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"Developing a Customer Win Back Strategy" was a Lorman webinar presented on September 12, 2014.
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DEVELOPING A CUSTOMER WIN-BACK STRATEGY
September 12, 2014
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
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
an
ne
l Stra
teg
y&
Ma
rketin
g M
ix
Customer Management
Operating Model
Cu
stom
er M
an
ag
em
en
t P
roce
sses &
Stru
cture
s
Sa
les F
orce
E
ffective
ne
ss
Cu
stom
er In
sigh
ts &
An
alytics
Da
ta, K
PI’s, a
nd
P
erfo
rma
nce
Re
po
rting
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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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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...
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
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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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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)
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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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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
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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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CLTV
Profitability
+Propensity
Model=
Operationalized Segmentation(Customer Score)
Recommendations
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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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3
4
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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
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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
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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
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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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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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