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Customer retention: Long-term strategy

Use this section of the customer loyalty guide to find out more on customer retention and handling common situations that might impede long-term customer retention.

Table of contents:
Understanding customer loyalty
How to build customer loyalty
Measuring customer loyalty
Customer loyalty case studies and industry-specific strategies
Customer retention: Long-term strategy
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  Customer retention: Long-term strategy  

Long-term customer retention is especially challenging as social networks and new media allow customers a forum for airing complaints about companies. A new focus on the customer experience has emerged, as businesses walk a fine line of keeping a steady supply of happy customers while maintaining a healthy bottom line with their customer retention programs. Frequent data breaches across industries also present a challenge in an increasingly digital world.

A focus on the customer experience
It's a good time to be in service and support, said presenters talking about the future of the industry at Oracle OpenWorld in 2006. "I love being in service now -- we're grabbing hold," said Mike Betzer, vice president of CRM for service at Oracle Corp. "The drive for efficiency is clearly behind us. Our leading customers are clearly thinking about [a new approach to service] at a C-level." With reducing costs and improving efficiencies in the contact center now taking a back seat to priorities like improving customer loyalty, new technology and challenges are emerging. Key among these is the arrival of social networks, said Michael Maoz, research vice president at Stamford, Conn.-based Gartner Inc., who preceded Betzer at a session. Organizations need to rethink their services processes from a customer perspective, Maoz said. A company perspective typically progresses from targeting customers, to inquiring, acquiring, welcoming and eventually developing and managing them. Customers, on the other hand, see their relationships with companies evolving from awareness, to searching to selecting, ordering, paying and setup, to eventually using support and upgrading, Maoz said.

Can a call center train agents to feel empathy for customers? That's a question many businesses are tackling as they try to improve their customer experience. Panelists at the CRM Association conference in Atlanta in April of 2007 discussed making an emotional connection with customers during calls. Trainer Steve Cohn believes that most customer service representatives can learn the skills they need to recognize and deal with customer emotions, which will in turn improve the customer experience. Tracking a call center agent's first call resolution (FCR) or average handle time (AHT) is a straightforward measurement. Customer emotions are more slippery, however. Businesses are starting to come up with ways to quantify emotion. Call centers still must rely on traditional metrics to judge whether paying attention to customer emotion is improving service.

Find out more on the customer experience:

  • Browse this chapter download from Managing Customers as Investments, by Sunil Gupta & Donald R. Lehmann, to find out more on placing customers at the center of a retention program that will create value and keep customers happy.

Potential challenges to long-term customer retention and loyalty
Personal data protection has become a major concern in recent years as high-profile data breaches, coupled with a rise in identity theft, have left consumers nervous about who is handling their information. It is becoming apparent that data breaches are not just a problem for IT and customer service but should be a major concern for marketers as well. Yet while marketers see information security as an important marketing and business concern, few are taking steps to prepare for it, according to a recent survey from the CMO Council, a private, nonprofit research firm. Of marketing executives surveyed, 76% believe security breaches negatively impact company branding. Yet 60% said that security has not become a significant theme in their company's messaging and marketing communications and only 29% said their company has a crisis containment plan for security breaches and failures. Another 27% don't even know if such a plan exists. The study recommends three actions for companies to take to protect and promote brand trust: establish strong policies for customer data from the beginning; have a containment plan in place; and be prepared to offer restitution or monitoring if a breach does occur.

As the reports of companies losing customer data continue to pile up, privacy protection is becoming a top-of-mind issue, both for customers, who naturally don't want their personal information falling into the wrong hands, and companies, who are suffering real damage to their brand, customer loyalty and bottom line. Recent research is starting to put a number to the costs associated with lost customer data. A benchmarking study conducted by the Ponemon Institute in Tucson, Ariz., found that the average total recovery costs were $140 per lost customer record. Ponemon groups the costs into four core buckets: discovery, escalation, notification and ex-post response. In rare cases a data breach can offer a chance to reinforce customer loyalty. Ponemon was surprised to find that 12% of respondents said the incident increased their confidence and trust in the company. When he went to double-check the surprising figure, Ponemon spoke with one woman who said she was so impressed with the way her bank dealt with her after the breach she was less likely to leave. All this comes at a time when the Internet is making customer loyalty increasingly fleeting. A survey of 1,000 U.S. consumers, conducted by Accenture Ltd., a Bermuda-based consulting firm, found that a majority believed the Internet makes it easier to change service providers.

The North American market for outsourced customer service operations is expected to continue along a steady growth path, according to recent research by Frost & Sullivan Inc. Call center agent attrition, companies' continuing to adjust to the Do Not Call legislation, and greater specialization by North American outsourcers are driving the market, according to Michael DeSalles, Frost & Sullivan's industry analyst for the communications practice. Also, the backlash by North American consumers over jobs sent overseas is helping to bolster the on-shore and near-shore outsourcing markets. The market is growing, but outsourcers are also under increasing pressure to do more than just increase efficiencies. Clients expect outsourced call centers to improve retention, and loyalty as well. Outsourcers are also conducting post-call surveys, measuring the number of transfer calls and up-selling and cross-selling.

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