Developing a Customer Win Back Strategy

19
DEVELOPING A CUSTOMER WIN-BACK STRATEGY September 12, 2014
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"Developing a Customer Win Back Strategy" was a Lorman webinar presented on September 12, 2014.

Transcript of Developing a Customer Win Back Strategy

Page 1: Developing a Customer Win Back Strategy

DEVELOPING A CUSTOMER WIN-BACK STRATEGY

September 12, 2014

Page 2: Developing a Customer Win Back Strategy

CUSTOMER WIN-BACK STRATEGIES ARE ALL TO OFTEN BUILT ON MISCONCEPTIONS

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“It is more profitable to

keep existing customers”

“All sales drive profitability”

“Targeting departing

customers is the only focus”

• Understanding the customer lifecycle allows more effective targeting of customers before they decide to depart vs. accurate predictions of leaving customer numbers

• Understand costs: customer acquisitions and other transaction costs• Future revenue: products taken, duration, likelihood of switches or cancellation,

upsell opportunities

“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

• Not all (existing) customers are profitable and it might be better to lose unprofitable customers

• Some customers leave due to ‘natural’ reasons caused by changes in the business and therefore their retention might not be cost-effective

Page 3: Developing a Customer Win Back Strategy

TO SUCCEED, COMPANIES WILL NEED TO BUILD OPERATING MODELS AND ANALYTICAL CAPABILITIES THAT DRIVE MASTERY OF THE ENTIRE CUSTOMER LIFECYCLE

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Clearly defined Customer Management Operating Model

Master Customer Engagement Across the Entire lifecycle

Customer Win-Back Value Proposition

Ch

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Customer Management

Operating Model

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Stru

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Sa

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orce

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ffective

ne

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Cu

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An

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Da

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PI’s, a

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rting

Page 4: Developing a Customer Win Back Strategy

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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

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Page 5: Developing a Customer Win Back Strategy

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DEVELOP FRAMEWORK TO COMMUNICATE THE OVERALL STRATEGIC OBJECTIVES FOR A CUSTOMER WIN-BACK PROGRAM

Overall objective is to…improve retention, reduce cost-to-serve…

Objectives for Customer Win-Back Program?

Strategy MeasurementAcquisition ManagementConversion

Customer Lifecycle Management

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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...

Page 6: Developing a Customer Win Back Strategy

ALIGN THE PORTFOLIO OF INITIATIVES TO THE FRAMEWORK

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Strategy MeasurementAcquisition ManagementConversion

Customer Treatment Strategy NPS Surveys

Leads routing to Sales

Alignment to overall growth

strategy

Proactive Retention Triggers

Alternative Service Propositions

Key Account Management

Planning

Contracting Policy and Mechanisms

“Call only” contracting

90 Day Rolling Contracting

Auto-renewal

Pay-as-you-go

Marketing Services

Sales Policy & Commission

Enhance Commission with

quality metric

Discounting & Subscription Sales

Marketing Effectiveness

Measure read/open rates on Push Data

Operationalize Propensity Model

SegmentedProspects Database

Targeted Campaigns

Improved Bedding In Process

Enhanced Treatment Segments

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

… …

Customer Segmentation

Customer Profitability Model

Propensity Model

Customer Lifetime Value Model

Competitive Intelligence

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Payment policies by Segment

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A B C D E

Page 7: Developing a Customer Win Back Strategy

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BUILD A BLUEPRINT FOR THE FUTURE STATE OPERATING MODEL

Invest and apply

analytics

Carefully Segment

Your Customer

Base

Develop Customer /

Account Journeys

Embed / Onboard

Customers

Develop Proactive Retention / Win-Back Triggers

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Page 8: Developing a Customer Win Back Strategy

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CUSTOMER JOURNEY MAP SHOW THE MINIMUM CONTACT POINTS THAT CUSTOMERS CAN EXPECT TO HAVE WITHIN A YEAR

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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)

Page 9: Developing a Customer Win Back Strategy

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PRIORITIZE AND SEQUENCE THE INITIATIVE PORTFOLIO

Pillar # Initiative Owner Lever Ease of Impl. Bus. ImpactCriticalDependency?

