Saving Customers Through the Call Center After They've Dumped Us
There comes a point when every customer decides they no longer want to do business with you. It is inevitable. However there are always opportunities to change the customer’s mind to convince the customer your call center can still service his or her needs. Keeping these customers on your side is critical to customer retention.
In my experience this vital activity of saving customer relationships is ignored or done badly. Ignorance usually comes from smaller businesses where the emphasis is placed on driving revenues by selling to new customers rather than protecting the existing customers. Badly knows no type or size of business, often appearing either as an "add on" task within the customer call center, or as something that's done without understanding how it fits into the business. Either way, the results can be disappointing and sometimes damaging.
Passive and Active Customer Retention
At its most basic, customer retention falls into two camps: passive and active. Passive customer retention is the approach we may be most familiar with. We wait for the customer to contact us and then we encourage the customer to change their mind with "save the sale" techniques in our call center, or "customer loyalty discounts" behind the online cancellation pages. For the most part this is undertaken by those firms that have a subscription or regular payment model, such as online content, insurance or utilities. In theory passive retention is relatively easy to establish as it requires simple modifications to a website, or some additional training and support for call center representatives.
Active retention requires greater business intelligence and investment. The objective is to identify those customers whose behavior suggest customer disloyalty. Then the call center should proactively contact the customer before the customer can make a conscious decision to go elsewhere. This is not the same as blanket customer loyalty programs or untargeted discounts for long-term supporters, but about picking up the phone or writing an e-mail that saves future revenues.
What Toilet Rolls Can Teach Us About Customer Retention
Being active requires a constant watch on the customer base for signs that something is going on, then having in place a suite of tools to reach out. Some years ago, during my consulting career, I worked with a retailer who was disappointed with the performance of their customer loyalty program. By looking into the customer data my team was able to identify an indicator of customer disloyalty developing—toilet rolls. If a shopper did not buy toilet rolls on the visit their normal purchasing patterns suggested there was a high probability that within a couple of weeks they would stop coming back.
Their retention strategy was built out of constantly mining their data in search of potential disloyalty, and then sending vouchers in the mail. Initially sent as blanket "money off" coupons, the mailings were eventually tailored to offer a discount on a product the customer normally purchased, which proved to be much more effective. The strategy even produced an instance where a specific cheese was ordered into a specific store because just one person with a high spend purchased it.
Clearly delivering this level of sophistication required a substantial investment in technology and may be beyond the reach of many. Yet even simple approaches can yield results. When home insurances were due for renewal, one insurance broker I knew would call the policyholder and talk to them—but only if that customer had cancelled or lapsed another policy during the previous two years. A few years before he'd noticed how those who cancelled one policy would gradually move away over a couple of years. His simple intervention of a phone call limited this effect and typically he saw a third of the people he spoke to come back into the fold within two years.
Putting a Customer Retention Plan Into Your Overarching Strategy
The key to both of these examples is that the approaches had been thought about as part of the overarching business strategy. Volume mattered to the supermarket, so it made sense to invest in automation and technology. Profitable customers mattered to the broker, so while he was happy to allow transient policyholders to come and go, those who had more than one policy were typically more profitable and therefore worth protecting. The personal touch of the phone call enhanced his brand as the "local" expert.
When you start to form your customer retention strategy it must be considered within this context. If your aim is to increase your customer base you may decide to use techniques that hit as many people as possible, regardless of profitability. On the other hand, profit hunters may be more selective, willing to lose outright revenue because the cost of winning it is too high. Whatever decision is made, it must be a well-informed decision, which is where I have often seen retention strategies fall flat.
A small business I was working with had adopted a fairly traditional passive retention strategy because it seemed like the right thing to do. Customers would call in to cancel their subscriptions, at which point the call center representative would try and talk them out of it. They were reasonably successful, and an Activity Based Costing exercise had shown it cost $20 to field the cancellation call. Based on margins it would take about four months to recover the extra expense, and as on average a saved subscription would last for another eight or nine months before it was finally cancelled. It appeared there was profit to be had.
What I saw wasn't $20 dollars; it was more than $65. Yes, it cost $20 to handle one call, but only one call in four resulted in a saved subscription. A simple math error had resulted in the management team buying into a strategy that was making an operational loss. This was not good news for a business actively seeking profits.
The Answer is Training
A simple solution—one taken too often perhaps—would have been to give the call center representatives some more sales-oriented training and then set specific customer retention targets. In some cases this may be the answer, indeed sometimes customer retention teams perform so poorly because they are treated as a customer service team rather than a sales team. For this business the customer strategy took on a more rounded approach.
The passive component was moved largely online. Many customers managed their accounts via a website, although providing a "cancel my subscription" option had been resisted to drive people into making a call. The new cancellation page was designed to focus on the benefits of membership, while follow-up e-mails were designed that counted down to the date access was withdrawn, each giving an option to repurchase at a "welcome back" discount. It was simple, cheap to set up and although retentions were barely in the double digits, the investment was recovered within a few weeks.
Taking Action to Save Customers
Two active components were also created to target "desirable" customers—typically customers who bought additional services or who recommended other potential customers. First was an outbound phone call from the call center representative to customers who did not log into their accounts during a four week period. Structured as a survey, the call was designed to both collect information to determine whether or not to continue trying to retain the customer, and to remind the customer they were subscribed to the service. Second was an outbound call from the call center sales representative to the customers who did cancel online. Already subject to the passive tactics, this gave the desirable customers an extra nudge in the right direction.
Finally, the payment structure was changed. Direct debits had been accepted, but these can be cancelled directly at the bank, therefore bypassing the customer retention strategy completely. New subscribers were only offered cards as a payment method, drawing them into the pool of potential retentions.
It is true to say that revenues dropped marginally as a result of lower retention rates, yet so too did call center operating costs. With greater discipline and understanding within the strategy it became easier to tweak components, making them more effective. The result was an increase in profitability, freeing up money for investment.
Customer retention is one of the key, and often overlooked, strategies. I've seen too many businesses who seem quite content to watch customers leave without even talking to them to find out why. I've also seen good money thrown at bad ideas which may keep numbers on the books, but do little for profits. With a well thought out customer strategy there is no reason why your call center shouldn't be able to retain customers who might otherwise walk away.
First published on Call Center IQ.