Keeping only the best
Loyalty comes in many forms: unquestionably the first rule is to provide the right product at the right price in the right place at the right time. Here’s an example: I routinely use the same hotel when I stay in London – and it has no rewards offering of any kind. But it does offer a great value fixed price for comfortable accommodation and a convenient location. So I go back there time after time.
Card programmes aren’t as fortunate: their prime functions – making payments and providing a credit facility – are effectively a commodity, and have to compete on price. And, despite the best efforts of marketing folk, many customers do decide, for one reason or another, to cancel their accounts.
What happens then?
If the customer calls in, or otherwise notifies us, most issuers have a Retention Unit, whose goal is to try to keep the customer’s business.
Two questions: Do the Retention Unit’s staff have the tools to:
- Focus only on profitable customers?
- Provide a range of relevant and compelling offers?
1. Focus only on profitable customers
Easy to say, tough to do.
| “Despite the best efforts of marketing folk, many customers do decide, for one reason or another, to cancel their accounts.
What happens then?” |
To start with, what do we mean by “profitable”? Many accountants argue that, in the case of a card business which draws upon corporate services, the best measure is what contribution the card group makes to overall profitability once all its own direct expenses have been met. But there’s often room for debate about how this formula works out at product and account level.
Also, does “profitable” mean just as a card customer? Because it could be that a customer who generates little or no card income could hold a range of other products which make him or her very profitable from the point of view of the bank as a whole.
The debates around these topics can sometimes seem tedious, but they’re essential groundwork to put in place before developing our marketing response to the attriting customer.
2. Provide a range of relevant and compelling offers
First of all, let’s review what the customer management process might look like:
That’s one way for the retention flow chart to work. Now let’s take a look at the second question: what might the retention offers be?
CUSTOMER RETENTION OFFER MATRIX
The following matrix is being successfully used by a South American card issuer for profitable Gold Card customers who are threatening to cancel. The specific offer to be used is selected by the Retention Unit agent on the basis of the customer’s comments, the account’s profitability, and the cost of the offer. For example, a customer who said that she was cancelling because she no longer wanted to pay a fee for a card which she rarely used would be offered a downgrade to a free basic card.
ACCOUNT PROFITABILITY |
| High |
|
Low |
| OFFERS TO |
| Grade A Customers |
Grade B Customers |
Grade C Customers |
Upgrade to Platinum tier at no extra cost |
Year’s fee waiver |
Downgrade to a no-cost no-frills card |
| Supplementary cards at no extra cost |
Free membership of payment protection/virus protection/extended warranty |
Free membership of card protection/virus protection |
Year’s fee waiver |
|
|
Bonus rewards points |
|
|
Free membership of rewards programme/card protection/payment protection/virus protection/extended warranty |
|
|
Note, however, that even this large and sophisticated institution cannot take a whole customer view.
Armed with these tools, one issuer’s Retention Unit recently hit a very creditable 45% of profitable accounts retained.
Even better, of course, is to get to customers before they attrite – but that’s a story for another day. |
