Wednesday, December 30, 2009

Improving Customer Retention: Win-Back Programs

Repeat customers generally produce the majority of revenue for businesses in the service industry.  This well-known fact makes improving customer retention an annual goal for companies looking to increase profits.  Many companies utilize CRM systems, run frequency or loyalty programs and have dedicated marketing teams focused on customer retention.  However, even the most customer-centric companies lose some of their good customers to “controllable” reasons.

An often-overlooked tactic that goes hand-in-hand with customer retention is a “win-back” program.  These programs are designed to regain lost customers or reactivate lapsed customers.  This could be something as simple as a phone-call to a former customer asking them to return, or a full-blown automated multi-media campaign.  Generally these programs use personalized communications and tiered discounts fueled by data stored in both the customer service and transactional databases.   

Win-back programs can be an extremely profitable way of acquiring incremental business.  If your business has the following general characteristics, it might be a good candidate for a win-back program: 

  •      Historical transaction data available for customers
  •      Customer profile information
  •      Customer service records
  •      Frequent purchase occasions
  •      Customer revenue segmentation with “Heavy Users”
  •      Ability to offer “soft” incentives – free minutes, bonus product, etc.

Case Studies:  Successful Win-Back Programs

Comcast

Several years ago, Beacon Marketing Group was asked to do a win-back program for Comcast Metrophone, now AT&T Wireless.  They had a significant opportunity to reactivate customers lost to competition in the rapidly growing cellular telephone market.  At the time, the company had a 2% monthly churn rate, which meant that every year, they lost one-quarter of their existing subscribers.

We used a direct mail and phone effort to communicate a tiered promotional offer based on value segmentation to reacquire the most profitable customers lost to rival companies.  The audience was sent a personalized letter communicating a relative value offer with variable copy geared towards their specific, individual disconnection reason.  The letter was followed up by a phone-call from a customer-service representative. 

Comcast Metrophone experienced a reactivation rate of over seven percent, and achieved a one-year payback of eleven dollars in profit for each marketing dollar spent on the program.

 UPS

Another example of a successful Win-back program is what UPS did to regain customers lost as a result of a labor strike.  In 1997, a fifteen day Teamsters strike caused loyal UPS customers to turn to FedEx, Airborne, RPS and USPS to meet their shipping needs.  FedEx delivered 850,000 additional packages during the strike and expected to keep as much as twenty-five percent of the new business.  Thousands of UPS workers were laid off as a result of the company's losses and employee morale was low.  Jobs relied on an aggressive customer win-back strategy.

UPS sought to rebuild trust with a timely, dedicated effort to reach out to all lost customers through a combination of personal contact, direct mail and incentives.  UPS officials telephoned apologies to customers for inconveniences while assuring that they were back in business and pledging reliability.  Drivers assured customers that things were “back to normal,” and were cheerful, confident and customer focused.  UPS issued letters of apology and discount certificates, and initiated face-to-face meetings with big and small customers alike to rebuild trust and reinforce UPS's commitment. 

This aggressive strategy resulted in an eighty-seven percent increase in profits in the year following the strike, and allowed UPS to reinstate many laid-off workers.


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Thursday, October 22, 2009

Mail Just Won't Die!

Years ago, industry forecasts predicted that the rise of the Internet and email would eliminate the need for direct mail.  Now that email has become ingrained into society, should we prepare for life without daily visits from the mail-truck?

Definitely not.  Last year, the United States Postal Service delivered 203 billion pieces of mail – an average of 3.9 billion per week – to 134 million addresses.  This is almost six-billion more pieces than in 1998.  Old-fashioned, “snail-mail” generated $75 billion in revenue in 2008 for the USPS. 

Direct mail is still the marketer's most widely used tool.  In fact, direct mail is the media of choice for marketers to drive people to their website.  Why?  Because it is still the most selective, scalable and measurable form of advertising.

But that is not all.  Email, while typically cheaper and faster than traditional mail, has its limitations, such as lower response rates (versus direct mail), deliverability issues with more sophisticated spam filters and image blockers, the need to find reliable list sources, stringent CANSPAM policies, and size limits and after all, not everyone has email. 

We recommend a multi-media approach, where budgets allow.  Statistics show that campaigns using both print and electronic mediums boast higher response rates.  We proved this out most recently with a B2C baked goods client.  In an effort to save their way to success, they decided not to mail their catalog to their customer base, instead relying solely on email communications during their 2007 holiday season.  The result?  A significant decrease in the year-over-year customer retention rate, and disappointing sales during their critical holiday period.  Upon our review and recommendation, in 2008 they mailed their current and lapsed customers, in addition to the email blasts.  This strategy yielded a 72% increase in the retention rate.  And in a down economy, sales were up significantly.  The ROI on the customer mailing was at 250%!  Was cutting out the customer catalog mailing really a good idea? 

The bottom line is that 88% of marketing experts use more than one medium to generate results (DMA – Integrated Marketing Media Mix Report).  And companies that sell from catalogs attribute 44% of their sales to their print catalog mailings.  The 2008 Catalog Report from the DMA's Statistical Fact Book reveals two key facts:

·         The number of catalogs mailed continues to increase year-over-year despite the web and rising print and postage costs

·         100% of respondents had a website, but only 11% considered them to be their principal order drivers.  That means success requires more than an, “If you build it, they will come,” mentality.

The conclusions that can be drawn from this are that the big catalog companies (who consequently know more than anyone else about effectiveness and efficiency) are not eliminating their print catalogs for a reason.  Knowledgeable direct marketers are using multi-media and know that they cannot rely on email and paid search alone.  And no, direct mail is not dead!


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