Tag Archives: customer retention

Rapid Revenue Retention: A “Swarming” Approach to Keeping Customers During Recessionary Conditions

Given all the business challenges you’re facing today, the last thing you want to do is drive away customers, particularly your most valuable customers.  However, I can say with total confidence that:

Some of your best customers will leave you based on negative experiences they’re currently having!

How do I know this?  Because, after having worked on customer experience initiatives with many dozens of different companies, I’ve learned that every complex organization is disconnected from their customers’ changing priorities… and the harsh realities of the experience customers have as they pursue those priorities.  (Note:  It turns out that this statement is more than just an observation.  It’s a provable certainty that I’ll cover in another post). As a result, it is highly likely your organization is unintentionally frustrating, annoying, confusing, missing opportunities with, and on the verge of losing some of its best customers.  And your organization is doing this in ways that are impossible to fully see from where you are sitting inside the organization.

I’m not trying to be antagonistic.  I’m just stating something that should be intuitively obvious to anyone that’s ever experienced the joys of being a customer.   Bain’sClosing the Delivery Gap” clearly illustrated this disconnect as follows, “When we recently surveyed 362 firms, we found that 80% believed they delivered a “superior experience” to their customers. But when we then asked customers about their own perceptions, we heard a very different story. They said that only 8% of companies were really delivering.”

disconnect

But wait!  It gets worse!   Not only does the gap exist, the gap is almost always growing.  This is true in any situation where the EXTERNAL REALITIES (customers’ circumstances, needs, expectations, and perceived alternatives) ARE CHANGING FASTER THAN THE INTERNAL BELIEFS held by management about what’s most important to customers.  If this is true in your situation, the rate this gap is growing is proportional to the rate of change in your external environment.

As we’ve entered this recessionary economic period, the external environment is changing quite dramatically and quite unpredictably.   As a result, any organization that turns its attention inwards rather than getting even closer to customers is only going to accelerate customer attrition and, ultimately, the irrelevance of their business.

In previous posts, I’ve started to address the most important strategies for dealing with these challenges.  (See:  When the Going Gets Tough… The Tough Get Closer to Their Customers and Delivering Winning Experiences for the Recessionary Customer Mindset ).   In this post, I’d like to extend these perspectives to one of the most valuable things you can start doing today.

Rapid Revenue Retention – A “Swarming” Approach

Over the past decade, we’ve done a particular type of focused Rapid Revenue Retention effort for clients.  We’ve affectionately call the approach we follow “swarming” or “swarm sensing” because it involves sending a distributed team of people into the field to observe (i.e., to swarm around) the experience customers are having.  The approach we follow is based on Swarm Intelligence; a highly parallelized approach to reconnaissance used by the military.

swarm

The objective is, over an 8-10 week period to:

Identify and prioritize the six most important things the company can immediately start doing or stop doing that will lead to a substantial improvement in customer retention or additional sales

In order to accomplish this objective, we send a team of “swarmers” into the field to live with and talk with customers and prospects; to experience things first hand, from the customers’ perspective; and to identify the specific frustration and confusion points that are leading to attrition or lost sales opportunities.   Generally these efforts have been able to quickly identify improvements that lead to a 3 to 5 point increase in retention and, often, a significant increase in the win rate on new business.  Depending on the size of the business, the benefits of this focused effort have traditionally run into the tens of millions of incremental retained revenue.

Here’s an example:

  • Situation: The company is a leading provider of financial products that get sold through intermediaries (dealers) around the country. The differentiated positioning for this organization was their ability to partner with those dealers in a way that created a measurable improvement in their performance. The President of the organization approached us and said, “I believe we provide a highly superior product but I can’t understand why dealers are leaving us at an increasing rate.”
  • Approach: In order to respond to his request, we had a team of swarmers hit the field and spend about 6 weeks with current dealers, lost dealers, as well as, the customers of those dealers. Like other situations we’ve been in, it’s surprising how immediately apparent the issues are when you’re able to step into the customers’ perspective.
  • Results: In the course of those six weeks, we were able to identify seven immediate interventions that improved both dealer retention and the profitability of the existing dealers. These interventions included improvements to the screening criteria for pursuing new dealers, modifications to the initial dealer training they provided along with the creation of a refresher training schedule, and an attrition early warning process that picked up on changes in dealer behavior and directed sales people to intervene proactively as soon as the dealer started to exhibit the behaviors associated with leaving. Over the course of the 6 months following this effort, the organization was able to increase their retention from 88% to 91% creating a revenue uplift of approximately 20 million dollars.

