Be Defensive: Predict and Prevent Customer Attrition
It finally happened. I filled my tank at the gas pumps of a membership-only discount retailer. For my entire adult life, I’ve sworn by the majors—a BP, a Mobil, a Shell, a Texaco.
Why? To be honest, I do it mostly because Dad filled up at those types of stations. They’re clean; they’re well-lit; they’re safe for his baby girl to fill up her car.
But I may have crossed over to the dark side. On a few of my recent Saturday treks to my local hypermarket, I started surreptitiously filling up. Since I was already shopping at the main store, I figured, why not go ahead and fill up?
But, I didn’t establish a new fill-up habit right away without some angst … and a few obstacles. Given the uncustomary lines, I didn’t know how long a fill-up would take. Given that I must use the membership card for fueling, I needed to learn a new process.
But here’s the thing: Switching really wasn’t so hard. It didn’t take so long. And, all it took was that first trial to get me filling up at the discounter once a month. Now, I often adjust my fueling pattern to fit in with my Saturday trek to the hectic hypermarket. And “Major GasCo” doesn’t seem to have missed me.
As a loyalty consultant, I know that Major GasCo could have recognized this turning point—and stopped me from defecting. Suppose that after a couple of fill-ups at the discounter, Major GasCo e-mailed me a reminder of the benefits of filling up at my regular pit stop, or offered a free car wash with my next purchase. Instead of filling up at the discounter on Saturday, I would have topped off my jalopy on Thursday at my regular station.
Just how would Major GasCo have spotted me sneaking away to the dark side? By noticing my absence in its customer database. Capitalizing on simple transactional data, Major GasCo could have diagnosed me as a defector early enough to stop a new habit from forming.
Whether you’re a fuel retailer, a grocery chain, a credit card issuer, or a supplier of some other everyday-spend product or service, you can rig a strategic safety net by assigning a defection defense score to your customers. When customers begin to fall away, the defection defense score identifies them and triggers the net.
Most companies already store the information needed to create a defection defense. There are several approaches to create a dynamic defection scoring model. You’ll of course need a database platform that can sweep your entire customer file for customers who exhibit warning signs. Its rules engine must also trigger e- or snail-mailings, presenting targeted offers to at-risk customers based on their profitability.
As a best practice, you should trigger a series of mailings to your highest-value customers. Using my experience as example, Major GasCo might offer richer rewards—like a fun partner reward such as free movie tickets—for a fill-up in the next two weeks. Mid-level customers might get a couple of communications offering in-kind rewards such as a free car wash or a six-pack of soda. Lower-value customers might simply receive one e-mail—perhaps a reminder that Major GasCo values their business, or maybe a free cup of joe.
The key to defection defense, of course, is paying early attention to the red warning lights. In my case, the lights were my car’s receding tail-lights the first few times I drove down the street to a competitor, and made the right turn to the dark side. Only a sound customer strategy can turn me back to the light—and help my Dad rest easy.
COLLOQUY Managing Partner Kelly Hlavinka has the shiniest car on the block and can be reached at [email protected].
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