Deliberate rambling is sometimes a good tool (for me at least) to flesh out and present different ideas…kind of like brainstorming. I have worked with hundreds of global organizations on the subject of customer retention, and it’s by no chance this topic continues to swirl in my brain. I consulted some long ago notes on the topic and decided to dig a few key themes out to share with you. Somethig to noodle on if you are trying to tackle customer retention as well. I illustrated on previous posts the impact retained customers have on customer lifetime value, and it’s role in the customer experience domain. Today, there are 3 key themes I dug out of my notes. Hopefully this gets you thinking as it does me.
1. When does retention begin? (lots of debate on this one folks)
2. The role of “perceived value” in retention
3. Where do emotions fit in?
When was the last time you left a company that you did business with? Did that company try and retain you? Did they wait until you were ready to leave then magically swoop in with a too good to be true offer to keep you? Was this offer made to you by someone official sounding? Someone from their “win-back department”?. Did the dialogue go something like this, “Sir/Madam, I have been authorized to provide our most valuable customers, a 1 time, 5% discount off their monthly bill for staying with us. You are an important customer, and we really value your business .” “Please stay…pretty please?”
Well, if you have experienced this, you have a good idea of how a lot of organizations deal with retention. For these organizations retention begins when you call to cancel. For others, it starts with some “red flag” popping up on the organization’s radar screen, an indicator of your “propensity to defect”. Very few organizations that I have worked with look at retention as something that begins before the alarm bells start sounding.
So looking back…did you take the offer? It probably goes without saying that this is NOT the preferred way to handle things. That if a company waits this long to retain, and offers a financial incentive to do so, this customer is probably not destined to be with the company for very long. They will be price sensitive, and when that next best offer comes streaming along, they will probably jump at it. At the very least, they will tell others on social media how to game the system. Before you know it, many will be calling seeking the same 5% discount. That’s called margin erosion, and it is a big, big problem if you are looking to increase customer lifetime value (CLV).
Here comes the punch-line. Retention begins early, earlier than most realize. There is tons of debate on when. Some say that retention begins when a prospect (before they become a customer) makes the first contact with the firm. This seems logical. Opinions and perceptions are formed here, and these will most likely affect the prospect’s willingness to become a customer. Some of these perceptions may carry over into “customer-hood”, but I contend that organizations have somewhat of a clean slate once the prospect makes the mental decision to buy and become your customer. This is precisely the point of time that I think retention “begins” – When a customer transverses the “buy” phase and begins the “own” phase of their journey.
Why is that?
I believe that opinions formed before a customer becomes a customer can be altered. And, that the experiences and opinions that matter most, form when the customer transverses the “buy” phase of the customer journey into the “ownership” phase of the customer journey. At this point, the customer begins to evaluate experiences a bit more diligently and differently. This evaluation points in the direction of “perceived value”. Meaning, what the customer has invested up to this point in time, money, reputation, against the benefit of what they have purchased. When this begins to occur, the experiences and opinions formed here matter most, because as customers, we are performing (sometimes unknowingly) a cost/benefit exercise in perceived value on a continual basis. Questions start to arise, “Did I make the right decisions?”, “Did I pay too much?”, “Were there alternatives?”, “Can I opt out if I run into problems or don’t like it?” “Am I getting the value from my purchase?”
Let’s pause here. Think back to something you purchased recently? Something where you had to spend some well-earned money, and consider that spend in the context of your overall financial situation. What happened after you made that purchase? What was the first 60-90 days of ownership like? Do you regret the purchase? Do you see the value? Was your investment in time, money, reputation offset by the value of what you purchased? Was it a good decision? Would you do it again?
All these questions I’m asking above are precisely where I believe retention begins and what effects retention the most. There is a high correlation between “perceived value”, emotional response, and retention. The first 60-90 days of birth are the most critical time in the life of the customer, and, the single biggest contributor to potential defection. This time is often referred to as “customer on-boarding”. It sets the stage for what type of relationship the organization will have with the customer.
Here is where our focus on retention needs to begin. There are specific activities an organization can build in to its processes to address the emotional side of the customer, and, in turn impact “perceived value”. First, we need to welcome them to the family. And do so in a very personalized and special way. Second, we should think about reinforcing the customer’s purchase decision. We need to make them feel good and confident about their purchase. Third, we need to educate them. Education should include both education about what they purchased so they can maximize its use, and education about how to do business with the organization, how to seek service and support, pay their bill, get answers to questions. Fourth, we should introduce them to others in the family, and help them start building a community where they can share information and experiences.
These samples above are four discrete things an organization can do to impact perceived value, retention and elicit the emotional responses that begin to build loyalty to the brand, starting with those that impact retention.
I am convinced through experience that if an organization approaches retention in this proactive way, it will have a dramatic effect on keeping customers long-term. Retention, perceived value, perceptions and emotions all go hand in hand. They start early and play a big role in the customer’s journey with the brand, and how long that journey will last.
