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See all Premium member Presentation Transcript How to retain customers Arthur Middleton Hughes VP Solutions Architect KnowledgeBase Marketing: How to retain customers Arthur Middleton Hughes VP Solutions Architect KnowledgeBase MarketingA complete customer retention plan: A complete customer retention plan Why customer retention is important Methods of retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition – Risk Revenue Matrix Create a loyalty program Sell them a second product Get them to become multi-channel buyers Evaluation of Retention Programs Tests and Controls Return on investment Why retention is important : Why retention is important Long term loyal customers: Buy more per year Buy higher priced options Buy more often Are less price sensitive Are less costly to serve Are more loyal Have a higher lifetime valueRetention is the way to measure loyalty: Retention is the way to measure loyaltyRetention pays better than acquisition. $100 spent returns:: Retention pays better than acquisition. $100 spent returns:Basic Retention Strategy Rule: Put yourself in customer shoes: Basic Retention Strategy Rule: Put yourself in customer shoes Say: “What would I want to be on this database? What’s in it for me?” If you can’t come up with a good answer, the database will failMethods of Retention: Methods of Retention Recruit right ones to start with Communicate with them & Reward them Create segments Predict attrition – Risk Revenue Matrix Create a loyalty program Who are likely to be loyal?: Who are likely to be loyal? Reichheld points out that Some customers are loyal – others not Begin by recruiting the right ones One insurance company found that disloyal customers were: Transient individuals Young people, rather than older people Single people, rather than married people Renters, rather than homeowners. People who respond to low-ball discount offers People who respond to temporary salesRecruit relationship buyers: Recruit relationship buyers Transaction buyers only interest is price Relationship buyers want a firm that gives good service to whom they can be loyal How to find relationship buyers: How to find relationship buyers Lowball offers will attract transaction buyers You cannot make a profit from them Relationship buyers are interested in good service, high value and two way loyalty They will stick with you and provide a profitable bottom lineSlide11: Methods of Retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition- Risk Revenue Matrix Create a loyalty program has a one-to-one customer communications program.: has a one-to-one customer communications program. Results: Retention goes up 5.6 points Travelers gains $14,000 per year per agent Agents gain $2,380 per year The annual program: The annual program Letter 60 days before annual renewal Annual review Thank you card in 1st quarter Cross sell postcard in 2nd quarter Newsletter in 3rd quarter Seasonal card in 4th quarterThe value of a conversation with insurance customers: The value of a conversation with insurance customers 62% of customers who leave, never talk to an agent first 80% of people who talk to an agent do not leave.Restaurant chain sent $5 reward cards to 4,000 lapsed customers: Restaurant chain sent $5 reward cards to 4,000 lapsed customers Average member visits went from 25 per day before the promotion, to 42 per day. Average visits per card went from 1.18 before to 1.26 during and 1.22 after the promotion. Incremental sales were $17,100 during the promotion and $4,700 in the 35 days after the promotion was over. Communications increased sales and retention. Slide16: Methods of Retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition – Risk Revenue Matrix Create a loyalty program Creating customer segments- Many are unprofitable: Creating customer segments- Many are unprofitable This 28% lost 22% of the bank’s profits! Bank Customers by ProfitabilityMarketing to Customer Segments: Marketing to Customer SegmentsA ideal segment:: A ideal segment: Has definable characteristics Is large enough to justify a custom marketing strategy with appropriate rewards and budget Has members who can be motivated Makes efficient use of available data Can be measured in performance Justifies an organization devoted to it. Can be part of a person’s time, but there should be someone who “owns” each segment. Strategy for each segment:: Strategy for each segment: Communications to the segment (direct mail, email, on-location personal attention) Rewards designed to modify behavior Controls to measure the success of the strategy A budget for implementation of the strategy Specific goals and metrics for engagement: for behavior modification An organization that accepts responsibility for the segmentSegments and Status Levels: Segments and Status LevelsHow one women’s chain segments their customers: How one women’s chain segments their customersSlide23: Methods of Retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition- Risk Revenue Matrix