Win-Back Opportunity: 3 Steps for Success for the Enterprise Market
By Christopher Fergus
Churn is a significant risk to service providers who rely on recurring revenue. Customer losses can be particularly dangerous in the business segment, where contracts are generally more valuable than residential contracts, and where each customer represents a significant stream of income.
Service providers suffering from high churn rates often focus on replacing lost business customers with new ones (see how sales analytics strategies can help); however, parallel efforts should focus on winning back select churned customers – which we refer to as the “Win-Back” opportunity – as they have already demonstrated a need for the products and services and have an established relationship with the service provider.
It is important to recognize that Win-Back efforts aren’t appropriate for all customers. For example, a customer with limited bandwidth needs and a low ARPU may not warrant a Win-Back effort. Also, in some countries, direct marketing rules, which prevent companies from contacting prospects, may apply.
Customers that do merit Win-Back targeting can often be reacquired using fewer resources and less time than new ones, if pursued efficiently. Here we outline three steps that service providers can follow to develop and execute an effective Win-Back strategy.
Step 1: Prioritize Win-Back Targets
To begin, prioritize Win-Back targets along two dimensions—Customer Lifetime Value and Win-Back Potential—to ensure resources are deployed efficiently.
Customer Lifetime Value measures how much a customer is worth. Service providers have a wealth of data about their customers—such as monthly ARPU, products/services purchased, usage patterns, and business characteristics. This information can be leveraged to estimate Customer Lifetime Value and rank churned accounts from highest expected value to lowest.
It is then necessary to estimate how likely a customer is to be successfully won back – their Win-Back Potential. This can be estimated using a range of inputs such as their churn reason (e.g. why did they leave) and product availability and serviceability (e.g. how compelling is our offer relative to the competition). For instance, customers who churned because a particular service offered by competitors wasn’t available at the service provider represent weak Win-Back opportunities. Conversely, customers that churned because a service provided lacked adequate broadband speeds but that provider since upgraded their network to accommodate high speed connections represent strong Win-Back opportunities.
Identifying customers with the highest lifetime value and greatest win-back potential allows providers to effectively prioritize potential Win-Back targets, and capture the greatest return on their investment.
Step 2: Design the Win-Back Program
A successful Win-Back program relies first on the stakeholders who own it. They should understand the logistical requirements of the campaign, have access to relevant tools and internal knowledge (e.g. business customer databases or IT buyer contact lists), and be ready to leverage existing communication channels or infrastructure.
The best programs also leverage a “Product & Offer Targeting Model” to recommend lead offers for salespeople. Even a rudimentary model can suggest opening with a free trial of a faster speed to a customer who churned because of increasing bandwidth demand in a highly competitive area. And the more data a service provider incorporates, the more precise these models can become.
Finally, a well-defined “Communication Strategy” can improve the campaign by pairing with the “Product Targeting Model” to map the most effective communication channels and techniques for different Win-Back segments.
Step 3: Test and Refine the Win-Back Program
Service providers should roll out pilot programs in select markets to evaluate results and make necessary adjustments before a full-scale deployment. As gaps in the pilot program are identified, service providers can develop alternative strategies, conduct A/B tests, and use regression analyses to identify strategies that lead to success.
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Summary
Win-Back programs are one tool businesses can use to mitigate the negative effects of churn. The decision to create a Win-Back program should be considered in parallel with other churn mitigation strategies, such as preemptively flagging customers who are at a high-risk of churning. When employed, Win-Back programs have proven to be a cost-effective mechanism to recover churned revenue. There is no doubt that all service providers should examine the viability of a Win-Back program before pouring precious marketing dollars into acquiring new customers. <>
Source:
“Winning Back Lost Customers”, Harvard Business Review, March 2016.
