Customer Retention: I could be
dead for all they know.....
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Customer Retention: I could be dead for all they know.....
It never ceases to amaze me how organizations pour money into attracting new
Customers, but comparatively spend little on retaining them. Everyone knows it costs far
less to retain an existing customer than acquire a new one, some say it is 5 times more
cost effective. Why then is there an obsession with acquiring new Customers and such
scant regard given to existing customers? In this article we'll get to the root cause of this
dichotomy.
To illustrate the issue let me share with you an example of a current experience. A bit of
context first. Beyond Philosophy started life in London, England, but quickly received a
high demand from the US and thus I quickly qualified for a frequent flyer Gold card from
my preferred carrier, Virgin Atlantic.
As our US business expanded rapidly in 2005 we opened an office in Atlanta, Georgia.
This caused a change in my flight patterns as Virgin did not offer a direct service.
I switched and now travel with British Airways to Atlanta. I considered staying with
Virgin and using an inter-connecting flight but decided the additional time it would take
was not worth it. I guess Virgin hadn't built enough loyalty with me to justify the
additional travel time. As a result Virgin has lost one of their most highly profitable
`Upper Class' (Business Class) Customers.
But here is the strange thing. I expected something to happen, some type of contact, but
so far nothing! No letter asking me why I am not flying Virgin any more, no automated
email saying that they had noticed a change of flight patterns, no phone call from the
Gold member's team, nothing. For all they know I could be dead!
If they looked at my statement it would show them I haven't flown anywhere, nothing at
all in over a year. So why haven't they even bothered to find out why? Here the irony, I
used to be a big Virgin fan, but as each month slips past in which I am ignored I lose
faith in them. I now realise I am not as important as I through I was. Here's the rub; if a
gold card member is not important to them, who is?
Essentially by their lack of action they are saying "we don't care". Despite having all the
data they can't be bothered to look at it. I am sure I am a statistic somewhere on gold
card member behaviour. Some marketing person has probably completed some wonderful
presentations on this "flights are up or down on last year, blah blah blah...". But in the
trenches, they don't do anything. The devil is always in the detail.
Virgin has been spending $$$ running on marketing their Upper Class, however they
have not looked at how they can retain their existing customers. How crazy is that!
In our engagements with organizations this is what we typical see. The root cause of
Customer retentions is NOT systems, although they can be challenging, it is NOT
marketing spend, although this is required, it is the culture of the organization, and the
obsession with the "bright and shiny", the new business. This is the organizations
©Beyond PhilosophyTM 2001-2007 - In Commercial Confidence
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obsession, it dominates people lives, it dominates the KPI's and dominates, more
importantly peoples' thoughts and actions.
We see examples of this obsession behaviour manifest itself everywhere. For example:
•
Providing an 800 free phone number for new sales and premium numbers for
Customer service
•
Marketing spend being lavished on acquisition not retention
•
KPI's being dominated by the new not the existing
•
Resourcing call centres to enable sales lines to be answered quickly and Customer
service lines answered slower.
•
Targeting offers at "new Customer only" to the detriment of the existing
Customer.
•
Developing organizational cultures that rests the power with Sales or Marketing
functions, treating Customer services as second class citizens
•
Sales calls being answered in the UK, service calls being answered off shore.
Ask yourself, when did you have a party in your office for retaining a customer? People
are rewarded for the new, the exciting, the existing are just taken for granted.
New Customers bring new possibilities, new hope... "This one will be the big one", "this
one will make us $$$"! The existing Customers are boring and mundane. We know them.
Existing Customers even have the audacity to complain to us! Boy are they hard work,
lets turn our attentions to something more exciting!
It's the difference between being single or married. When you are single you go to clubs
and meet lots of exciting people and have fun. Then you get married. It's exciting at first
and then it becomes "normal". The peaks of excitement are not as frequent but the long
term rewards are much greater. You are with someone you can trust, someone you can
rely on, someone who will be with you until "death do us part". Would it be good if you
had profitable Customers who stayed with you that long. Imagine the growth, imagine
the reduction in costs.
But as someone who has been married for 26 years can tell you, marriage takes
commitment from both sides, it means compromise. You need to recognise that there
will be good times and bad times. It takes work. But is worth it! People don't think in
those timescales. Organizations don't think about life time value. But why not? Consider:
how much has Virgin lost if I was to remain a gold card member for my life time?
Therefore the first and foremost issue you need to deal with when talking about
Customer retention is to realise this is ingrained in the culture and no system or solution
is going to deal with it. This is NOT an instance fix. This subject needs addressing with
the senior team. They need to see the light and what the organization is doing today and
the opportunity to be shown some hard numbers. A business case needs to be written.
You need to have conversations about life time value, not just what it will bring in the
next 6 weeks. Once you have peoples' attention then there are a number of actions to
consider.
©Beyond PhilosophyTM 2001-2007 - In Commercial Confidence
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In our next article we will tell you what to do to retain Customers. This is the subject of
our latest book, The DNA of Customer Experience how emotions drive value. In this we
reveal two years of research with London Business School on how to create loyal
Customers.
©Beyond PhilosophyTM 2001-2007 - In Commercial Confidence
Page 4 of 4
Beyond Philosophy have written three best-
selling books on the subject of `how to improve
your Customer Experience', produced numerous
articles which have appeared in the National
Press, along with appearances on TV as expert
commentators. We are well respected for our
thoughts and theories on the Customer
Experience. We provide a very sound theoretical approach to our work. Our programmes
are grounded in our three books, our own research and our links with academia. For
example, our last book was based on research undertaken with London Business School.