For a long time, building customer loyalty was arguably the business world’s equivalent of the weather. Lots of people talked about it, but very few seemed committed to doing anything about it. In the presence of an increasing number of well-managed customer retention programs, research confirms that customers who are targeted by a retention program demonstrate higher loyalty to a business. 

Analytics driving powerful customer and business intelligence systems have helped contribute to that evolution. But at the heart of it, every successful customer retention program – in the telecom and media arena as well as other areas – revolves around understanding your customer; steady, consistent communications; providing appropriate rewards; and establishing clear feedback loops. Do these things consistently well and you stand a very good chance of developing loyal customers who engage in profitable behavior for extended periods of time.

Putting a Price on Customers

It’s no surprise that building loyalty and retention has achieved prominence on the agendas of businesses generally, and customer service-driven companies in particular. The costs of customer churn and attrition are well understood by management teams. 

The key culprits behind customer churn include some seemingly obvious ones that remain persistent:

•         irrelevance of a service offering;
•         competitors providing a service offering at a lower cost, or a more compelling offering;
•         not living up to customer commitments;
•         poor customer service;
•         emergence of new, disruptive technology; and
•         consolidation in the form of bundled offers, with disruption in the form of one-stop-shop offerings for all services.

According to multiple sources, including leading industry publications and various annual reports, churn rates in the U.S. range anywhere from 2 to 3 percent per month, or approximately 25 to 35 percent annually overall. It is estimated that the cost of acquiring a new customer is roughly six times the cost of retaining an existing one. It’s no surprise then that there has been an intensified focus on customer retention awareness and corresponding initiatives. Consistently applied with an emphasis on both reactive and proactive measures, success save rates can reach as high as 40 to 45 percent.

Executing retention programs right, however, means expanding the range of key metrics to include a variety of more nuanced factors such as actual cost per save and customer value post save. For that reason, churn analytics have taken a leading role in this area.

Whether viewed through the lens of customer retention or the larger framework of increasingly robust loyalty management models that are emerging in the sector, it is essential that service providers and other businesses today thoroughly understand what makes today’s customers tick from behavioral and lifestyle perspectives.

Know Your Customer

Successful proactive retention efforts start with the recognition that customers are people. In other words, they do more than simply use a particular mobile phone – they lead active, busy lives and spend time and energy doing many different things. Understanding your customers’ lifestyles is the first step in developing a sustainable program to keep them as customers. Seeing every customer interaction as part of an ongoing dialog rather than simply as a transaction constitutes a beachhead in long-range customer lifestyle awareness and management campaigns. Such an effort can be the catalyst in lifting a program from loyalty to advocacy.

Our own experience has shown us that relevance and a competitive edge in this regard stems from our ability to provide our clients with customer lifestyle data (through analytics, surveys, and other tools) that can be the fuel for loyalty programs. By understanding these lifestyle choices, likes and dislikes, hobbies and interests, a service provider can help its clients manage the processes that come with implementing these kinds of programs. 

One dimension of customer lifestyle that defines our era is that of mobile phones. We are witnessing a sea change in use and behavior among customers that is nothing less than industry transforming. More than ever, consumers are using their mobile phones to partake in activities that had been conducted on their computers. From researching prices and locations for services and goods to finding entertainment to purchasing tickets and much more, the advent of social media has been a major catalyst in these behavioral changes. For call center professionals today, the importance of embracing these substantial behavioral changes and integrating them into a service offering for customers has become mission critical.

Retention: Proactive Vs. Reactive

Reducing customer churn in a sustainable way means looking at the process from both reactive and proactive dimensions. Reactive retention efforts often start with outbound calls to customers who have decided to leave to determine their reasons for churning out, understand their concerns and provide ways to address those concerns. Not infrequently, an exit interview can provide an opportunity to fix a problem there and then to hold onto the customer.

From a proactive perspective, it is essential to be able to perform the appropriate data analytics to identify probable future churn in concert with outbound calling or outreach in order to pre-empt churn. Part of these analytics incorporates identifying unprofitable customers and determining ways to increase profitability.

In one such case, a leading mobile service provider with more than 140 million customers was able to increase customer retention from 20 percent to 53 percent with help of proactive and reactive retention strategies employed by a business process outsourcing partner.

Finding a Recipe for Retention

Achieving customer retention and loyalty are the results of well-managed processes that go the extra mile in a host of ways to communicate with customers, and encourage them to remain active and engaged with the client in consistently profitable ways for an extended period of time.

While there are no guarantees that a customer will remain one for an extended period, there is a roadmap for cutting customer churn in clearly quantifiable ways. As noted earlier, step one is recognizing that more customers today handle almost all of their interactions through a mobile device. Our ability to keep those devices up and running has never been more core to our role in terms of customer retention. 

Beyond that, this roadmap has several clearly marked signposts:

Identify the customer base.

Keeping track of all customer interaction data across all touch points – including churn data and why customers leave – is the keystone of an effective customer management initiative.

Segment the customer base.

Identify the most profitable customers and compile loyalty-oriented data drawn from lifestyle markers (e.g., travel, entertainment, sports, etc.). This calls for robust customer analytics.

Communicate effectively.

 Multi-channel contact includes direct phone contact, e-mail, automated notifications, website personalization, direct (white mail) billing notices, message boards, customer forums, text, SMS, and social media outreach (Facebook, Twitter (News - Alert)). Messages should reflect information from customer databases and recent interactions.

Target and reward.

Reward customers based on their predictive lifecycle value and their buying behaviors. Establish short- and long-term benefits based on current or anticipated behavior and activities. This is the most common area for companies to focus their efforts on. Coupons, discounts, rebates, frequency programs, special programs and offers, differentiated customer care, and other incentives fall into this category.

Measure customer satisfaction and act on customer feedback.

Measure product innovation, speed of delivery, customer service, and other factors that have the greatest appeal to customers and their propensity to remain loyal. Use after-call surveys, first-call resolution rates and Net Promoter scores.

Customers interact with brands not in a linear fashion, but through a circle of touch points comprising everything from sales and service, billing and advertising to day-to-day use of the product or service. Forging substantive relationships that will support a customer retention platform also means relating to customers in their day-to-day lives as customers and as people. Companies that do so in ways that are strategically aligned with the brand promise will be best positioned to navigate the road to cutting customer churn.

 Tim Smith is senior vice president at Firstsource Solutions  (www.firstsource.com).