal.com
Twitter: Art_Hall4
LinkedIn: https://www.linkedin.com/in/arthall

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