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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