Developing a Customer Win Back Strategy
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The document discusses developing an effective customer win-back strategy. It notes that win-back strategies are often built on misconceptions and that not all existing customers are profitable. It recommends understanding customer lifecycles and costs to effectively target customers. Companies need to build operating models and analytics to master the entire customer lifecycle. Developing a successful win-back strategy involves framework development, initiative alignment, operating model design, prioritization, and KPI establishment.
Developing a Customer Win Back Strategy
- 1. DEVELOPING A CUSTOMER WIN-BACK STRATEGY September 12, 2014
- 2. CUSTOMER WIN-BACK STRATEGIES ARE ALL TO OFTEN BUILT ON MISCONCEPTIONS • Not all (existing) customers are profitable and it might be better to lose unprofitable • Some customers leave due to ‘natural’ reasons caused by changes in the business 2 “It is more profitable to keep existing customers” “All sales drive profitability” “Targeting departing customers is the only focus” customers and therefore their retention might not be cost-effective • Understand costs: customer acquisitions and other transaction costs • Future revenue: products taken, duration, likelihood of switches or cancellation, upsell opportunities • Understanding the customer lifecycle allows more effective targeting of customers before they decide to depart vs. accurate predictions of leaving customer numbers “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
- 3. TO SUCCEED, COMPANIES WILL NEED TO BUILD OPERATING MODELS AND ANALYTICAL CAPABILITIES THAT DRIVE MASTERY OF THE ENTIRE CUSTOMER LIFECYCLE 3 Clearly defined Customer Management Operating Model Master Customer Engagement Across the Entire lifecycle Channel Strategy & Marketing Mix Customer Management Operating Model Customer Management Processes & Structures Sales Force Effectiveness Customer Insights & Analytics Data, KPI’s, and Performance Reporting Customer Win-Back Value Proposition
- 4. 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 4 1 2 3 4 5
- 5. DEVELOP FRAMEWORK TO COMMUNICATE THE OVERALL STRATEGIC OBJECTIVES FOR A CUSTOMER WIN-BACK PROGRAM 5 Objectives for Customer Win-Back Program? Overall objective is to…improve retention, reduce cost-to-serve… Customer Lifecycle Management Strategy Acquisition Conversion Management Measurement 1 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...
- 6. ALIGN THE PORTFOLIO OF INITIATIVES TO THE FRAMEWORK 6 Strategy Acquisition Conversion Management Measurement Customer Treatment Strategy NPS Surveys Leads routing to Sales Customer Segmentation Customer Lifetime Value Model Customer Profitability Model Propensity Model Competitive Intelligence Alignment to overall growth strategy Enhanced Treatment Segments Proactive Retention Triggers Operationalize Propensity Model Alternative Service Propositions Discounting & Subscription Sales Contracting Policy and Mechanisms Auto-renewal 90 Day Rolling Contracting “Call only” contracting Key Account Management Planning Marketing Services Pay-as-you-go Sales Policy & Commission Enhance Commission with quality metric Marketing Effectiveness Measure read/open rates on Push Data Segmented Prospects Database Targeted Campaigns Improved Bedding In Process 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 … … … 2 Payment policies by Segment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A B C D E
- 7. BUILD A BLUEPRINT FOR THE FUTURE STATE OPERATING MODEL 7 Invest and apply analytics Carefully Segment Your Customer Base Develop Customer / Account Journeys Embed / Onboard Customers Develop Proactive Retention / Win-Back Triggers 3
- 8. CUSTOMER JOURNEY MAP SHOW THE MINIMUM CONTACT POINTS THAT CUSTOMERS CAN EXPECT TO HAVE WITHIN A YEAR 8 3 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)
