It used to be that when the client of a given company wanted to receive service from that company, he or she had to interact through two or three channels – generally through a contact center, face-to-face via at a shop or dealer, or via mail (and in the case of banks, ATMs). In terms of channel strategies, companies had little to worry themselves about, aside from ensuring employee capacity was sufficient to meet demands, and that the service provided was of an acceptable quality, and to some degree, consistent across the channels.

Over the past two decades, the number of channels through which customers can receive service through has exploded. On top of the traditional channels, new ones have emerged – from Twitter to SMS, e-mail to self-care websites, customers can get in touch with their service providers in nearly a dozen different ways.

This proliferation has brought with it several issues that companies are having a difficult time of dealing with – namely that:

• They are unable to provide a consistent level of service across all channels (in terms of quality, speed to service, speed to respond, the offering of all types of services, etc.)

• They have failed to provide a differentiated level of service in each channel (i.e. to high value customers)

• They are unable to control the channels customers choose to use (in terms of different customer segments using different channels)

The above issues, taken as a whole, lead to two common, undesirable situations that service providers need to address:

• That low-value customers are being serviced through high-cost channels, leading to situations wherein some customers end up costing more to serve than the revenue they generate.

• That high-value customers are being serviced through low-quality / non-differentiating channels, leading to situations wherein the relationship is damaged through the poor service provided.

Insofar that the ideal solution would be to “fix” the level of service provided through each channel so that it is consistent and differentiated, such an effort is rather burdensome, takes a significant amount of time, and requires substantial investments.

At a minimum, companies need to take steps to match various customer segments to their optimum channels, then work to migrate them accordingly. To do so, we recommend companies follow the below five steps:

1. Define Cost Per Transaction Per Channel

Based on type of service-related transaction, the cost to service customers needs to be defined as the first step. This needs to be done by channel (i.e. in shops, over the phone, via IVR, via Facebook, etc.) and by type of transaction (i.e. handling complaint, processing an order, enabling a service, general inquiry, etc.), taking into account all possible costs that can be calculated and attributed to the transaction (cost of employee resources, physical resources, system costs, etc.).

This is a practice that has been completed by most companies; however, many have not gone so far as to define costs by type of transaction. Such an effort is a critical first step that is needed in order to be able to determine what types of transactions should be pushed via which channels to which customer segments.

2. Define Existing Service Levels by Type of Transaction Per Channel

Based again on the type of service-related transaction, the next step is to understand the current level of service provided to customers via different channels. The key aspects to examine here are related to efficiency (how quickly the customer can be serviced via the given channel), to quality (the error rates related to processing the customer’s requested transaction), and to satisfaction (the overall impact – tangible and intangible – that receiving service via the given channel has on the customer related to their satisfaction of working with the service provider).

3. Define Customer Segments Based on Their Value / Cost to Serve

Now that the cost and service level aspects of each channel have been defined, the next step is to understand the customer base. When examining customers, there are several different factors that can be examined in regards to them – the purpose here is to understand at a minimum:

• Each customer’s existing value
• Each customer’s potential value
• Each customer’s volume of service-related interactions, by channel
• Each customer’s cost to serve around their service-related interactions

The objective is to define customer segments for the purpose of taking migration-related actions on. Once this is complete, the next step is to determine where to migrate customers towards, if any.

The goal is to find which customers to leave alone (in that they cost little to serve or are high value customers that should have the “right” to choose which channels to interact through), which ones to migrate (for the purpose of decreasing the cost to serve or for driving up the quality of service they receive by shifting to higher quality channels), and which ones to “fire” (customers that cost more to serve than the revenue they generate, those that even if migrated would barely be made break-even customers).

The output of such an effort would look as follows:

The above is a simplified version of the segmentation that needs to be completed here. Additional factors can and should be taken into account (i.e. demographic data), such that determining the migration paths to be considered may be affected through such an effort.

For example, the above could take into consideration the age of the customer, which could be a factor into determining whether to push customers toward e-channels such as Twitter or Self-Care or not (with younger customers directed towards these channels, those who would show some resistance – elder clients – not).

4. Define Migration Paths

Once the high-level migration-related strategy is determined, the next step is to examine the channel behaviors of each segment, to identify specifically which types of transactions to push towards which channels, taking into consideration the cost to serve via that channel, the service level of that channel, etc.

