notes version: multichannel retention strategies a steady diet of low-hanging fruit

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Agenda

• Identifying Churn and measuring Life Time Value

• Cost of Acquisition vs. Retention

• Utilization of Business Intelligence and Analytics to identify optimal channel(s) for your customer or donor

• Real World example of an effective Multi-Channel Retention campaign utilizing Analytics and Cost-Progressive Channel Strategy

Acquisition

Current Customers

Farmer Retention Farmer Acquisition

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What is Customer Churn?Simply stated:It’s the act of losing

your customers due to competitive pressure, unhealthy relationships, financial constraints, etc.

How do most of us deal with customer churn?

REACTIVE!

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Customer Churn Costs• The average consumer service

company experiences between 30% and 70% customer churn annually

• The average company has between a 60% and 70% probability of success selling more services to a current customer. These figures drop to a 20% to 40% probability, and then to a 5% to 20% probability, when selling to former customers or prospects, respectively

• Last year, customer churn collectively cost wireless operators an estimated $10 billion. And that’s just the costs of activating and deactivating services

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Customer Churn Costs• As little as a 5% reduction in

customer churn can boost net profits by as much as 20%

• A 5% monthly churn rate for a services industry means a company has to acquire 1.7 digital customers just to keep one

• Hundreds of studies have proven that most companies spend $10 to acquire a new donor for $1 spent in retention strategies!

Knowing this, why don’t we invest more in our current customers?

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Advertising

Target Marketing

Technology

Modeling/Profiling

Incentives

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Customer Acquisition

Case Study: AccuQuote

• A leading provider of term life insurance

• The Challenge• Inbound leads needed to be better prioritized for

the sales team

• “We knew that 20% of our leads were unlikely to move through to paid status – the problem was that we didn’t know which leads were which.”

• Sean Cheyney, Vice President of Marketing and Business Development


• The Solution: • Score leads based on their likelihood to convert

to policies

• Leads are ranked on a scale of 1 to 10 with 1 being most likely to convert and 10 being least likely

• The most likely-to-purchase prospects are then moved to the top of the queue for the outbound dialer and handled by live agents

• Leads that are judged to be less likely to convert are contacted through email or passed to trainees

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• The Result• 4-5% increase in sales conversion overall

• Increase in conversion plus decrease in expense leads to lower cost of acquisition

• A boost to sales team productivity — agents gained an extra hour to spend on cross-sell and needs analysis

• No loss of sales in the segment that received email only

Case Study: Education Client

• A leading provider of educational support services to consumer households

• The Challenge• Thousands of leads coming in and being

distributed to franchise owners

• Dissatisfaction from franchise owners over quality of leads

• Need to prioritize efforts to maximize revenue

• 3% lift in conversion equates to over $30mm in additional revenue


• The Solution• A multi-channel approach to following up on

leads based on lead quality

• Use a combination of phone, email and direct mail to contact high potential consumers

• Use a lower cost contact method for lower potential leads

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• Example:• High potential customers receive premium DVD,

personalized direct mail piece directing consumer to personalized URL, email and phone contacts on a set schedule over 2 weeks

• Low potential customers receive postcard only


• The Result• Compared to a control group, the test group

utilizing a tiered, multi-channel approach saw a 41% increase in initial enrollments within the targeted groups

• An overall 8% increase in conversion overall

• A 360% ROI

Are all Customers created equal?

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Customer A Customer B

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First…Who do you WANT to keep?

$ $Formula for CLV

Present Value = Future Value/(1+i)n

(1+i) = Interests N = No of Years

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First…Who do you WANT to keep?

• The customer lifetime value can be used to drive decisions such as which customers to target, how much to spend on saving them, what is the most effective media to use to communicate with them, and how best to serve them to ensure that they remain loyal for years to come

• Common questions that service providers should be asking to be used in analytics:

• Am I accurately capturing, on a per-subscriber basis, all relevant revenue and cost events?

• Am I capturing information necessary to identify different types of churn; e.g. structural, voluntary, and non-payment churn?

• What can the data tell me that I can act upon?

• Can I tell if my business is changing based on my data?

• Am I using the right data?

• When looking at how to keep my customers—am I recording (properly) why they left?

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Utilizing Business Intelligence in Retention

• First, you have to decide who you WANT to save

• Analytic data models and human analysis combine to return recommendations on upselling and retaining individual customers drives real value for providers

• Develop a customer contact strategy. Some companies have a policy of six touches per year, remembering that a bill is not a touch

• Don’t rely on statement stuffers to communicate

• Use analytics to predict defection. A modern database can identify potential churners with an accuracy of better than 90%

• Understand the causes of churn and use this information in your analytics

• Develop Lifetime Value ROI’s for your customers

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Customers are Different

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• Customer A

• High usage

• Infrequent complaints

• High end equipment

• No threats of leaving

• Customer B

• Low usage

• Frequent complaints

• Low end equipment

• Frequent threats of leaving

How you doin’?

