Where online sale of lip gloss and B2B software customer retention converge

March 25, 2013

Sometimes marketing inspiration and confirmation of instincts comes from places you wouldn’t normally look. This recent blog post on getelastic.com is case in point: http://www.getelastic.com/the-easiest-way-to-increase-conversion-by-20/. On the face of it, this post would seem to be quite far afield from the world of customer retention in B2B software, or any of the other B2B industries in which EMI works for that matter. And indeed there isn’t much that links lip gloss and software; but there is a link in the approach to solving marketing challenges.

The getelastic blog post starts off with a research-based data point: ecommerce customers are 20% more likely to purchase a product that has at least one customer review. Then, based on that data point, it presents several reasonable ways to obtain that key *first* review. The ways to do this are only important if you’re interested in driving web purchases. What’s important outside that context – and especially in a B2B context like CSM strategy for SaaS – is the way in which marketing research and analytics have identified an operational measure which becomes the strategic focus. Increasing web sales is obviously the business goal, but it’s so broad and influenced by so many factors that it’s unwieldy as an operational focus. By isolating one key factor that has a significant impact on the objective, exploration and testing of tactical options becomes significantly easier. In mathematical terms, you solve for “reviews” because you know that it will drive conversions.

Take this approach out of the world of online sales of lip gloss and into the world of B2B software customer retention and it is still just as effective. Retention is impacted by a multitude of factors –satisfaction, perceived value, switching costs, depth and breadth of utilization – each of which can be affected by a set of strategies and tactics. To optimize retention, you must first sift through all the potential factors to identify those that actually have the greatest impact. Once you have effectively ranked the factors based on their likely impact, then you can develop retention marketing strategies – new communications approaches, new messaging, testing – that specifically and precisely aim to drive improvement in that factor.

What an Overnight Camp Can Teach Us about Managing the Customer Experience

July 18, 2012

Note: Since this involves a personal anecdote, I deviate from normal EMI blog practice and include my name at the bottom of this post. What follows is a cautionary tale about how an organization can destroy customer satisfaction and ultimately threaten revenue by not adhering to these simple rules:

View your CRM approach and communications through the lens of the customer.
Understand that satisfaction = reality – expectations: if you set expectations properly through communications, then satisfaction will benefit.

This summer, for the first time, my 11-year-old daughter decided that she really wanted to go with a friend to overnight camp. The camp we selected was one that the friend—and my wife—had attended in the past and enjoyed a great deal. For anyone familiar with overnight camps these days, it will not come as surprise to learn that the cost for a month of camp was not insignificant. My wife and I wanted our daughter to be able to have the experience, though, so decided to sign her up.

About a month before camp was to start, we received a communication that detailed all of the clothes that our daughter would need during her stay. All of a sudden, we were now on the hook for several hundred dollars more, but we appreciated the level of organization that enabled us to ensure that our daughter had what she needed.

But things took a turn for the worse, as detailed below:

We were informed that in addition to the clothes on the list, we would also HAVE TO purchase several shirts and pants from the camp. No option to opt-out, no mention of that when we signed her up.
Then, immediately after dropping her off, we were told that in order to communicate with her we had to sign up for an emailing service for which, yes, there was a fee.
Now, with the end of camp approaching, we have received another communication: on the day we pick up our daughter we must—before we actually get to see her—settle up her “Canteen tab”, which comprises items (e.g., batteries, candy, soft drinks) she “purchased” from the little on-site store as well as the costs associated with day trips (e.g., to a nearby amusement park) planned by the camp.

All these additional costs took us by surprise. Maybe they were buried somewhere in the material provided about the camp, but they certainly weren’t prominently displayed. Moreover, we had no control over the expenditures. I’m confident that opting-out of the amusement park trip was not an option, nor would I have wanted to deprive my daughter of the experience, but since the camp knew it was going to charge me for these things, why didn’t it clearly tell me upfront…or better yet, why not build the charges into the cost of the camp?

And that brings me to what this whole experience should teach us about the importance of thinking strategically about the relationship between poor customer experience and lifetime value. My daughter might come back from camp having had so much fun that alternatives will not be an option next summer, and the camp will retain us as customers. However, the camp’s poorly considered pricing and communication decisions mean that even if my daughter loves it, I don’t. The next time another parent asks me how it was, my answer will be “Well, my daughter thought it was great, but it aggravated me like crazy….”

That’s called negative word-of-mouth and it should be a cause of concern for any business—but especially ones like this camp that relies on referrals for most of its marketing. Now, not only am I on the fence about sending my daughter, but I’m sure the parents I talk to will have second thoughts about sending their children. Avoiding this problem wouldn’t have involved any loss of profit for the camp; all it needed to do was follow the rules laid out at the top of this post.

Anthony Nygren

Best Practices in Retail Financial Services Symposium: Maximizing opportunities with customers who switch banks

April 6, 2012

At this year’s Best Practices in Retail Financial Services Symposium, J. Michael Beird of J.D. Power and Associates and Becky DeGeorge of U.S. Bank illuminated some important trends around customers who switch their primary bank. The number of customers doing this has increased for the second year in a row – in spite of the fairly high level of effort required to switch to a new primary bank.

How can banks take advantage of this trend?

An obvious response might be to ramp up prospecting efforts – but the speakers pointed out that the reason a customer selects a bank is highly relevant to their long-term profitability. J.D. Power and Associates has found that customers who choose a bank because of the bank’s community involvement are the most loyal and tend to give that bank greatest share of wallet; customers who switch to a bank based on a promotion are, unsurprisingly, at the opposite end of spectrum.

Banks looking to reap the benefits of the current turbulent landscape through prospecting must understand who they are targeting as their leads, as it should drastically change their acquisition strategy.

What’s even more important than acquiring new customers is maximizing their relationship with your bank once they’ve come in the door. How can you avoid repeating the mistakes of the competitors that drove these customers to switch banks in the first place?

The speakers outlined the necessary first steps for onboarding customers: satisfaction of a new bank customer is optimized if they receive a thorough needs assessment and a follow-up phone call within 2 days. This initial interaction has direct impacts on loyalty and share of wallet.

A complete needs assessment gets at what led the customer to switch as well as how they operate on a daily basis:

What were they looking for in their last banking relationship that they weren’t getting?
What don’t they like about their last bank?
What other accounts (aside from the one they originally came for) do they need or use?
How many checks do they write a month?

Such an assessment provides the customer with a positive first impression of the bank, and reassures the customer that they have made a correct decision in switching from a bank where they’ve had bad experiences.

From there, having the person who opened the first account with a new customer call within 2 days to say thank you enhances that customer’s first experience with your bank. It’s a simple step that, according to J.D. Power and Associates, does make a measurable difference in customer satisfaction.

To build on the speakers’ insights, banks targeting customers who switch institutions need to extend and support the customer experience throughout the life of the relationship. How can you use the insights gained from the needs assessment? Are there other simple actions, like that first phone call, that build loyalty in your customers?