customer retention summit integrated insight v1

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Integrated Insight Strategy for Customer Retention

Tony MooneyCustomer Retention Summit, London14th Oct 2009

2Customer Retention Summit October 2009

Agenda

• What do we mean by ‘integrated insight’?

• Steps to Success

• Examples and Summary


For retention, two important domains need an integrated, insight-driven approach

Product

AcquisitionCustomer Experience

DifferentiatedPropositions

Customer Journey

Brand

What is ‘integrated insight’?

Legal

Policies Processes

CompetitionChannel

Financials

Customer Behaviour Business Behaviour


Insight techniques need to be integrated in the right sequenceInsight is a business process supported by technology

What has changed?

Why?

What to do about it?

What is customer behaviour Vs organisation behaviour

or process?

What will happen?

What is important?


Propensity Modelling

Scenario Modelling | Forecasting | Segmentation

Portfolio Dynamics Analysis and Reporting

Financial Sensitivities | Profiling | Segmentation

Market Research | Exit Interviews | Internal Reference

Customer Process Mapping | Policy Analysis | Portfolio Analysis

Insight Technique


Right-time Decision support for multi-channel marketingNot ‘some-time’ analytics

Creative

Develop Review Plan Optimise Execute

Business &ProductStrategy

Customer Strategy

Planning

DecisionManagement

Analytics

DataAcquisition

DataManagement

Strategy Product Proposition Offer

Base DataOptimisation

Reporting& Profiles

OpportunityDiscovery &Data Mining

Value &PerformanceImprovement

Strategies

CampaignEvaluation

CampaignReporting

Analytical Domain Operational Domain

ResponseCapture & Management

CandidatePropositions

BudgetsTargetsOperationalConstraints

Creative Requirements

Rapid Insight

ScenarioBuild

Model Build&

Maintenance

BuildPlan

Third PartyData Purchase

Report & review last cycle, define next steps

Optimisation

& Iteration

Plan

Specification

Define new inputs, requirements, assumptions

ScenarioOptimisation

Real-timeAssignments

Decisioning &OptimisationDeployment

Creative & ContentManagement

‘Offline’ ‘Online’

Timing is key



Issue: IT has not delivered for Marketing Increasing demand for integrated technology from marketing

“Marketing vs. Technology is a cage-fight between ignorant

marketing people who expect technological miracles immediately

and the propeller-heads who talk only about the benefits of some

coding philosophy that no-one this side of the Klingon Empire really

understands.”

CMO Magazine



Agenda



• Examples and Summary


Establish Customer Metrics using financial modelling, profiling, predictive modelling and segmentation

Potential Value

CurrentValue

Low

High

Low

Low High

Retention

High

High

Predictive Modelled

= Customer Lifetime Value

Steps to Success


Product YCustomer

Base

Product XCustomer

Base

The Washing MachineCustomer portfolio dynamics must be understood and mapped

.. by recognising customers as individuals & tracking and measuring customer behaviour better

value evaporation

Voluntary Churn

Compulsory Churn

Migrations(soft churn)

Migrations/downgrading

Inactivity

Revenue Pool

New Revenue

New Revenue

Voluntary Churn

Upgrading

Steps to Success


Select and focus on material, addressable areas of churn that offer best chance of success

Strategy will also have to recognise that some drivers of churn will not be addressable

Net Churn pa

Goal ?% ? pa

Target Churn reduction ?

New customers

At renewal

At Home move

Re-acquired customers

Est Materiality pa

Price Rise

Channel mis-selling

Focus areasUniverse

illustrative

Competitor offer

Steps to Success


Sequenced and integrated, closed loop consumer experience - for decisions and data capture across all channels

Uninterested & rejecters

Interested Enquirer On boarding

Subscribe Establishment In LifeNursery Renew or Cancel

Ex Customer

Suspect-prospect-customer journey

Value-based acquisition

Actionable measurement of consumer dynamics

Informed Interactions: Recognise, Remember, Value

Differentiated propositions and flexible, reactive consumer strategies4

1

3

2

Marketing ‘with memory’