Create a loyalty program Slide24: Methods of Retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition- Risk Revenue Matrix Create a loyalty program Who is going to defect?: Who is going to defect? Besides LTV, you can develop a model that predicts which customers are most likely to leave. Putting that model with LTV you can refocus your entire retention strategy You create a Risk Revenue MatrixFocus retention programs on A and B: 44% of your customers. : Focus retention programs on A and B: 44% of your customers. Using Risk Revenue Matrix: Using Risk Revenue Matrix Telecom company sent special messages to priorities A and B. Ignored customers in priority C Result: Boost in retention and profitsFurther results…: Further results…Slide29: Methods of Retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition- Risk Revenue Matrix Create a loyalty program What is a loyalty program?: What is a loyalty program? A system whereby a customer has specifically signed up for a program. She may receive a plastic card with her name on it. The card is used whenever she shops in a retail store, on the phone or on the web. The card provides her with some benefit she could not get without the card. It provides you with valuable information that you can use to understand the customer and build her loyalty. Who participates in loyalty programs?: Who participates in loyalty programs? Parago (www.parago.com) found that high income households ($125K and more), participated much more in loyalty programs than the average household. Notable participation rates were: Airline Frequent Flyer Programs 92% Hotel Frequent Guest Programs 79% Credit Card Rewards 71% Retail Store Programs 44%How do loyalty programs boost retention?: How do loyalty programs boost retention? Program permits you to keep track of customer behavior You can see if valuable customers are reducing their orders or spending You can proactively call them, write them, or make them offers Telecom company rewards program results:A complete customer retention plan: A complete customer retention plan Methods of retention Recruit right ones to start with Communicate with them and reward them Sell them a second product Get them to become multi-channel Evaluation of Retention ProgramsThe value of a second product: The value of a second productNext Best Product: Next Best Product Collaborative Filtering can be used to determine for each customer her next most likely product. Customer service and the web have this info available whenever a customer visits or calls. Tests with GUS, largest cataloger in the UK, resulted in doubling the cross sale rate (from 20% to 40%) using the next best product on the telemarketers screensCross sales build retention : Cross sales build retention Customers who have more than one product have a higher retention rate. Two reasons for second product: Profit from the new product Retain customers for the existing one. An insurance company with independent agents used a model to predict the Next Best Product for each customer Offered a 10% discount on first product if second is purchasedSelling a second insurance product: Dear Bob & Kitty: As I figure it, you could save about $106 per year on your auto premium. Call me today! Susan Selling a second insurance productAutomatic follow up note: Automatic follow up note Dear Bob & Kitty I haven’t heard from you on the letter on the new homeowner’s policy. The savings on your auto policy are terrific. Call me. Susan HughesHow did it work out?: How did it work out? 89% of agents invited went to web and participated. 52% created personal notes Recipient HH bought 11% more than the controls Follow up letter created 8% more sales Follow up phone gained 43% more.Slide40: A complete customer retention plan Methods of retention Recruit right ones to start with Communicate with them and reward them Sell them a second product Get them to become multi channel Evaluation of Retention ProgramsMulti-channel users are more loyal: Multi-channel users are more loyal Illustrative numbers from several case studiesWhy the web is important to retention: Why the web is important to retention Web customers are more affluent Their average order size is 12% higher than phone orders. The cost of the web order is 16% lower than phone orders. Typical incentive offered is 5% off on any order over $50. Result: 11% of non web customers shift to the web every year. Creating a club on the internet: Creating a club on the internet A company selling sporting goods created an internet member club. When DB was built they learned that: Club members bought 11 times more than non club members. In two years, 81% of club members became multi-buyers. The club boosted retentionClub Members Retention: Club Members RetentionCataloger Customer Retention: Cataloger Customer Retention Miles Kimball sent 20,000 emails with three different catalogs, and 20,000 with the three catalogs alone. Those who got the emails bought 18% more than those who got the catalogs alone. More sales = Higher overall retention