An analysis of a segment that is to be shifted towards lower cost channels could look something like this:

5. Design Migration-Driving Initiatives

With the above steps complete, the next step is to design initiatives that can be used below or above the line to motivate the customer segments to use the desired channel.

There are several different ways of doing this – the important thing here is to test different behavior-changing incentives with different customer segments, in order to use the right mix of benefits to convince the customer to make the switch. In some cases, simply providing information to customers can be enough to get them to switch channels (insofar that many customers are unaware of the benefits of different channels, or even that certain transactions can be handled via different channels – i.e. sending an SMS to customers heavily using the Call Center for Service Activation, notifying them that such transactions can be completed faster through the Self-Care portal).

In others, incentives need to be offered to convince customers to make a switch. Some examples of benefits that can be provided to convince customers to change their transactional behavior:

• Providing double loyalty points for bill payments made via the Self-Care portal.
• Providing discounts on products purchased via IVR or via the Self-Care portal.
• Providing a free month of service for annual service activations made via the Self-Care portal.
• Providing higher speed of service guarantees for transactions processed through certain channels (i.e. products ordered via Twitter are shipped out immediately).
• Providing better rates, lower prices, etc., across the board, for customers choosing to interact only via self-care type low-cost channels.
• Providing random additional perks for transactions processed via desired channels.

The important thing regarding the above is that there should be a business case built around the effort – the cost of benefits provided to customers should not exceed the savings obtained from migrating them to alternate channels. If the numbers seem right, pilots should be conducted to assess the impact on the bottom line by examining the overall effect of the efforts on migrating customers to the desired channels. If the desired results are obtained, the tactics should be scaled out across the entire target segment of customers.

We believe there exists great opportunity in shifting customers to optimum channels – not only benefits that can be realized from reducing costs, but also from increasing high-value customer satisfaction. To learn more about migrating customers to optimum channels, please contact us at info@forteconsultancy.com.

What?

Conventional (and even relatively innovative) customer analytics applications in telecommunications focus on how customers use their products and services, rather than in which context they use them. Although extremely beneficial, such a limited look into customer behavior keeps operators from understanding who their customers truly are, and how they can relate better to their lifestyles. ‘Context mining’ provides telecoms operators with a tool that lets them put these lifestyles under a microscope, by focusing on the context of telecommunications service used by customers (such as who they call, where they travel, what they watch, what they communicate about, etc.). Staying within the boundaries of customer privacy, operators now have to take this next step in customer analytics to create an environment in which they can become truly customer-centric.

Why?

In recent years, some leading telecom companies have begun catering to their customers in ways beyond just offering communications services; NTT Docomo, for example, provides life and behavior assistance to its subscribers. Qwest similarly has adopted a vision that states it goal is to bring more life into the lives of its customers. Such shifts in strategy require a better understanding of the lives of subscribers by telecom companies, beyond just knowing how subscribers use telecom products; rather, it necessitates an understanding of how subscribers live their lives – knowing their hobbies, if they like to go clubbing, if they prefer staying in, their vacation habits, etc.

The ultimate purpose of learning so much about subscribers is so that a telecom can:

• Develop new products or services, which are most relevant to customers’ lifestyles, expanding the realm of telecommunications offerings (i.e. concierge services which are now provided by some of the leading operators)
• Customize marketing communications for each customer, relating to their day-to-day lives in the most effective manner (i.e. positioning data bundle as a means for staying online during vacations vs. being accessible for business 24/7)
• Partner with the most relevant brands in campaigns and loyalty propositions (i.e. with certain sports clubs in case there exists a large group of customers who regularly go to games)
• Provide unmatchable opportunities to companies via mobile marketing, with detailed data on customers’ lives that is not available elsewhere (i.e. providing a service whereby tour operators for a fee can target subscribers who travel to specific destinations each year during the holiday season)

To be able to get at such information about its subscribers, operators need to take the next step in customer analytics. Through analyzing the “context” in which its subscribers use its products and services, an operator can make many inferences about the lifestyles of these subscribers.

Getting at context related data doesn’t require the collection of subscriber surveys or even demographic data; by conducting customer analytics in a different manner, telecoms can get at such information through the data already in their hands. For example…

• A customer’s home-cell location can be used to predict the SES group, based on the neighborhood profile

• The phone numbers called by the customer can indicate frequent reservations to concerts and events, based on matching the destination with phone numbers in yellow pages

• A frequent use of the word ‘meeting’ in SMS messages can indicate the business nature of communications, as does frequent connection to a company’s e-mail servers from a Blackberry

…all of which are accessible data providing clues into the lifestyle of the customer.

