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Customer Winback: How to Recapture Lost Customers--And Keep Them Loyal / Edition 1

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Overview

Use the Power of Customer WinBack to Bring Back Lost Customers, Save Customers on the Brink of Defection, and Make Your Company Defection Proof High-value customers are the lifeblood of any business-so what can a company do when they lose them? Customer WinBack shows you how to identify at-risk customers, win back those who have left, and change how business is done to prevent future customer loss. This pragmatic guide is brimming with savvy methods and detailed case studies that show you in real-world detail how to turn lost customers into gold. "Winning back lost customers is the marketing equivalent of finding hidden treasure. Griffin and Lowenstein provide an excellent treasure map." — Dr. Leonard L. Berry, distinguished professor of marketing, Texas A&M University, and author of Discovering the Soul of Service "Customer WinBack deals with one of the most overlooked dimensions of managing customer loyalty-earning it back. I've personally seen the power a focused win-back effort can achieve, and business leaders would be well-advised to follow Griffin and Lowenstein's formulas to regain lost revenue." —Jeanne Lombardo, general manager, Worldwide Satisfaction & Loyalty, Microsoft Corporation "Griffin and Lowenstein know that in order to win back lost customers you must know why they left. Customer WinBack provides sound examples that illustrate ways to recapture lost customers that can be applied to any business." —Stephen P. Campbell, director of franchise marketing, Sprint

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Editorial Reviews

From the Publisher
"Winning back lost customers is the marketing equivalent of finding hidden treasure. Griffin and Lowenstein provide an excellent treasure map." (Dr. Leonard L. Berry, distinguished professor of marketing, Texas A&M University, and author of Discovering the Soul of Service)

"Customer WinBack deals with one of the most overlooked dimensions of managing customer loyalty-earning it back. I've personally seen the power a focused win-back effort can achieve, and business leaders would be well-advised to follow Griffin and Lowenstein's formulas to regain lost revenue." (Jeanne Lombardo, general manager, Worldwide Satisfaction & Loyalty, Microsoft Corporation)

"Griffin and Lowenstein know that in order to win back lost customers you must know why they left. Customer WinBack provides sound examples that illustrate ways to recapture lost customers that can be applied to any business." (Stephen P. Campbell, director of franchise marketing, Sprint)

Soundview Executive Book Summaries
Customer defection is one of the most overlooked and least understood problems facing businesses today. With customer churn increasing and customer loyalty becoming commoditized, winning back and keeping lost customers have never been more important. Lost customers mean lost revenues and negative word-of-mouth, and can even damage employee morale. But by designing and implementing a "customer winback" program, the authors write, companies can transform these problems into increased customer loyalty while decreasing acquisition costs.

On average, firms can lose up to 40 percent of their customers every year. However, a study by research firm Marketing Metrics uncovered that overall, companies have a much better chance of gaining business from former customers than from new prospects. On average, firms have a 60 to 70 percent chance of selling to their current customers again, a 20 to 40 percent chance of successfully selling to previous customers, and only a 5 to 20 percent chance of turning prospects into customers.

The authors write that lost customers often lead to more than just decreased profits. Steady customer defection can create low morale among employees, which results in higher employee hiring and training expenses. By keeping customers from defecting in the first place, the authors explain that a company can minimize any negative word-of-mouth that lost customers can generate.

The authors write that the trick is to reframe customer defection as an opportunity to provide superior, individualized customer service. They explain that companies can profit by listening to unsatisfied customers, and can use the feedback to shape a more powerful marketing strategy for all of their customers.

The authors write that knowledge is the key to successfully winning back lost customers. Today's computer technology allows unprecedented access to and analysis of a wealth of detailed customer data. The authors advise companies to find out which information is worth capturing and to learn what to do with the data. Customers defect for different reasons, and some customers aren't worth winning back. Through careful segmentation, the authors write that companies can select the most important customers to win back, and develop individualized strategies for each sector of lost customers.

