Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

OK, here’s a bit of a tough one – what if while investigating customer retention problems you find out that customer defection is highly correlated to specific salespeople or marketing programs? What if I told you this correlation is pretty common – but unrecognized, because hardly anybody goes looking for it? And if found, find trouble doing something about it?

Two issues – you can try to predict / save a customer in the process of defecting, and / or you can hunt down / fix the source of the defection – why is it happening in the first place?

Welcome to the politics of customer retention – and make sure to put your Drillin’ shoes on …

Please note: XXX is a major cell phone provider…

Q:  I’m an XXX customer – I saw an ad for a new phone I wanted for $230.  I went in to the XXX store and asked for the phone – the clerk rang it up at $580!! I showed him the ad.  He said that price is for new customers and he could not give it to me at that price.  So it made me feel that XXX did not value my business.  I then cancelled with XXX service and have told about 10 people about this situation.

A:  Right, this is a pretty common problem with companies that don’t understand
customer retention.  They’re so focused on acquisition that they cause defection and that’s where a lot of the churn in that particular business comes from.  I’d chalk it up to totally clueless marketing management.  

The irony of this situation:  XXX used to be one of the “gold standard” 1-to-1 marketers in the good ‘ol days.

In the first place, companies should not “broadcast” these kinds of offers, because you understand the impact, the leverage, the “costs 5x as much to acquire a customer as retain one” and so forth. If you want to make offers like that, you try to use discrete channels – direct mail and so on, as opposed to newspapers or radio / TV. The strategic issue is people are defecting at such a high rate the company thinks they need to really drive acquisition to make up for it instead of concentrating on retention, which would be less costly and more profitable overall. But even worse, these aggressive acquisition programs are actually increasing the likelihood of customer defection!