How?

Understanding the lifestyle of a customer can be achieved by analysis of the context of communications, which can be performed looking into some or all of four main dimensions of communications:

1. The Location

Using GPRS or call location data, operators can track home and work location, as well as frequently visited special cells, and derive an understanding of the profile and type of places a customer is accustomed to frequenting. From this location data, it is possible to gain an understanding of certain bits of the customers’ lives, such as:

• Home & Work-cell Locations: Predicting the socio-economic status of the customer based on the other customers living in same area.

• Specific Locations Visited: Understanding additional characteristics, such as whether the customer is a student (school cells), likes to attend sporting events (stadium cells), likes to travel frequently (holiday destinations),  travels abroad (roaming or airport cells), likes to go out on weekends (popular club neighborhoods), or enjoys shopping (mall cells).

All it takes to derive context intelligence from the location data is classification and interpretation of geographic cells / locations from a customer lifestyle perspective.

2. The Destination

Similar to location, destination of calls (i.e. the owners of numbers called by a customer) can tell a lot about the general interests and needs of a customer, especially when focused on the calls made to enterprise call centers, such as:

• Regular Calls to Specific Destinations: Predicting the company a customer is working for, which brands he/she prefers, the life stage of the customer (i.e. calls to a school) or understanding regular activities such as managing money (bank call centers), travelling (airlines), or ordering food (restaurants).

• Recent Calls to Specific Destinations: Understanding recent changes and interests of a customer, such as purchasing electronics (technology companies), having medical needs (hospitals), looking for a new house (estate agencies).

Again, similar to location, deriving context intelligence from the destination requires a mapping of numbers called by customers to company phone lists, such as yellow pages.

3. The Content

The content of a customer’s communications can be used to describe almost anything about the lifestyle of a customer, which requires looking at the content of four different communication types:

• Data Content: Understanding the web pages visited such as news pages, online stores, sites of leading brands, and different applications downloaded and used such as instant messaging and games can give useful hints about the overall lifestyle of customers.

• TV Content: Channels watched on mobile or regular TV can provide insights into the interests of a customer (i.e. fashion channels, sports channels, etc.), as well as whether the customer is likely to have children or not (i.e. watching kids channels).

• SMS Content: Performing text mining on the contents of SMS messages sent and received by a customer, it is possible to identify key words such as ‘meeting’, ‘party’, ‘school’, ‘wedding’, each of which gives information in regards to the lifestyles of customers.

• VAS Content: Similar to data and TV content, type of VAS preferred by a customer, such as games, sports, or more niche applications such as diet programs can show the special interests of a customer.

Product mapping into lifestyle segments is nowadays a common practice among leading retailers. What it translates to in telecommunications is the mapping of content into customer lifestyle segments, which should be performed for all types of content listed above.

4. The Relation

Last, but not least, many telecoms operators partner with various other retailers and service providers, for the sake of promotions, loyalty program offerings, etc., where the preferences of customers for specific partners can indicate their special interests and preferences (i.e. a customer using loyalty points mostly for movie tickets, fine-dining or sports apparel brands).

Putting these four pieces of the context puzzle together can facilitate a much deeper understanding of the profiles of a telecom operator’s customers, which, then, can be put into use for internal purposes as well as mobile marketing for enterprise customers.

What Next?

As operators move from traditional data mining into context mining, they will need to expand their thinking beyond standard telecommunications needs of customers and into how they can capitalize on newly discovered areas of opportunities. This change will also bring in new challenges, such as customer privacy management in using data.

To make this shift into context mining as smooth as possible, companies should start with pilot activities, analyzing small groups of customers focusing on specific lifestyles or dimensions first, testing actions on them and expanding into a full-fledged implementation only after the pilots have proven results without invading customer privacy.

To receive more information about our recommendations, and learn about related Forte Consultancy Group service offerings, please contact us at info@forteconsultancy.com.

What?

For a long time, retailers, as well as other companies with sizeable retail networks (such as banks and telecom operators) have been optimizing their sales networks, identifying the best location for each store / branch they have, in order to gain a competitive edge. Unfortunately, many have stopped there, as if a store’s future performance is set in stone once it is opened, without looking further into fine-tunings that can have a substantial effect on sales performance.