Developing Winback Strategies
Winning back customers is a company-wide effort that requires a new mindset from all employees in all departments. The authors explain that communication is essential to establishing an effective winback program. Rather than model acquisition and retention efforts along an "assembly line" system, which separates the marketing, operations and service departments, the authors write that a company must integrate winback efforts into each of these functions to transform the company into a "loyalty laboratory."

The authors write that companies should not underestimate their employees' ability to provide insights into customer behavior and preferences. Whenever any new promotion is considered, the authors write, companies should ask for input on how it will affect customer loyalty. Learning to leverage cause-and-effect factors in acquisition, retention and winback strategies can give a company an edge. The authors explain that a successful winback program also integrates past purchase performance with anticipated future purchase potential.

Calculating the lifetime value (LTV) of a customer involves studying past purchases, acquisition costs and retention costs as well as using educated assumptions about future purchase activity. The authors explain that customer orders per year as well as average order size will generally increase the longer a customer remains with a company. LTV can also include intangibles, such as a customer's referral value. By separating high LTV customers from low or marginal LTV customers, the authors write, a company can better budget marketing and advertising efforts.

Once a customer has defected, the authors write that a company needs to determine the reason the customer left, and then calculate that customer's second lifetime value (SLTV). A regained customer's SLTV differs from his or her LTV as an active customer. The authors write that these differences make targeting defected customers more profitable than new prospects.

The authors write that a salesperson should think from the defected customer's perspective. Chances are the customer feels bad at least on an emotional level for dropping a company's business. Once the lost customers a company wants to gain back have been identified, the authors explain, the essentials for any winback plan must include a thorough understanding of the customers' current needs and a sense of trust. A customer is lost in the first place because a product or service no longer meets the customer's needs. The authors write that the salesperson should study the customer's marketplace so he or she can anticipate any future changes, and position his or her company or product as offering a solution.

Once a company becomes a convert to customer winback efforts, the authors write that it should learn to prevent customer defection in the first place. Never before has so much customer information been available - from instantaneous, online click-through data to data-warehousing and data-mining techniques. The authors explain that turning this information into knowledge about customers is a way to gain a competitive edge by increasing customer loyalty and making a company defection-proof.

Why Soundview Likes This Book
Customer Winback offers easy-to-follow, step-by-step ways to capitalize on crucial customer loyalty solutions. This guidebook provides sound examples and methods that can help companies recapture lost customers and even provides them with strategies they can use to find the customers who will stick around the longest. Copyright (c) 2002 Soundview Executive Book Summaries

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Product Details

  • ISBN-13: 9780787946678
  • Publisher: Wiley
  • Publication date: 3/1/2001
  • Series: Business and Management Series
  • Edition description: 1 ED
  • Edition number: 1
  • Pages: 336
  • Product dimensions: 6.36 (w) x 9.76 (h) x 1.30 (d)

Meet the Author

JILL GRIFFIN is president of The Griffin Group, an Austin, Texas, firm providing customer and staff loyalty research, keynote speaking, and loyalty and win-back program consulting. Her clients include Microsoft, Ford, Arthur Andersen, Hewlett-Packard, Marriott Hotels, and Advanced Micro Devices. Griffin is the author of the business best-seller Customer Loyalty: How to Earn It, How to Keep It (Jossey-Bass, 1997). MICHAEL LOWENSTEIN CPCM, is managing director of Customer Retention Associates, a customer and staff loyalty program development, research, and training firm located in Collingswood, New Jersey. His clients include Toyota, Prudential, Sygma, Westvaco, Charles Schwab, and Microsoft. Lowenstein is the author of two books, including The Customer Loyalty Pyramid (Quorum, 1997).

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Read an Excerpt

Why Now's the Time to Focus On Customer Loss and Win-Back

If all the benefits we have described for your company's finances, reputation, and customer information system have not completely convinced you that you need customer recovery programs and now, hold on! There are at least three more good reasons why the time is right for your firm to establish customer loss and win-back initiatives alongside your acquisition and retention programs.

