It used to be boring. But five recessionary years have confirmed ‘retention’ as marketing fashion’s ‘new black’. It’s all that stuff everybody vaguely knew but most didn’t practice: loyalty, lifetime value, relationships. And, take note, it’s no fad. Just long overdue.
In traditional marketing, acquisition – making the next sale – is king. Understandably. It emphasises the next win, the thrill of the chase. It adopts the language of the ‘hunter’ (as top business developers are called in consultancy): you target the punter and you ‘knock him over’. It offers glamour and rich reward. And, in a final and most egregious flourish, it is the essence of the disaster that has engulfed banking. If you combine PhD-complex products, human ‘hunter’ instinct and cultures incentivised only to hit the next sale or deal, then why is anyone surprised by Barclays et al?
Poor old retention, meanwhile, is hard, continuous work. Long-term and longer yawn. Such ‘farming’ simply doesn’t have the same sex appeal as hunting. It won’t justify a bottle of Bolly! As an early boss summarised: “so long as we win more than we’re losing, who cares?”
Answer: well almost every business. For example, stemming a typical annual 25-33% churn means survival in tough times and will pump the bottom line in good. Leveraging the recommendation value of loyal client-advocates often underpins 50% of new business in a professional services or considered purchase environment. Focusing on your ‘share of wallet’ (say of a customer’s eating out preferences) may not only yield growth but also innovation for the long-term.
How does it work? Well don’t panic. This isn’t an ad for an expensive CRM software implementation. True, that might help when it comes to downstream execution. But first focus on how you create the retention asset: customer goodwill.
Think of customers’ ‘goodwill’ as a series of bank accounts. Keep them nicely in the black and you can ride out problems and build opportunities. Run them on ‘empty’, or into the red, and the smallest incident may mean you lose the customer.
Research finds six major ways to credit your customers’ goodwill accounts. As you might anticipate, people expect to be satisfied with service and utility. And many are committed to brands and relationships.
But evidence suggests that the most valuable is satisfaction based on pleasure. Your product ticks all boxes (utilitarian satisfaction) but do customers enjoy their experiences? Your waiter’s timing is impeccable but does he ever make customers smile? Your project reviews are perfectly organised and beautifully presented but does anyone have fun? And, note, this pleasure (or hedonic) satisfaction unerpins a very potent customer behaviour i.e. public advocacy or willingness to endorse your product in an article or on stage.
Next comes fairness (much loved of course by Brits). Please note this isn’t about some philosophical absolute. It is, rather, about perceptions. If a customer believes that you deal fairly in all aspects from pricing to after-sales service, it creates an unstated ‘my word is my bond’ relationship. Fairness is especially a strong defensive currency. It creates resistance to switching (‘yes, ABC is cheaper but I trust XYZ’) and it supports exclusive preference (‘I know we could easily walk to Beta or Gamma Restaurant but I’m at home at Alphas’). Note to any new potential entrants to UK banking: build even the most basic reputation for fairness and just watch the customers pour out of the old discredited high street players…
And finally: well it may be the ‘new black’ but your opportunity is that most people really don’t know how to wear it well. Retention isn’t about ‘targetting’ with a loyalty card or knocking them over with a special loyal-customer bonus. That’s hunter language…. Effective retention is about engaging, working together, creating mutual opportunities… It’s simply the right thing to do. Isn’t it?