Organizing the Swarm

We’ve generally done this with a small number of trained swarmers (consultants or researchers) supported by a team of more inexperienced swarmers (employees).  While it’s generally easier for outsiders to approach the situation from a fresh perspective, there are several conditions that can be managed to make it possible to accomplish work economically with inside people.  The keys to organizing the swarm include:

  • Ensure swarmers are capable of seeing things from an unbiased perspective. This can be an unnatural act for anyone that’s been involved in any way in delivering or managing the services being observed.  People who’ve had any involvement in delivering the services being observed are “burdened by knowledge.” This includes being steeped in the processes, constraints, assumptions, excuses, biases, and blind-spots associated with delivering the service.
  • Arm swarmers with the right tools and training. Over the past 10 years, we have developed and continuously improved a “Customer Experience Observation Field Book” and accompanying training that has been effective at helping swarmers better see the experience from the customers’ perspective.

experience-fieldbook

  • Ensure swarmers are able to put themselves in the customers’ shoes. Swarmers must be able to step into and “live” the customers’ priorities.  It’s important that swarmers be able to viscerally “get” what the customer is trying to accomplish, feels their needs, and understands how the customer looks at the experience.  This can be easier to do with inexperienced swarmers when those people strongly resemble the customers in question and have themselves been in similar customer situations.  For example, we’ve found that inexperienced swarmers have done an outstanding job observing the experience at Disneyland, when they themselves fit the profile of the customers whose experience we’re interested in.  However, we’ve had much less success in situations where swarmers come from significantly different cultural, economic, or business backgrounds than the customers in question.
  • Ensure that swarmers have no relationship with the customers being observed or interviewed. The presence of any personal, professional, or organizational relationship with the customers being interviewed will bias: 1) what customers may feel comfortable sharing, 2) what the swarmer is comfortable asking about, and 3) the purity of observations that can be captured.  It is particularly important that neither party has a stake in the findings.  This is one of the reasons why…

One of the most biased and ineffective ways to listen to customers is through your sales and account management executives.

The immediate reaction we typically get is, “We’ll just have our people on the frontlines… the one’s that spend all day with our customers… do this.”  While we understand the advantages, we’ve learned this is generally a bad idea.  There are three multiplicative barriers that get in the way of having salespeople and account executives be a good source of insight.  First, when salespeople talk to customers, they have an agenda and customers know it.  There are often negotiation-oriented and face-saving dimensions to the relationship between the salesperson and the customer.  As a result, customers do not tell salespeople everything.  Second, since sales people show up with their agenda and existing relationship, they generally filter everything they hear through that agenda and relationship.  So, salespeople don’t hear many of the most important things customers have to say.   Third, salespeople don’t accurately report everything they’ve heard back to management.  This is particularly true if, by any stretch of the imagination, what the salesperson heard might reflect negatively on them.

  • Build a capable, well balanced team. There is a profile for the good swarmers.  In our experience, the best swarmers tend to be extroverted, empathetic, open-minded, detail-oriented people who are capable of withholding judgment rather than quickly jumping to conclusions quickly.  Although we generally have a diverse team, you need to have enough of these types of people in the mix.

There are several things that make the Swarm Sensing process different from “mystery shopping.”  Most importantly, the intention is different.  The objective is to aggressively identify the highest impact improvements that can be made immediately.  This requires executive sponsorship and visibility for the effort, as well as, for implementing subsequent improvements.  In addition, the level of depth is different.  Most mystery shopping exercises are more about measuring compliance with expected service standards rather than getting deeply under the covers of what’s working and not working about the experience customers are having.  In a way this makes the swarming effort more like a highly directed ethnographic study.  The most challenging elements of this are equipping, training, and coordinating a distributed team of swarmers to do the work over a short period of time with a very well-defined and highly valuable business objective.