Steps to Success


Customer Lifecycle Management requires Multi-dimensional, dynamic segmentation

illustrativeUnderlying

DriversLifecycle state Triggers

& EventsProduct Holding Payment Exit Routes

AffordabilityAffordability

Value for MoneyValue for Money

FraudFraud

ChannelMiss-selling

ChannelMiss-selling

New not paidNew not paid

New in contractNew in contract

New 12-14 mthsNew 12-14 mths

Winback <14 mthsWinback <14 mths

Renewal <14mthsRenewal <14mths

14-24 mths14-24 mths

2-4 years2-4 years

Over 4 yearsOver 4 years

HomemoveHomemove

Price RisePrice Rise

Service ProblemService Problem

Competitive OfferCompetitive Offer

Offer EndOffer End

ChurnAttempt

ChurnAttempt

One ProductOne Product

Multiple ProductsMultiple Products

BundleBundle

Premium ProductPremium Product

RegularRegular

Failed OnceIn 12 mths

Failed OnceIn 12 mths

Failed multipleIn 12 months

Failed multipleIn 12 months

Call-to-cancelCall-to-cancel

Cancel PaymentCancel Payment

1 2 3 4 5 6

CompulsoryChurn

CompulsoryChurn

Direct DebitDirect Debit

• Integrated

• Sequenced

• Operationalised

• Timely

• Customer-centric

Steps to Success


Retention strategy will under-perform without creating differentiated propositions for key customer states

Tenure

Chu

rn R

isk

High

5 years +

New kit£XX offer

Samplepremium

FreeProduct

FreeProduct

Product deal

Service

DD migration

On-lineExtra kitFull price

Service

Service

Service

Service

Tenure Basedoffer

Service

Service

Tenure Basedoffer

Tenure Basedoffer

ServiceService

Samplepremium

Samplepremium

Product deal

Extra kitFull price

Extra kitFull price

Extra kitFull price

Samplepremium

New kit£XX offer

New kit£XX offer

New kit£XX offer

On-line

Product upgrade

Extra kitoffers

Pay up front3,6 months

Free content

Replace Old

equipment

Optimisedupgrade offer 2

Optimisedupgrade offerOptimised

upgrade offer 3

Free content (14 days, free)

Free contentWeekend (free)

BOGOFcontent

Sample DVD

Mid tierSample

CONTENT£5 for x months

CONTENT£5 for x months

Extra kitoffers

Extra kitoffers

FreeProduct

Free content

Product upgrade

Existing proposition

New – product based

New – Sample based

New – pre payment

New – anniversary

Low

Sample DVD

BOGOFcontent

BOGOFcontent

Free content

FreeProduct


Optimisedupgrade offer

Optimisedupgrade offer


Replace Old

equipment

Fairly well covered, but only

with introduction of new propositions

(green)

illustrative

Steps to Success


Strategies for Customer Acquisition & Retention must be joined up

Need for New Customers

Need to Keep Existing Customers

Financials

Customer Expectations

Customer Understanding

Marketing Techniques

Metrics

• Scale economies/market position• Return against CLV/Payback

• Set by Marketing & Sales Promises

• Researched• Assumptive

• Interruption advertising to all• Offers, incentives, discounts

• Volumes• Costs

• Market position• Retained volume/value at

lowest cost

• Set by experience

• Transactional• Behavioural

• More targeted communications• Offers, incentives, discounts

• Volumes• Values• Costs

Steps to Success


Agenda



• Case Study and Summary


An integrated insight approach transformed churn management

Starting Point Delivering the solution Building on success

• Success in growing its customer base but it came at a price – an increasing customer churn problem

• Internal analytical teams and other consultancies had been tasked with solving the problem, but none of them were able to tell the executives what was really driving churn

• Focus on diagnostic, hypothesis-based approach

• Concentrating only on the material issues

• Capability to enable analysts to deliver rapid profiling

• Development of portfolio analysis

• Impact analysis of organisational policies and processes

• Interpretation and synthesis to turn insight into a coherent strategy

• Scenario modelling

• New churn strategies and policies implemented

• Automated portfolio dynamic reporting

• Propensity Modelling based on strategy objectives

• Proactive retention programme

• Optimisation of retention budgets

Case Study: Integrated insight for Churn Management


Key dynamics were identified and remedial initiatives implemented and measured

Key Trends Identified

Growing instability in client baseDamaging “offer culture”

Churn risk from basic channelsHigh churn from winbacks

Falling quality of acquisitions

Main Initiatives

Offer “Washout” Saves & WinbackProactive Retention

Winback Optimisation Acquisition Survival Targeting

Churn “Deep-dives”

Benefits

Increased % of stable customers in the base

Lower churn calls as % of baseBetter profile of acquisitionsOptimised Winback activity


Profiling & Segmentation

Dominant Insight Technique

Modelling & Targeting Reporting & Evaluation


The rewards for getting it right were considerable.. Churn was reduced by 25% - £100m in retained revenue

Actual (Disguised) Example

Integrated Insight Programme



Integrating insight and making it actionableKey messages for improving retention performance

Create customer value metrics and align to P&L sensitivity

Integrate and operationalise prospect-customer journeys that manage customer state

Drive differentiated customer propositions not just different-coloured envelopes

Put more science into acquisition strategy

Be clear on materiality and let this guide where you focus efforts

Understand portfolio dynamics and the impacts on enterprise value

1

2

3

4

5

6

Summary

20

Thank you