We believe that after store locations have been set, companies can build analytical models to understand the impact of more variable success factors – i.e local marketing budget, store employee profile, store layout – on local sales performance of each store and apply their learnings across the sales network. Such analysis would lead into tactical changes, customized for each store, which would ultimately result in the maximum return from each location.

Even before the 21^st century, leading retailers have realized the impact of non-geographical factors on sales performance, such as Sears, which built a revenue model quantitatively linking employee attitude to increase in revenue growth for each store. As the expectations of customers have substantially increased over the years, the variety of such factors affecting local sales performance has become more and more complicated and significant. As for significance, according to a 2010 survey, only 8% of customers would bargain for lower prices, if that would mean a lower level of customer service as well. As for complications, a recent AC Nielsen survey on consumer preferences indicated that even whether a store has recyclable bags or not has become a considerable factor in store selection.

By scientifically analyzing what factors affect local sales performance, and by how much, companies can invest in the right store for growth with the right focus. Such analysis could reveal that replacing an employee in a given store with someone having the right demographic or psychographic profile would increase store sales by 5%, changing the store layout by 7%, and advertising in a local newspaper by an additional 10%.

There are four main steps towards identifying and capitalizing on the factors and their impact on store performance:

1. Gather Data on Stores and Potential Factors

Modeling relations between different factors and their impact on sales performance requires detailed store profile data to begin with. Any characteristic that may have an effect on sales performance needs to be taken into account and measured for each store. Such factors would range from store design to staffing and local marketing, and require both systematical and manual data collection, such as employee surveys and site visits. Hence, the first step is to hypothesize on factors as well as the data elements to be collected and gather the required data for each store.

In addition to data on potential factors, another data set is required to isolate the effect of environmental factors on store performance, which would include elements on store location, market size and profile as well as competitive pressure. Such data is required to segment stores into peer groups, so that their inherent impact on sales performance is isolated from the factors to be studied.

2. Segment Stores for Peer-to-Peer Evaluation

Once the data is ready, the next step is to segment all stores under evaluation into peer groups, where environmental differences are minimized to isolate the impact of factors under study. In addition to building the basis for impact analysis, such segmentation is valuable for ongoing performance evaluation with an objective comparison of store sales.

3. Model Impact of Factors on Store Sales

After the stores are segmented into peer groups for analysis, the next step is to build analytical models to establish quantitative links between the hypothesized factors and the sales performance of stores within each peer group, starting with simple hypotheses testing and correlation analysis.

For building the actual models, various techniques could be used, ranging from regression models to decision trees, although Structural Equation Modeling (SEM) is a perfect fit to study causal relations, as it allows for analyzing relations between measured factors, latent constructs (i.e. variables that are abstract on their own, such as ‘store design’) and results. Such modeling could reveal that a 5% improvement in ‘staffing’ would improve sales by 2%, and that such 5% improvements in ‘staffing’ could be created by replacing 2 employees with university graduates and boosting employee morale by 2 points.

4. Utilize Findings to Increase Sales

As the final steps, finding from the modeling exercise need to be translated into business actions for each store, where significant improvement opportunities exist. Such translation would incorporate cost analysis of each potential action with the expected impact of each based on the model outcomes, and prioritize stores and actions based on the results. Based on the prioritization outcomes, an implementation road-map can be defined and put into action.

Handsets are increasingly becoming the lifeline of the telecom industry, insofar that their importance in acquiring and retaining subscribers is increasing day by day. In most markets, handsets act as the sweeteners for acquisition purposes, wherein subscribers are lured to sign a 12 or 24 month contract in exchange for a free or discounted handset.

This trend is growing globally, with operators competing not just on price via their tariffs, but via the free or discounted handsets – as such, the handset is essentially becoming a service offering of the telecom, part of the overall benefits a subscriber gets when he or she signs on to an operator. Such offers are generally associated with postpaid tariffs, however, much less so with prepaid plans.

Such strategies / offers have helped telecoms particularly around the pursuit of two objectives – the increasing of subscribe acquisition and the decreasing of subscriber churn. They barely, if at all, help in the pursuit of a third key objective, which is existing subscriber ARPU growth.