I’d be happy to share more perspective on this approach than I have room to address here.  Shoot me a message or add a comment if you’d like more information.

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When the Going Gets Tough… The Tough Get Closer to Their Customers

Whether we like it or not, the current recession will separate the weak from the strong.  For many organizations, I believe the deciding factor will be how well they recognize…

The linchpin of an effective recessionary strategy is aggressive customer focus!

In a downturn, customers’ assumptions about the future are driven by fear and uncertainty more than objective financial realities.  Any recession generates the obvious and predictable belt-tightening; customers delay necessary purchases, choose more inexpensive options, and avoid discretionary spending.  However, it’s critically important to recognize that, beyond these generalities, each recession produces it’s own unique pattern of changes in customers’ needs, priorities, and behaviors.  As a result, a recession can create opportunities for organizations that can understand these changes, think creatively, and use the situation as an opportunity to strengthen relationships with their most valuable customers.

One of the worst things an organization can do during a recession is to take its eyes off of their customers.  However, when threatened, most organizations have a tendency to adopt an inwardly-focused, “survival mode,” mentality.   They focus on operational and financial controls and stop investing in what appears like discretionary initiatives aimed at strengthening relationships with customers.  By taking their eye off of the customer, they end up accelerating customer and revenue attrition while undermining their longer-term competitive strength.  There are three things we’d recommend based on the work we’re doing to help our clients deal with this challenge:

1.      The first priority is aggressive focus on and investment in your best customers and prospects.  During a recession, a relatively small number of your best customers will provide an even larger share of your profits, while the often larger ranks of marginal or unprofitable customers will create even more of drain on the system.   The first thing to do in a recession is to clearly identify who your most valuable customers are and invest in strengthening relationships with those customers.   This includes collaborating with those customers to understand and address their changing priorities, restructuring your offerings around their unique needs and, as necessary, restructuring financial terms.  It also includes focusing sales efforts on the most valuable, winnable customers and making sure that you’re not wasting resources on customers that are not going to buy and that are unlikely to be profitable.

There are many classic examples of the benefits resulting from aggressive, customer-focused investment during times when competitors are retrenching.  For example, Dell invested in their customer-centric telephone ordering and pull production systems during the 1990-1991 downturn.  As a result, Dell was able to capture the strongest competitive position when the economy sprang back.  Singapore Airlines invested $300 million in new seats, entertainment, meals, flight attendant training all aimed at their most profitable first-and business-class customers.  As a result, they were able to not only survive, but remain profitable in the aftermath of the 1997 Asian currency crisis and emerged in stronger competitive position.

A lot of the work we’ve been doing is focused on helping clients collaborate effectively with their best customers.  This starts with the analysis required to clearly determine who their best customers are and continues with the implementation of joint planning processes, closed-loop satisfaction management practices, as well as, more agile, open, and collaborative product development and service processes.  In addition, we’ve been helping clients optimize their selling activities by starting with a clearer understanding of how their customers’ buying priorities are changing.

2.      The second priority is watching, talking with, and listening to customers more closely in order to identify creative ways to address subtle changes in their needs, priorities, and behavior.  It’s critically important to NOT rely on your traditional assumptions about what’s important to customers.  Instead you need an informed view of how your customers’ needs and behaviors are changing as dark clouds appear on the horizon.  You need to think creatively about ways to meet those changing needs and address those changing behaviors in order to strengthen the relationship, generate more value, make their lives easier, or make their businesses easier to run.  Not surprisingly, customer behavior will increasingly be driven by emotion rather than rational consideration.  By getting closer to customers you can identify ways to proactively address customers’ emotional needs and reactions.  Here are a few of the overarching behavioral shifts we’ve been observing as the recession continues to take hold:

  • Sympathetic Frugality and Inconspicuous Consumption. Most people who are struggling don’t want it to show; they’ll make compromises in order to keep up appearances.  However, even the customers that are doing well are becoming more cautious as they see friends and colleagues cutting back or losing their jobs.  Appearances matter.  Inconspicuous consumption refers to purchasing goods or services that convey a lower socioeconomic status. People who have, so far, been unaffected directly by the recession don’t want to rub it in.  As a result, we are starting to see a regression towards a more socially-neutral mean.  While the customers that are struggling will buy up in order to keep up appearances, the ones that aren’t will tone it down.  I expect we’ll see an echo of the “grunge” music, fashion, and lifestyle movement that arose out of the recession of the early ’90s.  This creates opportunities for clever, customer-centric marketers.
  • Exercising Control. People are starting to cut corners in ways that give them the feeling of being in control and of acting responsibly. All inclusive and bundled pricing that creates more predictable and budgetable expense streams will have an advantage.  Companies need to look for ways to help their customers regain a feeling of control. This might include measuring the benefits and savings associated with programs, locking in discounts for the future, etc…
  • Inexpensive Luxuries. During the height of the great depression, when 25% of families had no income and unemployed labor reached 40%, movie receipts still increased by 22%.   As stress and uncertainty levels rise, people naturally look for more inexpensive ways to meet their personal and social needs. This includes affordable entertainment alternatives. Beer, liquor, movies and home entertainment tend to do well during a recession. Product and service organizations that provide affordable alternatives to premium pleasures can benefit from promoting these options.  This includes everything from buying your latte at McDonalds or Duncan Donuts rather than Starbucks… to more economically-oriented entertainment, restaurants, hotels, and vacations.

whole-deal

I walked into Whole Foods yesterday and noticed how effectively they’ve redesigned the experience.    They’ve launched “Whole Deal,” a more value-focused experience targeted at customers who relocal-producer-loanmain committed to natural and organic foods but are feeling a heightened attention to cost.  This experience includes several creative elements that match customers’ shifting priorities : an expanded selection of lower-priced alternatives marketed under their “365” store brand,  “Money Saving Meal Plans” and “Budget Friendly Recipes” that provide advice for containing costs while maintaining a focus healthy natural and organic foods.   They are even offering “Value Tours” through the store in order to help customers find the most cost-effective solutions.  In addition, they are promoting a “Local Producer Loan Program” that highlights the support they provide to suppliers.   Overall, they are meeting a challenging situation by finding ways to add more value for customers, rather than just cutting costs.

3.      The third priority is identifying and eliminating the negative experience elements that drive attrition. Most organizations unintentionally frustrate and annoy customers in ways that they can’t even begin to understand.  Recent studies have shown that, while the economy has been weakening, their tolerance for bad service has been diminishing.  For example, a recent Customer Experience Study (conducted by RightNow and Harris Interactive) found that:

  • 87 percent of consumers have stopped doing business with an organization after a bad customer experience, up from 80 percent in 2007 and 68 percent in 2006.
  • 84 percent of consumers indicated they would tell others about a bad experience – up from 74 percent in 2007 and 67 percent in 2006, In fact, blogging about a negative customer experiences is on the rise: 22 percent of consumers this year have posted negative feedback about a company, vs. only 13 percent in 2007.
  • 58 percent of U.S. consumers said that in a down economy, they will always or often pay more for a better customer experience

In many cases, the negative experience elements that contribute to attrition may be relatively easy to fix without major investment.    The trick is to be able to clearly identify these things with an unbiased and unfiltered, outside-looking in perspective.  Over the past decade, we’ve worked with several organizations to conduct an Urgent, Short-Term Customer Retention Program.  Typically, over the course of 6-8 weeks, we can quickly diagnose the specific breakdowns in the experience that are leading to defection or lost new business opportunities.  For example, we worked with a business-to-business financial services provider to uncover the root causes for why customer attrition was increasing.  Over the course of an 8-week effort, we were able to identify 7 things they could immediately to 3 point increase in retention.  This translated into a 12% improvement in the business’ bottom line.   These improvements included a new template for on-boarding and initiating new customers, an early warning system for changes in customer behavior that preceded attrition, and expanding the schedule of follow up training for customers.

The way through many tough times is finding ways to intelligently create more value for others.  One of the surest ways there is for making sure that you end up being the strong rather than the weak is avoiding the tendency to become self-absorbed and maintain a clear focus on the customers that are, ultimately, the source of your success.