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BI Analytics for Filtering • Data modeled to provide which

customers deliver the best ROI for targeting

• Second, channel segmentation utilized to maintain impression count while reducing costs

• Channel options can include:

• Email

• Mobile

• Social

• PURL’s

• Targeted Mail

• Telemarketing

Multi-Channel Campaign

• Client Profile: • National Wireless provider with “tens of millions”

of customers

• Regional competition driving variable offers that are hard to manage

• Brick and Mortar stores carry significantly higher cost structure

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Challenge

• Shrinking retention budgets

• Increasing mail costs

• Diminishing response rate to static Direct Mail offers

• Basic segmentation strategy did not accurately reflect “churn”

Solution

• Utilize Business Intelligence to identify likely to churn customers

• Utilize variable print and screen technology to unlock variable offers and segmentation

• Propose a multi-channel and cost-progressive strategy to increase ROI and marketing effectiveness

• Employ multiple call center strategies to reduce talk time and expense


• Control Retention Program:• Basic segmentation strategy based on contract

expiration

• Direct Mail offers driven by current plan and usage only

• Timing starts at 90 days to expiration and continues through 60 days after contract expiration

• Drive customer to inbound phone call for contract signing

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Control Campaign Results (Direct Mail Sent to Every Customer)

Units CostCustomers

Saved

Customer Base 30,000,000Identification Filter 0Customer Sent Direct Mail 30,000,000 $21,600,000Inbound Calls from Direct Mail 750,000 $4,125,000 202,500Total Cost of Direct Mail Campaign $25,725,000Direct Marketing Cost per Customer Saved $127.04


Multi-Channel Customer Retention Strategy

IDENTIFICATION

TEXT MESSAGING

DIRECT MAIL

OUTBOUNDPHONE CALL

IDENTIFICATION

TEXT MESSAGING

DIRECT MAIL

OUTBOUNDPHONE CALL

Strategies Employed

• Business Intelligence Group and Analytical Modeling

• Variable Scripting and Offers

• One-to-one Direct Mail/Digital Printing

• Target Routing/Skill Based Routing

• IVR Verification

• Best Time To Call/Bucket Calling Efficiency Based Dialing Strategies

• Front-end (Starter) / Back-end (Closer) Based Dialing Strategies

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IDENTIFICATION

TEXT MESSAGING

DIRECT MAIL

OUTBOUNDPHONE CALL

IDENTIFICATION

Propensity to churn

Over-utilization

Contract expiration

Old equipment

Low usage

Filter out

Payment issues

2.225 m customersto be targeted

Certain geographies

Do not contact

2.25M customersto be targeted


IDENTIFICATION

TEXT MESSAGING

DIRECT MAIL

OUTBOUNDPHONE CALL

TEXT MESSAGING

Filter

Do not textNon-

responders

Old equip/No text

capability

225kremoved

PersonalizedText2.0M

Offer Basedon

BI Model

Offer Basedon

plan type

Phoneexclusive

offer

InboundCall

Keepcustomeraway from

retailoutlet

160K Calls@ 8% RR

E-VerificationE-Contract

Offer Basedon

BI Model


IDENTIFICATION

TEXT MESSAGING

DIRECT MAIL

OUTBOUNDPHONE CALL

DIRECT MAIL

Filter

Do Not Mail

Non-Responsive

to Mail

ROI Filter:Usage/

Profitability

461KRemoved

PersonalizedMail Piece

1.38M

Personalized

Offer BasedOn BI Model

Offer BasedOn Plan Type

Geography

DemographicPsychographic

Drivers

PhoneExclusive

Offer

InboundCall


retailoutlet

55KCalls @4% RR


ROI Filter:Usage/

Profitability


DemographicPsychographic

Drivers

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IDENTIFICATION

TEXT MESSAGING

DIRECT MAIL

OUTBOUNDPHONE CALLOUTBOUND

PHONE CALL

Filter

Do Not Call

Non-Responsive

to Phone

Respondentsto Text orDirect Mail

BillingCycle

MoreStringent

ROI Filters

649KRemoved

OutboundCall675K


Offer BasedOn Plan Type

PhoneExclusive

Offer

405KContacts

Made

InboundCall


retailoutlet

74KCalls


MoreStringent

ROI Filters


Multi-Channel Campaign • Filtered out undesirable

customers in order to curb further investment

• Used modeling and analytics to filter through contact channels as well as crafting offers

• Utilized variable print and screen technology to ensure a customizable experience

• Focused on efficiency and maximizing ROI

Texting/Email

Direct Mail

Telemarketing

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Multi-Channel Campaign Results

Metric CostCustomers

Saved

Customer Base 30,000,000Identification Filter (27,775,000)Text Filter (225,000)Customer Sent Text 2,000,000 $80,000Inbound Calls from Text 160,000 $880,000 83,200Direct Mail Filter (460,920)Customer Sent Direct Mail 1,379,080 $992,938Inbound Calls from Direct Mail 55,163 $303,398 28,685Outbound Telemarketing Filter (648,719)Outbound Telemarketing Universe 675,198Outbound Telemarketing Contacts 405,119 $2,329,432 190,406Inbound Calls from Outbound TM 74,272 $408,495 38,621Total Cost of Direct Marketing Campaign $4,994,261 340,912Direct Marketing Cost per Customer Saved $14.65

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Multi-Channel Campaign Summary

Control Multi-Channel

Customers Saved 202,500 340,912

Direct Marketing Campaign Cost $25,725,000 $4,994,261

Cost per Customer Saved $127.04 $14.65

Sales Revenue of Saved Customers $96,130,800 $161,837,687

Percent of Saved Revenue Spent on Direct Marketing Efforts

26.76% 3.09%