Use Service Personalization to Grow Customer Lifetime Value
Editor’s note: This is the second post in a two-part series. View the first post Use Service Personalization to Reduce Customer Churn.
Business author and management consultant Geoffrey Moore has called customer churn “the cholesterol of today’s business.” In the past, churn was viewed as a part of doing business; there wasn’t too much a provider could do to reduce it. However, those were the days of service and personalization were an afterthought to the initial sale; rather than being an integral part of the interaction between a service organization and their customers.
The Lifetime Value of a Customer
Forward-thinking service providers are now placing a priority on staying ahead of their customers and their competition by focusing on making service engagements both personal and “frictionless” for their customers. While making service easy is an important step towards increasing customer satisfaction, retention and reducing churn for increased Customer Lifetime Value (CLV), it is shortsighted to stop there. In fact, it all comes down to the customer’s perception of your service—and importantly—the communication that goes along with it.
Shortening an appointment window from 4 hours to 2 hours will help improve satisfaction, but only for those that learn about the change when they initiate a service call. It’s critical that service organizations ensure that their customers are aware of the investment they have made to improve their experiences in advance of their next service call in order to gain maximum benefit. It’s well known that a long-term customers of a service providers such as telecommunication companies, that provide nearly 100% reliable service, receive at best, ambivalent ratings about the quality of the service they receive—even if though that reliability means that they haven’t had a service call in years. Yet, when their provider comes through quickly and effectively after a rare outage, their service rating for their telco provider soars. This points to the need for promoting your service quality, tools and personalization capabilities well before the need for service arises.
Your customers should be aware if you offer a portal where they can record their preferences (preferred communication channels for mobile service delivery updates, etc.) that allow the customer to feel in control well before the need to for service arises. This requires promoting those capabilities across virtually all communication channels; from customer service reps, to IVR messages, to the web, to printed bills.
The ramifications of a quality service experience and the in-home DVR offer for a cable operator are substantial: increased customer satisfaction and retention rates for improved CLV, as well as the $60 annual gross revenue increase for each customers that chooses to accept the upgrade offer—with no marketing expenses, no shipping costs, and a professionally installed upgrade to delight the customer. The cable provider can easily have the correct DVR inventory onboard their vehicles by being proactive based on historic conversion rates for these types of offers. When these types of service chain elements line up efficiently and effectively it greatly contributes to making your service professionals brand ambassadors for your company—further cementing the relationship with the customer—driving organic revenue growth.
Growing the CLV to Grow the Business
Exceeding customer expectations is one aspect of how staying ahead of the customer helps organizations stay ahead of their competition. In fact, positive experiences are a great catalyst for upselling.
Customers are much more willing to increase their service level (and CLV) directly after a positive experience with their provider. Think about how many customers would respond positively to the following recommendation if they just came off of a great cable TV service experience: “I see that you have an older model of our DVR. For only $5 a month I can upgrade you to our newest device with double the recording time. Would you be interested?” The numbers tell the rest of the story:
- A 5% reduction in the customer defection rate can increase profits by 5-95% – Bain & Company
- A 2% increase in customer retention has the same effect as decreasing costs by 10% – Leading on the Edge of Chaos, Emmet Murphy & Mark Murphy.
- The probability of selling to an existing customer is 60-70%. The probability of selling to a new prospect is 5-20% – Marketing Metrics.
Setting positive expectations in advance can go a long way towards moving the dial into positive territory well before a service experience. Changing service providers is not a trivial activity, and providing a positive customer engagement takes away much of that risk of defection. Returning to the Bob Seger reference in the introduction of this two part series, no one wants to feel like number; and your business can benefit from the revenue numbers generated by providing excellent, personalized service.