1. Never before have technological tools for winning back lost customers been more available or affordable. We all know the ease with which e-mail can be sent. But can technology really help you launch a direct-mail campaign to lost customers? Consider ELetter Inc., the on-line direct-mail service that allows you to launch an entire directmail campaign in minutes. Using the ELetter Web site, you upload your address list and document file. Next you select a format for your mailing (letter, postcard, or booklet). In one to four business days your mailing will be on its way. ELetter prints, folds, seals, addresses, adds postage, sorts, and then delivers your entire campaign to the post office. Sound expensive? Colored booklets can be printed and mailed for around $2.60 each, a letter for $.70, and a postcard for $.49.

2. In any market space, there is a limited number of best customers, so you need to keep yours close. Win-back is one more tool to do this. In All Customers Are Not Created Equal, Garth Hallberg points out that "for most categories [of business], one-third of the buyers account for at least two-thirds of the volume. This `high-profit segment' generally delivers six to ten times as much profit as the lowprofit segment.Moreover, they are critical, not only because of their profit contribution, but also because of their relatively small number."" Bottom line, this small segment of profit-producing consumers deserves a high priority in your marketing plan. That's why you need to back up your retention efforts with win-back and save programs that return that high-value customer to your business as quickly and efficiently as possible.

3. Win-back programs can give you a real competitive edge. A combination of strong acquisition, retention, and win-back programs can help you bullet proof your firm against competitive attacks. Conversely, if your competitor gets strong win-back programs in place before you do, your chances for recapturing and keeping the best customers are reduced considerably. In many things in life, there is true advantage to being first. Win-back programs are no exception.

Let's take a look at how one company is masterfully leveraging these three factors-using technology, protecting its best customers, and being first to market with state-of-the-art service systems-in a highly volatile, rapidly changing marketplace.

Like many businesses, banks are under attack from all sides. Brokerage firms and mutual funds are out to grab traditional bank customers and the highly profitable ones are the most sought after. The 80/20 rule is often applied to various forms of economic distribution. Applied to profits it states that 80 percent of a firm's profits are generally produced by roughly 20 percent of its customers. This rule is alive and well in banking today and perhaps even an understatement. According to Market Line Associates, an Atlanta bank consulting firm, the top 20 percent of a typical bank's customers contribute as much as 150 percent of overall profit, while the bottom 20 percent of customers siphon off about 50 percent of profits from the bank's bottom line. It is this profit awareness that has awakened banks to the reality that they should fight harder to keep some customers and not others.

That's precisely the motivation propelling First Union Corporation, the nation's sixth largest bank, to find ways to help its reps provide effective but tiered customer service, with a keen eye toward saving those customers with highest value. Customer service rep Amy Hathcock is one of hundreds of frontliners fielding phone calls at the company's huge customer service center in Charlotte, North Carolina. They handle forty-five million customer calls a year, and first-class customer service is a critical priority. In her call center cubicle, Hathcock is surrounded by an array of reminders to deliver the personal touch to callers. A "practice random kindness" bumper sticker is posted near her phone and a television carrying the weather channel hangs from the ceiling so she can take a quick glance and know if her current caller is in a rainstorm.

But when deciding to say yes or no to a caller who requests a lower interest rate on a credit card or wants to avoid a $28 bounced check penalty, the answer is anything but random. All of it depends on the color of the tiny square that pops up on the screen alongside the customer's name. For customers who get a green pop-up, waivers are granted because these customers generate hefty profits for the bank. Not so the red pop-ups. These customers lose money for the bank, and so Hathcock stands firm. Yellow is for the borderline customers, whose profitability provides some space for negotiation. Einstein, the bank's computer system, takes a quick fifteen seconds to pull up the ranking on a customer, using a formula of variables including such items as minimum balances, account activity, and branch visits.

