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Customer retention strategies: A complete waste of time?

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Forget customer retention, says Ashley Patterson, focus on anti-defection instead. Because there is a difference...

25th Nov 2011
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In the current economic climate, you can understand why doubt can creep into the minds of marketers regarding the value of investing in customer loyalty. If consumers are looking for better value alternatives to their current brand choices then perhaps acquisition should be the priority when it comes to budget allocation.

Certainly over the last two years it is possible to identify groups of customers who have become both increasingly price sensitive and also less committed to brands they have been loyal to previously. The supermarket industry is a great example where once great relational loyalty propositions are being overshadowed by price promotions and greater promiscuity from the customer base. 
 
However, research still highlights that the probability of selling something to a prospect is only about 2-20%, while the probability of selling something to a customer is 50-60%. A big problem for brands, though, is that customers can all appear to have the same likelihood or opportunity to be loyal when first acquired, and yet clearly some customers end up being more loyal than others.
 
What the current climate does demand is new thinking about the best way of keeping your customers. Rather than executing passive retention strategies which assume that customers are yours to keep, it is critical to think more aggressively and focus on ‘anti-defection’. 
 
Semantics? Not at all. Anti-defection is about earning loyalty. It is about using every touchpoint at your disposal to recognise the status of your relationship with the customer and their propensity to repurchase and responding to their changing needs and perceptions.

Accommodating the customer experience

The key to building profitable, enduring relationships is to understand what the customer values and expects from a brand. Brant McLaughlin, author of The Tao of Customer Loyalty, observes, “The customer absolutely always decides what is of value.....value is not pricing. Price is only meaningful when the customer doesn’t have anything else to compare and contrast”.
 
Consumers build a perceived equity with brands. Becoming a customer should change the way in which the brand listens to, talks to and rewards commitment from, the customer. Simply put, the experience of being a customer is the key determinant to the individual remaining a customer. Brands need to understand the customer experience more than ever before, identify key moments of truth or momentum points that have a real impact on the customer’s decision on whether to buy again or to look for a new brand.
 
Very few brands create retention programmes that really accommodate the full customer experience, or indeed the diversity of experiences customers may have. Welcome packs, newsletters or magazines and re-solicitation communications are still far too often created in batches with little more personal recognition of the distinct customer than dropping their name into a letter, email or pack. 
 
I have seen car companies send out welcome packs that show all of the other models the customer decided not buy or the credit package that is far too late to promote now the purchase has been made; similarly, I’ve seen mobile phone companies that instantly promote new handsets and tariffs to the fledgling customer. Neither of these help the consumer feel good about the product or service they have just paid for.
 
What customers want to have at the very least is some demonstration of recognition and effort from the brand when interactions occur. Being recognised is one of the most valued components of the customer relationship. For some it is through the points they earn whenever they shop, and the treats this offers them; for others it is the fact that they are instantly welcomed by name when they call to talk about their i-technology expert.
 
Consumers do not want to lose the benefits of being a brand’s customer if those benefits matter to them. The fear of loss is a much greater motivator than the opportunity or prospect of gain. Great anti-defection strategies are therefore about creating a high perceived value in the mind of the customer to ensure that the emotional tug of losing this far outweighs the rational arguments of better price or product innovation from competitors. Brands build loyalty through experiences that reinforce the consumer perceived equity. 
 
A friend of mine is an Apple devotee, in part because of the fantastic products, but more recently as a result of how the customer experience has made him feel. His disappointment with a phone case that had deteriorated was met with equal disappointment from Apple staff and a new case was dispatched immediately with a follow up to ensure it had arrived and that he was happy. The level of personalisation delivered from the moment he was recognised and greeted on the phone, the follow up and every time he interacts with the brand has made what could have been a cold corporate entity a familiar and welcome part of his life and something the competing brands will find almost impossible to dislodge.

A step change in strategy

The real step change in moving from a retention strategy to an anti-defection strategy is putting much more focus on recognising the triggers that indicate a customer may be at risk of leaving the brand. 
 
When working in the automotive sector I discovered that the second warranty claim on a new car increased the customer’s likelihood to defect by 30%, and that a request for information on the diesel range coming from a petrol powered customer increased defection by 50%! The former was linked to dissatisfaction, the latter was linked to a change in attitude and need for new information. Both were clearly identifiable through the brand’s database and could be acted upon before it was too late.
 
Brands have so much more data than ever before that can deliver new insights as a result of connecting multiple touchpoints and exploiting the digital environment. By creating a single customer view which joins up all of a customer’s touchpoints you can make well founded assumptions about the rationale behind a customer’s behaviour and what it means to you as a business. Data is still the critical tool in helping brands identify these momentum points and quantify their impact on the customer’s propensity to stay or switch.
 
Anti-defection strategies require a change in the view of how marketing budgets are used. It moves from being simply a resource to deploy marketing messages to a vital tool in delivering on the brand promise and delivering a customer experience. This approach builds upon the advantage of real time insight that only the brand has on its customers, and so reduce the impact of competitor acquisition strategies.
Ashley Patterson is executive planning director at direct response and relationship marketing agency WDMP.
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