Our customers are leaving and franchisees are complaining. What can we do quickly to make a difference?
Introducing the Seven Rules of No Excuses Marketing
Part 2
Our retail client was “between a rock and a hard place” — the customer base was declining and franchisees were up in arms. The business was subscription-based; after initial sign-up, customers could cancel at any time with a 30 day notice. The CEO was upset and our client needed action NOW.
If you want to learn about the first 2 rules of No Excuses Marketing, click here.
No Excuses Marketing Rule #3 — “Make your spreadsheets work hard to make your project run fast.” (cont’d)
By simply comparing behaviors of attrited customers to those who were retained, several patterns immediately appears. Of course, customers who stopped coming were likely to attrit. But two other factors were readily apparent. Best Customers (those who stayed the longest and purchased the most ancillary services) lived closer to the store and came in more frequently. Customers were more then 70% likely to attrit when they lived more than 7 miles from the store. Customers were also most likely to attrit when their average monthly frequency had been 30%+ less than the average over time. With those two key learnings, we were ready to proceed to the next rule of No Excuses Marketing.
No Excuses Marketing Rule #4 — “Challenge Conventional Wisdom with Data.”
Many times, when faced with a crisis, senior management retreats to the old assumptions that “everyone” has about the business. “The price is too high,” “our customers have forgotten us,” “there is no loyalty in our business,” and so on. The goal of No Excuses Marketing is to develop a strong platform quickly on what to do now, but to make that platform solidly fact-based. Management in this case believed that the only approach that would address attrition is to give the franchisees a list of customers who have canceled their membership, and let those franchisees call all the attrited customers to get as many as possible back.
Given the basic analysis we did, it was clear that “all customers were not created equal.” We could target customers who were most likely to leave, but the question was: If they left because they are not a good fit with our business, should we work hard to try to bring them back? It seemed like senior management’s approach (of targeting all at-risk customers) was likely to frustrate franchisees, since they would be spending a lot of time trying to win back customers who were unlikely to return because they were not good fits in the first place.
We built a spreadsheet that included all customers and ranked them on two factors: how likely they were to leave and how much they looked like best customers. “How likely they were to leave” was based on behaviors: time since last visit and average frequency. How much they resembled best customers was based initially on distance to store, some demographics and payment method. By ranking customers by risk and opportunity, we could help franchisees prioritize who they were going to spend the most effort on: customers the most likely to leave who most resembled best customers.
But an analysis is only as good as the ability to put it into the market. That leads us to rule #5…
No Excuses Marketing Rule #5 — “Work from the Bottom Up.”
When companies hit crisis mode, they tend to revert to “command and control” – top-down direction with little input from the sales and operations teams. They usually get exactly what they deserve — a 50,000 foot approach that does not take in account the line-level realities of the business. When the field team is not involved early and often, management tends to miss critical factors, such as POS process, customer service or physical constraints of staff or stores. In addition, management loses the most critical factor of all — the buy-in that comes from participation in the process, from the field team. Lacking both insight and buy-in, the effort usually results in failure.
Rather than move into an aggressive rollout program there was almost certainly likely to fail due to factors we didn’t yet know , we decided to establish a quick pilot program that would be followed by a phased rollout to gave us a greater chance for success. We identified 45 locations where the managers and franchisee owners were considered “early adopters,” leaders who were willing to take any opportunity in order to succeed and did not have a vested interest in the practices of the past. Rather than present those leaders with a program baked in concrete, we got them involved in the early planning stage. As a result, we were able to develop a pilot program that took into account the unique characteristics of each market as well as best practices in data-driven retention from other industries.
With a couple bumps along the way, the pilot program launched and was able to develop a positive ROI in less than 60 days. Now, this pilot program was done with an extremely “low tech,” approach, using manual pulls of at-risk customers fed into spreadsheets that were delivered to the store managers and franchise owners twice a week. While this is an excellent approach to proving out the concept in general, the challenge we next faced was how to scale this profitable activity to a larger portion (and eventually all ) of the stores and franchisees. Success in scaling these sorts of pilots required us to move on to the next “No Excuses Marketing” rule…
Stay tuned to my next post for the most important 2 rules of No Excuses Marketing!