We believe there are, in fact, significant opportunities around pursuing this objective, via the development of effective ARPU growth handset strategies – particularly, in driving voice, SMS, and data usage of subscribers on a customer-by-customer level. Driving this opportunity is a simple fact – certain handsets (due to their design, ease of use, features, etc.) in the hands of certain subscribers will be used more often than other handsets in the hands of the same subscribers. Two simple and generic examples to illustrate this point:

• Elderly subscribers will use a mobile phone more often if that phone has large keys as well as a large screen. A Nokia e71, with its tiny keyboard, for example, simply isn’t suited for them – in fact, pushing such a phone their way via a campaign could lead to a decrease in this segments’ ARPU.

• SMS addicts on non-Smartphones will decrease their SMS usage should they switch to iPhone or Android-supported phones, via the discovery of SMS replacing apps like WhatsApp – as such, pushing such phones to certain types of subscribers can detrimentally affect ARPU.

To most effectively ensure the protection / growth of ARPU as related to handsets on a customer-by-customer basis, we believe operators need to design their own ARPU growth handset strategies through doing the following:

1. Understand Handset Impact

The first step is to understand the revenues generated (on a customer-by-customer, segment-by-segment) by subscribers using different handsets, broken down by revenue type – voice, SMS, and data. Each brand and model should be examined, and ranked based on the findings, by customer segment.

Such an effort should become a routine exercise for a telecom’s marketing / business intelligence department, conducted quarterly, to understand in general the impact that certain brands and their models have on ARPU. An operator may find, for example, that a recently promoted handset is relatively low in the ARPU rankings and could discontinue pushing it.

2. Understand Handset Switch Impact

The second step is to then examine the changes in ARPU when subscribers switch their handset model and brand, from one to another, for every single handset brand and model. To clarify what we mean, let’s take the iPhone 3GS, as an example.

From the first step, we know how much ARPU current subscribers who use iPhone 3GS are generating, broken down in terms of voice, SMS, and data. In this step, we will examine whether this is higher or lower for subscribers that are currently using this phone, vs. the ARPU they generated with their prior handsets.

What this effort will show is that subscribers who used to use a certain handset model and brand who now use the iPhone 3GS are generating less ARPU than they used to, while others are generating more, now that they have switched to an iPhone 3GS (i.e. subscribers who used to use a Nokia e61 and now use an iPhone 3GS are showing a 25% increase in ARPU – broken down as follows – data revenues up 54%, voice revenue down 2%, SMS revenue down 3%).

Then, the next step will be to examine the opposite direction impact of subscribers switching handsets from one model and brand to another. Using the iPhone 3GS as the example once again, we will look at what happens to subscriber ARPU once they stop using the iPhone 3GS and switch to another model and brand, to again understand the bottom line impact of the handsets on driving up or down ARPU. Such an exercise may find, for example, that subscribers who switch from the iPhone 3GS to the iPhone 4 in fact exhibit a drop in ARPU, but spend more when they switch to Android-based handsets.

3. Develop / Revise Handset Strategies

With the above effort conducted, the impact of pushing certain handsets towards certain subscribers will be clear. Moreover, on a brand / model by brand / model level, a strategy can be developed that will ensure the protection / growth of ARPU by seeking to migrate subscribers from certain handsets to others. For example, the above will find that subscribers who use handset X show the highest ARPU increase when they switch to handset Y. Accordingly, a campaign can be developed targeting just handset X subscribers (below-the-line) to make the switch to handset Y. The level of change in ARPU can even dictate the level to which the operator can subsidize the switch.

On an above-the-line level, the handsets and brands the operator should push (by customer segment) can also be determined. This can reflect in the neighborhoods the operator can choose to advertise certain handsets in (based on where certain customer segments / handset subscribers reside), the handsets it can choose to promote in certain shops (again, based on where certain customer segments / handsets subscribers reside), etc.

4. Make the Practice Business as Usual

After revising below and above-the-line handset targeting / migration strategies, operators should conduct such an exercise every quarter to examine shifts in behavior and consumption patterns, so as to revise their strategies.

The introduction of new disruptive value added services (such as WhatsApp), new handsets, and new subscribers may be reasons that such strategies will need to be revised, reasons why certain migration paths from one handset to another will need to be redrawn.

We believe the above effort is one which should become practice as norm for mobile operators worldwide, as handsets continue becoming the lifeline of the industry in dictating how customers are acquired, how they are retained, and how much ARPU they generate. To learn more about developing effective ARPU growth handset strategies, please contact info@forteconsultancy.com.