First Union has seen evidence of the 80/20 rule in numerous ways. During a recent focus group with customers, First Union bankers spoke with a woman who had kept as little as $18 in a savings account for more than twenty years. Most of her money was held by another financial institution. She kept the account because of sentiment: her mother had opened it for her when she was thirteen.

Recognizing that the 80/20 rule is profoundly at work in their customer base, visionary banks like First Union are separating the profitable from the nonprofitable customers and servicing them accordingly. Nonprofitable customers make frequent branch visits, keep less than $1,000 in the bank, and call often to check on balances. These nonprofitable behaviors are in stark contrast to those of the most profitable customers, who keep two thousand dollars or more in their accounts, use a teller no more than once a month, and almost never use the call center. The bank's worst customers often cost the bank a minimum of $500 apiece each year, while favored customers each generate more than $1,000 in profits each year.

First Union estimates its Einstein system added at least $100 million in annual revenue to its 1997 total revenues of about $12 billion. But these gains have not come without a real commitment to finding out which customers to service and save through extraordinary service. "Everyone isn't all the same anymore," says Steven G. Boehm, general manager of the bank's customer information center.

Whether you're a small mom 'n' pop company or a Fortune 100 corporation, the time is now to put workable plans in place for saving at-risk customers and winning them back if they leave. Technology and know-how are converging to make this possible for any company, regardless of size. It's the next frontier for companies who are truly committed to leveraging the loyalty and profits from their customers. Get there first, and you'll enjoy a big advantage over your lagging competitors...

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Table of Contents

CUSTOMER RECOVERY: WINNING BACK LOST CUSTOMERS.

Why Aggressive Customer Recovery is Critical to Your Success.

A Closer Look at Customer Loss.

Making New Customers Defection Proof.@Preventing Loss When the Honeymoon is Over.

Early Intervention for Rocky Relationships. Saving Customers On the Brink of Defection.

Recovering Lost Customers.

CUSTOMER PROCOVERY: KEEPING REACTIVATED CUSTOMERS AND MINIMIZING DEFECTIONS.

Practicing Procovery: Why Recovery is Not Enough.

Happy Employees Equal Loyal Customers.

Complaints: Your Number One Customer Procovery Weapon.

The Real Role of Service in Customer Recovery.

Making Your Company Defection Proof.

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Foreword

No matter what business you're in, customers are the central mission of your enterprise. A business, to stay in business, must be able to get, keep and grow customers. And if for some reason you don't manage to keep a customer, then by all means figure out how to get the customer back. Getting customers to return, once they have terminated their relationship with you, is what Customer WinBack is about.

Getting a customer to return can be accomplished in many different ways, using a variety of tactics and offers. However, what all successful win-back programs have in common is that they are proactive, strategically sound initiatives rather than occasional hit-and-run tactics. A win-back program may be based on promotional offers or it could be based on service-oriented customer coddling, but all successful programs are deliberate. They are measurable. And they are well thought out.

Thinking carefully about how to win customers back is what this book is all about.

Don Peppers and Martha Rogers
Partners, Peppers and Rogers Group

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  • Anonymous

    Posted January 13, 2001

    Customer Loss Can Destroy Companies. Win-back Strategies and Tactics are Essential to Prevent That from Happening. This Book Shows You How To Get These Customers Back - and Keep Them.

    This is an unprecedented time of customer turnover for companies around the world. We've entered a new era of defection where customer churn is reaching epidemic proportions both on-line and off-line, and it is wrecking businesses and lives along the way. Most companies, focused entirely on customer acquisition and retention, have neglected this important revenue and CRM opportunity. In this book, my colleague Jill Griffin and I present the causes of customer loss and the most successful methods of customer save and recovery learned from companies around the world. Using reader-friendly stories, examples, and graphics, we provide a strategic and tactical framework for any company to win back the customers they want.

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