- 9. PRIORITIZE AND SEQUENCE THE INITIATIVE PORTFOLIO 9 Pillar # Initiative Owner Lever Ease of Impl. Bus. Impact Critical Dependency? Operational KPI Priority Customer Strategy 1 CLTV Model 2 Profitability Model 3 Customer Segmentation 4 Competitive Intelligence 5 Alignment to overall Growth Strategy Customer Acquisition 6 Customer Scoring Methodology 7 Segmented Customer Database 8 Targeted Campaigns Customer Acquisition 9 Leads Routing to Sales 10 Discounting & Subscription Sales 11 Enhance Commission with quality metric 12 Payments Policy 13 Commission on Telesales Handover 14 Key Account Management Planning 15 Auto-renewal 16 “Call Only” Contracting 17 90-Day Rolling Contracts Customer Mgmt 18 Enhanced Treatment strategies 19 Improved Bedding-In Process 20 Optimized AM Resource Allocation 21 Operationalize 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 4
- 10. COMPANIES OFTEN STRUGGLE TO DEFINE AND OPERATIONALIZE THE RIGHT KPIS ACROSS THE CUSTOMER LIFECYCLE 10 WAYS TO MEASURE CHURN PROS AND CONS OF USING METRIC REVENUE / VALUE DRR CRR x Decrease in value % of month ( - MRR end of month ( ) MRR of / = MRR beginning - ( )) of month CUSTOMER VOLUME at end ( - New customers = Revenue Churn upgrades MRR beginning = One method in isolation will not tell the whole story or give a complete understanding of the business • 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 Customers acquired ) / Customers at beginning X 100 Churn Rate Customers at beginning ( - Customers at end ) / Customers at beginning = X 100 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 5
- 11. REDUCE THE NUMBER OF UNPROFITABLE CUSTOMERS ACQUIRED 11 Customer Strategy CLTV Profitability Operationalized Propensity Operationalize Segmentation Customer Scoring Strategy Optimize treatment strategies to reduce cost-to-serve on these accounts Recommendations
- 12. EMBED OPERATIONALIZED SEGMENTATION & PROPENSITY ACROSS THE CUSTOMER OPERATING MODEL 12 Customer Strategy CLTV Profitability Operationalized Propensity Operationalize Segmentation Customer Scoring Strategy Embed Operationalized Segmentation & Propensity across the Customer Operating Model 1 Acquisition • Prospect database • Marketing Campaigns • Leads Routing 2 Conversion • Discounting • Commission on Quality • Payment methods • Handover – IS to KA 3 Management • Improve bedding in • Enhanced treatment strategies • Trigger based retention 4 Measurement • Operational KPIs • Customer Surveys 1 4 3 2 CLTV Profitability + Propensity Model = Operationalized Segmentation (Customer Score) Recommendations
- 13. IMPROVE QUALITY OF LEADS 13 Customer Acquisition CLTV Profitability Operationalized Propensity Operationalize Segmentation Customer Scoring Customer Segmentation Marketing Prospects Database 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 Form Inbound Call To Telesales Zoe (SIC code driven, Camp. Code WIP) (~200k Contacts) 1 1 2 3 4 • 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 messaging 4 5 • Leads are rapidly categorized and routed through best channel/advisor 4 Recommendations Recommendations
- 14. IMPROVE QUALITY OF THE SALES PIPELINE 14 Key Accounts Telesales Handover to Account Management 1 2 3 4 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 accounts o 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 5 Recommendations Recommendations
- 15. ENHANCE EXISTING CUSTOMER STRATEGY AND JOURNEYS WITH A REFINED SEGMENTATION MODEL 15 Customer Management Grow/Invest Farm Park (low contact, renewal) Intensive Care Wi- Back Trigger 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 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 3 • 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
- 16. EXPLORE POTENTIAL FOR ALTERNATIVE BUSINESS MODELS TO TREAT LOW USAGE/PROFIT CUSTOMERS 16 Customer Management 2 3 Grow/Invest Farm Park (low contact, renewal) Intensive Care Retenti on Trigger 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 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
- 17. EXPLORE OPPORTUNITY FOR ALTERNATIVE CONTRACTING METHODS THAT WILL IMPROVE RETENTION 17 Customer Management 2 3 Grow/Invest Farm Park (low contact, renewal) Intensive Care Retenti on Trigger 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
- 18. LET’S KEEP IN TOUCH 18 Art Hall Alvarez and Marsal 3424 Peachtree Road Suite 1500 Atlanta, Georgia 30326 (404) 759-9158 ahall@alvarezandmarsal.com Twitter: Art_Hall4 LinkedIn: https://www.linkedin.com/in/arthall
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