levelsRetailer Customer Retention: Retailer Customer Retention Video retailer sent email newsletters to 170,000 customers for 6 months. Control group of 14,000 got no emails Retail sales to test group was 28% more than to those without emails. More sales = Higher overall retention levelsOne Click Ordering: One Click Ordering With the web we use cookies to say, “Welcome back Susan”. We keep her credit card on file if she wants so she can do one click ordering Result, compared to controls, is higher retention and annual revenue from those who have one click ordering available. Slide48: A complete customer retention plan Evaluation of Retention Programs Tests and Controls Return on investment Why controls are essential: Why controls are essential The sales force acquires new customers Database marketers create higher retention rates How do you prove this? Retention program effectiveness can only be measured using control groupsEvery marketing promotion should always be a test: Every marketing promotion should always be a test Test those who get the promotion against the performance of those who do not get the promotion If you are sending birthday cards or a newsletter, select 50,000 who do not get birthday cards or the newsletter. Look at the control’s spending rate, and retention rate. If there is no difference, your cards or newsletters are a waste of money.What to measure: What to measure Attrition and retention of both groups Migration upward and downward Incremental sales per program and per season Frequency of purchases Dollars spent per trip and per season Number of departments shopped Number of items purchased Share of customers’ wallet Slide52: A complete customer retention plan Evaluation of Retention Programs Tests and Controls Return on investmentRetention Strategies to be quantified: Retention Strategies to be quantified Find out who your Gold customers are, and keep them loyal Reward customer loyalty, resulting in increased retention Increase purchases and average order size Profile your customers, and acquire new ones with the same profile Personalize customer’s web and phone experience Illustration: Birthday Gift: Illustration: Birthday Gift Get customers to record their birthdays with their emails. On their birthday, send them a birthday Pizza Coupon One fast food restaurant offered a $10 birthday coupon to 215,000 customers. Of the coupons sent out, 86,612 were redeemed ($866,120) producing overall sales of $2,900,000 – a sales increase of $2 million. Slide55: Illustration: Corporate collaboration Hewlett Packard tested an on line survey to promote their network printers. Direct mail drove responders to a web site that contained the survey. Responders received $10 in Pizza Hut coupons. The survey provided a special HP offer for network printing solutions, product links, and e-subscription information. Live Agent: Live Agent 74% of shopping carts abandoned at checkout. Reason: customers have some question. They are unsure about the product, service, color, delivery, etc. Solution: put a live chat button at checkout time. Have live agents available to answer questions. Result: increased retention and salesCaller ID: Caller ID Use Caller ID to bring customer’s complete purchasing history on the screen before the agent begins talking. Result, she can talk to the customer as if she knew her. Result: Increased retention. Greater opportunity for cross sales. Putting It All Together:: Putting It All Together: An average of 19% of customers respond to one or more strategies The overall retention rate goes up by 19.3% Orders per year and average order size also increase significantly These numbers are illustrative. You can create your own numbers using tests and controlsAnnual costs of the strategies: Annual costs of the strategiesWhat should you do to increase retention? : What should you do to increase retention? Recruit right customers to start with Communicate with them & reward them Determine their lifetime value Create customer segments with a marketing strategy for each segment Sell them a second product Get them to become multi-channel buyers Use Tests and Controls Calculate return on investment Books by Arthur Hughes: Books by Arthur Hughes From McGraw Hill. Order at www.dbmarketing.com Contact Arthur: arthur.hughes@kbm1.com Thank you!: Thank you! You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
