Database : Stop the Churn

Six keys to successful, data-driven retention marketing

How can any company find out why customers left?

• Ask them, and keep the answers as data points that can be used for modeling.
• Profile them to discover what they have in common (demographically, behaviorally and/or attitudinally) with other customers who have attrited.

Key #3: Understand Retention
Just as you need to know what people who leave you have in common, you also need to learn as much as you can about the customers who stay. Generally, there are three reasons people will stay in a
business relationship:

• They’re so happy with the product or service that they become evangelists for the company. These people are rare and should be cherished and nurtured.
• They feel OK about the product or service. It’s adequate for their needs, and they don’t think much about it.
• They’re unhappy but not enough to go to the trouble of finding a new source. Inertia prevails.

If you know which of your customers fit each of these categories—you can ask them and use information provided by the responders to model the nonresponders—you can develop ongoing communications streams (see Key #4 below) to move some of them up the ladder. Some people who feel just OK about your company will become evangelists, and some that are unhappy can be turned into satisfied customers.

Modeling also can help a company define what kinds of customers to acquire. If attrition and retention can be predicted, why spend precious marketing dollars chasing prospects who are unlikely to stay with you?

Similarly, there probably are certain customers who you can model for potential profitability and, perhaps, not overtly try to retain them. Not every customer is good, and except for in highly regulated environments, they haven’t necessarily earned the right to stay customers forever simply by buying from you once.

Key #4: Create Personalized Communications Streams
One of the great benefits that direct and integrated marketing offers is the ability to communicate with consumers on a personal level. Usually, this involves messaging that is relevant to them, using their individual channels of choice.

To do an effective job of communications, each message must be part of an overall master plan to educate, inform and motivate the customer, rather than each communication being a stand-alone effort. Think of it as a dialogue, rather than a monologue; one that takes place over an extended period of time. This means the stream of communications should be reactive, as well as proactive. If the customer takes a specific action defined as important by business rules—such as buying again or upgrading a product or service—you should acknowledge it and build on the transaction to further deepen the relationship.

Every communication doesn’t need to sell. Sometimes a letter or e-mail that just thanks a customer for his business can work wonders. Service quality surveys are important, too. It’s a little-known fact, for example, that simply asking people to grade your service raises their perception about the quality of your service. You ask, therefore you care.

Key #5: Get Your Hands Around the Data
All of this presupposes that you have access to the data needed to determine which customers are likely to stay or leave, with enough depth of information to fully understand existing relationships and establish a 360-degree view of each customer. Quite often, this means gaining access to internal information you don’t presently have, as well as externally sourced consumer information that you can append for modeling, profiling and other forms of segmentation. A mature program needs to be driven by a database, but it doesn’t mean that you have to start there. You can test (see Key #6) using data integration capabilities before investing in a database if you don’t have one.

Key #6: Pilot and Test
You don’t have to institute a retention program all at once for every customer. Within every company there are almost always high-value segments that can be tested to prove the validity of a communications program before an enterprisewide rollout is funded. And once a program is funded and implemented, testing to improve it should continue—forever.

Almost any company can make a retention program work, if it builds the initiative around these six keys to successful, data-driven retention marketing.

Kurt Seemar is vice president, analytic strategy; Deborah Stewart is health care strategist; and Richard N. Tooker is vice president/solutions architect at KnowledgeBase Marketing, a data-driven marketing solutions firm based in Richardson, Texas. They can be reached at (972) 664-3600.

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