Retaining customers in the telecom industry is becoming increasingly difficult. Not only are competitors able to mimic tariffs and offerings at the drop of a dime and thus diluting product / service differentiation, subscribers are only a phone call away from porting out to them.

The process for switching between mobile operators is now more easier than ever – in Canada, the mobile number portability (MNP) process only takes 10 – 20 minutes to complete, with the subscriber ported over and using the services of their new subscriber in less than a half hour! While MNP in most markets won’t become this easy for quite a while, it’s quite clear that the churn issue will continue to grow for mobile operators around the world.

For many years now, mobile operators have been trying to address the churn issue through reactive churn efforts – that is, trying to convince a subscriber to not close their line when and only when that subscriber calls the contact center or visits a dealer to do so. The traditional method used to stem churn has been to offer the subscriber some incentive to stay (like a handset if he or she signs a year-long contract, or, a certain number of minutes for a certain number of months for free).

While such efforts have been effective in some markets at improving retention rates, they are not, and never will be, in others. The reason is quite simple – reactive retention strategies only work in trying to keep postpaid subscribers. The strategy requires the operator have a chance to make an offer to the subscriber, a chance which presents itself when postpaid clients give notice as to their desire to churn. Prepaid subscribers, on the other hand, just churn – they simply put aside their existing SIM card and start using a new one from a competitor. And in most markets globally, prepaid subscribers dominate the market – in Italy, Mexico, and India, for instance, more than 90% of the market is prepaid.

As such, mobile operators (with the exception of those in markets like the USA and South Korea, where most subscribers are postpaid) are unable to intervene in preventing a large majority of their subscribers from churning at will. What’s a telco to do? Launch proactive retention strategies.

Proactive retention is all about reaching out to a subscriber and addressing churn before it becomes something a mobile operator has to react to, thus the name. Rather than wait for a subscriber to…

• Port out, using the process defined by the given nation’s telecom authority
• Call the contact center or visit a dealer to close their postpaid line
• Pull out the SIM card in the case of a prepaid line

…a mobile operator can proactively contact those subscribers it predicts will churn in the coming weeks or months and try to stop it from happening.

To set up proactive retention strategies, we recommend mobile operators follow the below four steps:

1. Effectively Define Churn

As the first step in building a proactive retention practice, mobile operators need to first define properly what churn really means, for both prepaid and postpaid subscribers. This is not as easy as it may sound, as the definition used by telecoms globally can be quite different. If a prepaid subscriber does not make a chargeable transaction (i.e. make a call, send an SMS, use data, etc.) for a period of three months but does receive calls on the line, has he or she churned? Or, if a postpaid subscriber pays the subscription fee for six months in a row but has no inbound or outbound activity, has he or she churned?

Driving variations in the ways telecoms define churn are several factors, such as telecommunications authorities with their own definitions stepping in, subscribers who may be more mobile / go abroad for extended periods of time in a given market, competitive landscape, etc. To effectively define churn, telecoms need to conduct analysis regarding their consumer’s behavior, identifying at what point of behaving in a certain manner a subscriber does or does not leave.

Analyzing past churners to identify the number of weeks / months of inactivity preceded their leaving will help nail down a definition around churn, allowing for a standardized view across the organization on this issue. This definition will in all likelihood be different for prepaid and postpaid customers, and will serve as the driving measurement principle going forward.

2. Build Predictive Churn Model

A predictive churn model, for those who may be unfamiliar with it, is a tool that helps telecoms (or companies in other sectors as well, for that matter) identify which of its subscribers will churn within a given coming time period. If a telecom loses 100,000 customers each quarter, for example, the predictive churn model tries to identify who those 100,000 subscribers will be in the coming quarter.

Without a predictive churn model in place, proactive retention efforts cannot be put into action. It is this tool that defines which customers to contact proactively, in order to prevent the churn occurrence from happening. Otherwise, a mobile operator would have to guess which subscribers may churn, causing severe inefficiencies in retention efforts as well as yielding little results.

A churn model must be tested before it can be relied on to support retention efforts, as it may not be predicting accurately enough which subscribers may actually churn. If the model, for example, predicts that 10,000 of a group of 20,000 subscribers will churn, but two months down the road only 5,000 have churned, the model has a 50% error rate, essentially unusable. As an entire proactive retention effort will be designed around the models, it is critical that their accuracy be tested and ensured before going live. To learn more about building such models, please contact info@forteconsultancy.com).