Customer Retention Wanderer Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: Embed: Flash iPad Dynamic Copy Does not support media & animations Automatically changes to Flash or non-Flash embed WordPress Embed Customize Embed URL: Copy Thumbnail: Copy The presentation is successfully added In Your Favorites. Views: 13422 Category: Entertainment License: All Rights Reserved Like it (8) Dislike it (0) Added: September 28, 2007 This Presentation is Public Favorites: 10 Presentation Description No description available. Comments Posting comment... By: imransiddiq17 (5 month(s) ago) plz allow me to download this presentation Saving..... Post Reply Close Saving..... Edit Comment Close By: truenorthvic (12 month(s) ago) Can you please email presentation to: recklessme@hotmail.com, thank you in advance. Saving..... Post Reply Close Saving..... Edit Comment Close By: ravim1968 (13 month(s) ago) can u pls email your presentation it is gr8! Ravi Mirchandani Pune -India on my email Id:ravim1968@gmail.com Saving..... Post Reply Close Saving..... Edit Comment Close By: imorekyeh (14 month(s) ago) Pls send this to my mail - michael.orekyeh@gmail.com. Thanks Saving..... Post Reply Close Saving..... Edit Comment Close By: deank (19 month(s) ago) Please email .ppt to dkrispin@montad.com Saving..... Post Reply Close Saving..... Edit Comment Close loading.... See all Premium member Presentation Transcript How to retain customers Arthur Middleton Hughes VP Solutions Architect KnowledgeBase Marketing: How to retain customers Arthur Middleton Hughes VP Solutions Architect KnowledgeBase MarketingA complete customer retention plan: A complete customer retention plan Why customer retention is important Methods of retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition – Risk Revenue Matrix Create a loyalty program Sell them a second product Get them to become multi-channel buyers Evaluation of Retention Programs Tests and Controls Return on investment Why retention is important : Why retention is important Long term loyal customers: Buy more per year Buy higher priced options Buy more often Are less price sensitive Are less costly to serve Are more loyal Have a higher lifetime valueRetention is the way to measure loyalty: Retention is the way to measure loyaltyRetention pays better than acquisition. $100 spent returns:: Retention pays better than acquisition. $100 spent returns:Basic Retention Strategy Rule: Put yourself in customer shoes: Basic Retention Strategy Rule: Put yourself in customer shoes Say: “What would I want to be on this database? What’s in it for me?” If you can’t come up with a good answer, the database will failMethods of Retention: Methods of Retention Recruit right ones to start with Communicate with them & Reward them Create segments Predict attrition – Risk Revenue Matrix Create a loyalty program Who are likely to be loyal?: Who are likely to be loyal? Reichheld points out that Some customers are loyal – others not Begin by recruiting the right ones One insurance company found that disloyal customers were: Transient individuals Young people, rather than older people Single people, rather than married people Renters, rather than homeowners. People who respond to low-ball discount offers People who respond to temporary salesRecruit relationship buyers: Recruit relationship buyers Transaction buyers only interest is price Relationship buyers want a firm that gives good service to whom they can be loyal How to find relationship buyers: How to find relationship buyers Lowball offers will attract transaction buyers You cannot make a profit from them Relationship buyers are interested in good service, high value and two way loyalty They will stick with you and provide a profitable bottom lineSlide11: Methods of Retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition- Risk Revenue Matrix Create a loyalty program has a one-to-one customer communications program.: has a one-to-one customer communications program. Results: Retention goes up 5.6 points Travelers gains $14,000 per year per agent Agents gain $2,380 per year The annual program: The annual program Letter 60 days before annual renewal Annual review Thank you card in 1st quarter Cross sell postcard in 2nd quarter Newsletter in 3rd quarter Seasonal card in 4th quarterThe value of a conversation with insurance customers: The value of a conversation with insurance customers 62% of customers who leave, never talk to an agent first 80% of people who talk to an agent do not leave.Restaurant chain sent $5 reward cards to 4,000 lapsed customers: Restaurant chain sent $5 reward cards to 4,000 lapsed customers Average member visits went from 25 per day before the promotion, to 42 per day. Average visits per card went from 1.18 before to 1.26 during and 1.22 after the promotion. Incremental sales were $17,100 during the promotion and $4,700 in the 35 days after the promotion was over. Communications increased sales and retention. Slide16: Methods of Retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition – Risk Revenue Matrix Create a loyalty program Creating customer segments- Many are unprofitable: Creating customer segments- Many are unprofitable This 28% lost 22% of the bank’s profits! Bank Customers by ProfitabilityMarketing to Customer Segments: Marketing to Customer SegmentsA ideal segment:: A ideal segment: Has definable characteristics Is large enough to justify a custom marketing strategy with appropriate rewards and budget Has members who can be motivated Makes efficient use of available data Can be measured in performance Justifies an organization devoted to it. Can be part of a person’s time, but there should be someone who “owns” each segment. Strategy for each segment:: Strategy for each segment: Communications to the segment (direct mail, email, on-location personal attention) Rewards designed to modify behavior Controls to measure the success of the strategy A budget for implementation of the strategy Specific goals and metrics for engagement: for behavior modification An organization that accepts responsibility for the segmentSegments and Status Levels: Segments and Status LevelsHow one women’s chain segments their customers: How one women’s chain segments their customersSlide23: Methods of Retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition- Risk Revenue Matrix Create a loyalty program Slide24: Methods of Retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition- Risk Revenue Matrix Create a loyalty program Who is going to defect?: Who is going to defect? Besides LTV, you can develop a model that predicts which customers are most likely to leave. Putting that model with LTV you can refocus your entire retention strategy You create a Risk Revenue MatrixFocus retention programs on A and B: 44% of your customers. : Focus retention programs on A and B: 44% of your customers. Using Risk Revenue Matrix: Using Risk Revenue Matrix Telecom company sent special messages to priorities A and B. Ignored customers in priority C Result: Boost in retention and profitsFurther results…: Further results…Slide29: Methods of Retention Recruit right ones to start with Communicate with them & reward them Create segments Predict attrition- Risk Revenue Matrix Create a loyalty program What is a loyalty program?: What is a loyalty program? A system whereby a customer has specifically signed up for a program. She may receive a plastic card with her name on it. The card is used whenever she shops in a retail store, on the phone or on the web. The card provides her with some benefit she could not get without the card. It provides you with valuable information that you can use to understand the customer and build her loyalty. Who participates in loyalty programs?: Who participates in loyalty programs? Parago (www.parago.com) found that high income households ($125K and more), participated much more in loyalty programs than the average household. Notable participation rates were: Airline Frequent Flyer Programs 92% Hotel Frequent Guest Programs 79% Credit Card Rewards 71% Retail Store Programs 44%How do loyalty programs boost retention?: How do loyalty programs boost retention? Program permits you to keep track of customer behavior You can see if valuable customers are reducing their orders or spending You can proactively call them, write them, or make them offers Telecom company rewards program results:A complete customer retention plan: A complete customer retention plan Methods of retention Recruit right ones to start with Communicate with them and reward them Sell them a second product Get them to become multi-channel Evaluation of Retention ProgramsThe value of a second product: The value of a second productNext Best Product: Next Best Product Collaborative Filtering can be used to determine for each customer her next most likely product. Customer service and the web have this info available whenever a customer visits or calls. Tests with GUS, largest cataloger in the UK, resulted in doubling the cross sale rate (from 20% to 40%) using the next best product on the telemarketers screensCross sales build retention : Cross sales build retention Customers who have more than one product have a higher retention rate. Two reasons for second product: Profit from the new product Retain customers for the existing one. An insurance company with independent agents used a model to predict the Next Best Product for each customer Offered a 10% discount on first product if second is purchasedSelling a second insurance product: Dear Bob & Kitty: As I figure it, you could save about $106 per year on your auto premium. Call me today! Susan Selling a second insurance productAutomatic follow up note: Automatic follow up note Dear Bob & Kitty I haven’t heard from you on the letter on the new homeowner’s policy. The savings on your auto policy are terrific. Call me. Susan HughesHow did it work out?: How did it work out? 89% of agents invited went to web and participated. 