Operational KPI

Priority

Customer Strategy 1 CLTV Model

2 Profitability Model

3 Customer Segmentation

4 Competitive Intelligence

5Alignment to overall Growth Strategy

Customer Acquisition 6

Customer Scoring Methodology

7Segmented Customer Database

8 Targeted Campaigns

Customer Acquisition 9 Leads Routing to Sales

10Discounting & Subscription Sales

11Enhance Commission with quality metric

12 Payments Policy

13Commission on Telesales Handover

14Key Account Management Planning

15 Auto-renewal

16 “Call Only” Contracting

17 90-Day Rolling Contracts

Customer Mgmt 18Enhanced Treatment strategies

19Improved Bedding-In Process

20Optimized AM Resource Allocation

21Operationalize 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

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Page 10: Developing a Customer Win Back Strategy

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COMPANIES OFTEN STRUGGLE TO DEFINE AND OPERATIONALIZE THE RIGHT KPIS ACROSS THE CUSTOMER LIFECYCLE

One method in isolation will not tell the whole story or give a complete understanding of the business

WAYS TO MEASURE CHURN PROS AND CONS OF USING METRIC

• 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 Customersat end

( - New customers acquired ) / Customers at

beginning X 100

ChurnRate

Customersat beginning( - Customers

at end ) / Customers atbeginning X 100=

DRR CRR x Decrease in value %

=

RevenueChurn

MRR beginningof month

( - MRR end of month ) /( MRR of

upgradesMRR beginning

of month- ( ))=

=

REVENUE / VALUE

CUSTOMER VOLUME

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

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REDUCE THE NUMBER OF UNPROFITABLE CUSTOMERS ACQUIRED

Customer Strategy

CLTV

Profitability

Operationalized Propensity

Operationalize Segmentation

Customer Scoring

Strategy

Optimize treatment strategies to reduce cost-to-serve on these accounts

Recommendations

Page 12: Developing a Customer Win Back Strategy

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EMBED OPERATIONALIZED SEGMENTATION & PROPENSITY ACROSS THE CUSTOMER OPERATING MODEL

Customer Strategy

CLTV

Profitability

Operationalized Propensity

Operationalize Segmentation

Customer Scoring

Strategy

Embed Operationalized Segmentation & Propensity across the Customer Operating Model

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Acquisition• Prospect database• Marketing Campaigns• Leads Routing

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Conversion• Discounting• Commission on Quality• Payment methods• Handover – IS to KA

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Management• Improve bedding in• Enhanced treatment strategies• Trigger based retention

4Measurement• Operational KPIs• Customer Surveys

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3

2

CLTV

Profitability

+Propensity

Model=

Operationalized Segmentation(Customer Score)

Recommendations

Page 13: Developing a Customer Win Back Strategy

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IMPROVE QUALITY OF LEADSCustomer Acquisition

CLTV

Profitability

Operationalized Propensity

Operationalize Segmentation

Customer Scoring

Customer Segmentation

Marketing ProspectsDatabase

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 FormInbound Call To Telesales

Zoe (SIC code driven, Camp. Code WIP)

(~200k Contacts)

1 • 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 messaging4

5 • Leads are rapidly categorized and routed through best channel/advisor

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Recommendations

Recommendations

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IMPROVE QUALITY OF THE SALES PIPELINE

Telesales

Key Accounts

Handover to Account

Management

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 accountso 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

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Recommendations

Recommendations

Page 15: Developing a Customer Win Back Strategy

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ENHANCE EXISTING CUSTOMER STRATEGY AND JOURNEYS WITH A REFINED SEGMENTATION MODEL

Customer Management

Grow/Invest

Farm

Park (low contact, renewal)

Intensive Care

Wi-

Bac

k

Trig

ge

r

Unprofitable – “New Proposition”

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Renew or Winback

Renew or Winback

Bedding In

Lasts until adoption or allocation to

Park or Unprofitable

segment

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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

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• 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

Page 16: Developing a Customer Win Back Strategy

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EXPLORE POTENTIAL FOR ALTERNATIVE BUSINESS MODELS TO TREAT LOW USAGE/PROFIT CUSTOMERS

Customer Management

Grow/Invest

Farm

Park (low contact, renewal)

Intensive Care

Rete

nti

on

T

rigg

er

s

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

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

Page 17: Developing a Customer Win Back Strategy

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EXPLORE OPPORTUNITY FOR ALTERNATIVE CONTRACTING METHODS THAT WILL IMPROVE RETENTION

Customer Management

Grow/Invest

Farm

Park (low contact, renewal)

Intensive Care

Rete

nti

on

T

rigg

er

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

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Page 18: Developing a Customer Win Back Strategy

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LET’S KEEP IN TOUCH

Art HallAlvarez and Marsal3424 Peachtree Road Suite 1500Atlanta, Georgia 30326(404) [email protected]: Art_Hall4LinkedIn: https://www.linkedin.com/in/arthall

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