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Winning back the defectors

All too often, companies view a lost customer as lost forever. This is as true in financial services – where frequency of purchase is comparatively low – as anywhere. To combat this money marketers have traditionally used continuous customer acquisition programmes.

IFAs and providers alike can give in to disappointment, purging customers from databases or banishing them to the regulatory “archive”. There is an alternative. They can take steps to ensure that the customer comes back – if not imm-ediately, then the next time that a policy or investment is rev-iewed or supplemented. Defection does not have to be the end of a relationship.

Some customers officially communicate their intent to leave – for example, through policy cancellation. Others make no apparent declaration, simply buying elsewhere next time. It is often hard to tell. Typical communications activities are in one direction, for example, a periodic newsletter or statement.

Without dialogue, it is difficult to know whether the customer&#39s circumstances or attitudes have changed.

The best answer is regular dialogue. If this is beyond reach for the entire customer base, then focus on certain segments and rely on purchase behaviours and other informal signals that defection is looming in the others. The quicker an organisation realises that termination is nigh, the better positioned it is to take action.

One advantage an organisation has in winning back lost customers is inside knowledge. It is a little like courtship. Marketers can target favourable looking customers whose characteristics from the outside seem attractive. The reality is sometimes quite different once a relationship is established and ugly traits are uncovered which might dampen the initial attraction.

So, if a customer is lost or looking around it is not necessarily true that the organisation would want to woo them back from a rival suitor.

Conversely, however, the customer is being lured by an organisation whose marketers are painting him beautiful pictures. He has experienced the reality of being a customer of your organisation but not of the suitor&#39s. You may look less attractive.

Determining the likely second marriage lifetime value – revenue minus costs – of a recovered customer is key in deciding what resources to invest and where.

The reasons for defection add valuable insight for the future and help to determine the case for a win-back programme:

The intentionally lost customer

This customer may have been unprofitable, a poor payer or taken too much resource to service (perhaps resisting the move to online management). This customer must be identified and eliminated from any win-back initiative.

The unintentionally disenchanted customer

For them (if not captured in time by a churn management programme) your performance did not match their expectation or desire. This customer may have been unhappy with the product, the service or an unexpected rise in annual premiums, for example. They may have had a poor complaint resolution or disapprove of changes to a policy or an individual financial adviser. This customer should be evaluated for future worth.

The stolen customer

For one or more reasons this customer has been lured away by a competitor&#39s company, products or innovation. There need not necessarily have been a price or interest rate advantage. This customer is potentially worth winning back.

The bought customer

This has been particularly rife in mortgages. If the reason is purely price then this customer is less likely to be profitable or loyal.

The changed customer

This one might have altered circumstances and no longer need your products or services. This will not become apparent until you engage in dialogue.

Successfully identifying and classifying lapsed customers&#39 defection criteria is crucial. Second-level segmentation must be the projected value of the customer to you for the remainder of their life.

While the winning back itself is often a lengthy process, the programme will quickly yield a wealth of information about the reasons for defection. This can be used to reduce other defections and boost satisfaction levels in your remaining customers.

Once segmented, we recommend a pilot involving all target groups, taking a percentage of each and retaining a control group of customers in each category against which to measure the programme&#39s success.

As with customer satisfaction and churn management programmes the design and flow of the dialogue is key.

The most sensitive group is the unintentionally disenchanted customer, who may have given your organisation signals or cries for help which were simply not picked up. Again, there has been a preponderance of this in mortgage redemption requests.

What returns can you expect from win-back programmes? Aside from significant insights into the process improvement initiatives most likely to reduce churn, win-back programmes yield a tangible return on investment.

Success measured in terms of redeemed customers varies considerably between segments and between products, and results can take some time to prove absolutely. One example, however, includes high-end motor and household insurance provision that achieved a 35 per cent win-back the following year (predominantly from unintentionally lost customers).

In such a competitive and increasingly commoditised market no stone can be left unturned in the quest for market share or profitability.

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