52% created personal notes Recipient HH bought 11% more than the controls Follow up letter created 8% more sales Follow up phone gained 43% more.Slide40: A complete customer retention plan Methods of retention Recruit right ones to start with Communicate with them and reward them Sell them a second product Get them to become multi channel Evaluation of Retention ProgramsMulti-channel users are more loyal: Multi-channel users are more loyal Illustrative numbers from several case studiesWhy the web is important to retention: Why the web is important to retention Web customers are more affluent Their average order size is 12% higher than phone orders. The cost of the web order is 16% lower than phone orders. Typical incentive offered is 5% off on any order over $50. Result: 11% of non web customers shift to the web every year. Creating a club on the internet: Creating a club on the internet A company selling sporting goods created an internet member club. When DB was built they learned that: Club members bought 11 times more than non club members. In two years, 81% of club members became multi-buyers. The club boosted retentionClub Members Retention: Club Members RetentionCataloger Customer Retention: Cataloger Customer Retention Miles Kimball sent 20,000 emails with three different catalogs, and 20,000 with the three catalogs alone. Those who got the emails bought 18% more than those who got the catalogs alone. More sales = Higher overall retention levelsRetailer Customer Retention: Retailer Customer Retention Video retailer sent email newsletters to 170,000 customers for 6 months. Control group of 14,000 got no emails Retail sales to test group was 28% more than to those without emails. More sales = Higher overall retention levelsOne Click Ordering: One Click Ordering With the web we use cookies to say, “Welcome back Susan”. We keep her credit card on file if she wants so she can do one click ordering Result, compared to controls, is higher retention and annual revenue from those who have one click ordering available. Slide48: A complete customer retention plan Evaluation of Retention Programs Tests and Controls Return on investment Why controls are essential: Why controls are essential The sales force acquires new customers Database marketers create higher retention rates How do you prove this? Retention program effectiveness can only be measured using control groupsEvery marketing promotion should always be a test: Every marketing promotion should always be a test Test those who get the promotion against the performance of those who do not get the promotion If you are sending birthday cards or a newsletter, select 50,000 who do not get birthday cards or the newsletter. Look at the control’s spending rate, and retention rate. If there is no difference, your cards or newsletters are a waste of money.What to measure: What to measure Attrition and retention of both groups Migration upward and downward Incremental sales per program and per season Frequency of purchases Dollars spent per trip and per season Number of departments shopped Number of items purchased Share of customers’ wallet Slide52: A complete customer retention plan Evaluation of Retention Programs Tests and Controls Return on investmentRetention Strategies to be quantified: Retention Strategies to be quantified Find out who your Gold customers are, and keep them loyal Reward customer loyalty, resulting in increased retention Increase purchases and average order size Profile your customers, and acquire new ones with the same profile Personalize customer’s web and phone experience Illustration: Birthday Gift: Illustration: Birthday Gift Get customers to record their birthdays with their emails. On their birthday, send them a birthday Pizza Coupon One fast food restaurant offered a $10 birthday coupon to 215,000 customers. Of the coupons sent out, 86,612 were redeemed ($866,120) producing overall sales of $2,900,000 – a sales increase of $2 million. Slide55: Illustration: Corporate collaboration Hewlett Packard tested an on line survey to promote their network printers. Direct mail drove responders to a web site that contained the survey. Responders received $10 in Pizza Hut coupons. The survey provided a special HP offer for network printing solutions, product links, and e-subscription information. Live Agent: Live Agent 74% of shopping carts abandoned at checkout. Reason: customers have some question. They are unsure about the product, service, color, delivery, etc. Solution: put a live chat button at checkout time. Have live agents available to answer questions. Result: increased retention and salesCaller ID: Caller ID Use Caller ID to bring customer’s complete purchasing history on the screen before the agent begins talking. Result, she can talk to the customer as if she knew her. Result: Increased retention. Greater opportunity for cross sales. Putting It All Together:: Putting It All Together: An average of 19% of customers respond to one or more strategies The overall retention rate goes up by 19.3% Orders per year and average order size also increase significantly These numbers are illustrative. You can create your own numbers using tests and controlsAnnual costs of the strategies: Annual costs of the strategiesWhat should you do to increase retention? : What should you do to increase retention? Recruit right customers to start with Communicate with them & reward them Determine their lifetime value Create customer segments with a marketing strategy for each segment Sell them a second product Get them to become multi-channel buyers Use Tests and Controls Calculate return on investment Books by Arthur Hughes: Books by Arthur Hughes From McGraw Hill. Order at www.dbmarketing.com Contact Arthur: arthur.hughes@kbm1.com Thank you!: Thank you!