Is Your Company Sitting on Buried Treasure?A company's history of its customer experiences is often a hidden asset that goes underused. Too commonly, companies do not recognize the richness of the customer information that sits buried in a database or lost in a stack of papers.
Your database contains the secrets of how your customers have interacted with you. It is often the only direct information you have about that experience. Using RFM to identify the best-performing customers is only the start. Marketers need to use this data to identify those with the greatest potential to maximize ROI.
Mining the information can form the basis of a retention program to keep your most important customers. Conventional wisdom says that it is five to eight times cheaper to keep a current customer than it is to get a new one. Another known metric is that, on average, you have a 60 percent to 70 percent chance of doing business again with a current customer, a 20 percent to 40 percent chance with a former customer, but only a 5 percent to 10 percent chance of ever doing business with a non-customer.
Clearly, while acquisition is important, the greatest ROI can be achieved by retaining current customers and winning back those with profit potential who have left.
Satisfaction does not always mean loyalty. Critical in developing a retention program is this: Your long-term customers may harbor issues that can cause you to lose them. Satisfaction does not equal loyalty. A recent study indicated that prior to leaving, customers who left the franchise had satisfaction scores similar to those who stayed.
The issue is not satisfaction, it is loyalty. How would they react if asked: Would you recommend product X to your friends? Learning what it is that bothers them, that you could change or improve if you only knew, is a crucial piece of information.
How do you find out? Ask them. Most customers will appreciate being asked. Many customers leave their suppliers because of a lack of communication. They feel that they never hear from their vendors and when they do the information is not what they are looking for, or is incomplete.
A major health club chain did an excellent job of acquiring members. Its advertising and promotions brought prospects into the clubs and had people joining. It was not as strong at getting members to renew when their annual membership was about to expire.
By conducting focus groups and asking members what it would take to continue their membership, the chain learned the most appealing offers to encourage renewal, put those in place in its clubs and achieved a 30 percent rise in renewals.
Only 4 percent of customers complain about something that went wrong for them. The rest simply consider leaving and are open to an offer from your competitor. Wouldn't it be useful to find out what is wrong so that you do not lose them?
Keeping those customers pays big dividends. Those who currently buy from you are the most likely to buy new products from you. They understand how you provide service, your billing procedures, delivery systems, sales process, etc. Do whatever you have to do to keep them loyal.
Win back high-potential lost customers. Many companies look at their former customers, shrug their shoulders and think it is too late to do anything about them. Maximizing that customer database will let you determine which of those former customers were profitable in the first place and are worth winning back.
Win-back programs can be conducted similarly to the retention programs. Determine which former customers you want to target with this program by learning which ones generated enough profit to spend money on, and then go contact them. Find out what caused them to leave, and what it will take for them to come back.
Our experience says that using an outside firm to do this research yields better results. The former customer is more at ease telling a third party, in a non-sales environment, what bothered them, what drove them away and what changes would be needed for them to come back.
With this information, a win-back program can be created to address the specific needs of each group of former customers, and targeted offers can be made to address their concerns. In this way, a program can be executed against these former customers yielding a much stronger ROI than you experience on acquisition programs.
Not all customers are equal. As you examine your database of customer information, you realize that some customers do not generate the level of profit necessary for you to continue to service them as you have. They should not be included in any retention program that you create because the expense will never pay for itself.
These are customers that you either abandon or modify how you service them. Nobody wants to fire a customer, but you need to determine which ones make you money, and not invest in those with little potential.
All it takes to open that treasure chest and enjoy all that buried treasure is the ability to organize and understand your database. Then you can extract the information to make the most of your current client relationships and rekindle the ones you want with your former customers.