3. Design Offers & Channel Strategy

Based on the findings coming out of the predictive churn model, the next step will be to design offers to be made to the various groups predicted to churn. The variables to be considered in designing the offers are as follows:

• Churn Likelihood
• Customer Product (Prepaid or Postpaid)
• Customer Value
• Customer Usage Behavior (Local / International Minutes & SMS, Data, VAS, etc.)

Utilizing these variables, a dozen or more subscribers groups for targeting should be defined (i.e. postpaid subs with ARPU 500+ USD and above, with 25 – 50% churn risk, with 50+% of MoU international). Based on the defined groups, the next step is to design customized offers that appeal to their unique characteristics.

It is critical that the offers be relevant to the groups; using one or two standard offers won’t cut it, as an unattractive benefit won’t do much towards keeping the customer from churning. For example, an offer to a prepaid subscriber whose ARPU is 30 USD, has a 25% likelihood of churning and only sends SMS in terms of behavior must be drastically different than that offered to a postpaid subscribers whose ARPU is 150 USD, has a 50% likelihood of churning and is active across the board, using data, VAS, etc.

The offers to be used should be of the kind that at least ensure the subscriber stay for a certain amount of time, preferably of the kind that even drive up ARPU. In its simplest form, the offer could be one that gives the customer a certain amount of free minutes each month for a certain number of months. In a more complex form, it could be one that gives a discount on a fixed postpaid plan fee for a certain number of months if and only if the subscriber migrates from their prepaid plan (this would be an example of driving up ARPU). One-off offers should be avoided, as the subscriber can churn immediately after depleting the benefits (i.e. 50 USD discount on a bill this month). One additional note – loyalty program benefits can also be used here, giving the subscriber additional points or services through the program for a certain period (i.e. if you stay with us, we’ll give you access to our platinum level service of our loyalty program for the next year).

Once a primary offer is defined for each target group, a secondary offer should also be defined, in case the subscriber rejects the primary offer. Not all offers will be attractive to all subscribers in a given group; having a secondary offer will ensure higher retention rates are realized through churn prevention efforts.

The above, of course, must all be in line with telecommunications regulations in the marketplace – in some markets, such offers must be made available to everyone – in others, such below-the-line offers are allowed.

Once the offers are designed and ready in the billing systems, the next step is to determine the contact strategy – who will be contact by what channel in what order. Using a contact center is the most effective method in retaining subscribers, but doesn’t make financial sense in many cases – a breakeven analysis will help determine which subscribers should be called (i.e. only those subscribers who have over 100 USD ARPU and have a 25+% likelihood of churning). Those not to be called can be contacted via SMS, e-mail, or auto-dialer (again, regulations need to be reviewed here).

4. Prepare Operations & Pilot Efforts

The final step, before going live, will be to design the enablers to drive the retention efforts – including alternate scripts, SMS text, training materials, etc. The importance of these cannot be stressed enough – a poorly trained call center representative with an ineffective script in his or her hands may cause more harm than good. The piloting phase is a perfect opportunity for examining the effectiveness of the materials as well as the agents.

At this point a critical fact about proactive retention efforts must be mentioned – such efforts only work when the retention offers are made mainly only to those subscribers who are about to churn. Even the most sophisticated and advanced predictive churn models in the world are unable to only pinpoint churners; that is, a model is able to state that 50 of a specific 100 subscribers will churn, not pinpoint the specific 50. The trick lies in making an offer to the 50 who will churn, and not to the 50 who won’t. If offers had to be given to all 100 subscribers, the business case around proactive retention efforts would not make sense.

As such, call center representatives need to have a target around the percentage of subscribers they can make offers to – thus, their goal is to gauge the satisfaction level of the subscribers during the conversation to determine whether or not to make an offer. This can be done with excellent scripts and effective training, arming the representative as much as possible to ensure the desired outcomes are realized.

The final step, before going live, will be to pilot the churn prevention efforts, to ensure the optimal strategy is in place, taking into consideration several different factors:

• Reach Rates, by Channel
• Response Rates, by Channel
• % Satisfied
• % Accepting Primary Offer
• %Accepting Secondary Offer
• % Rejecting All Offers
• % Saved
• % Change in ARPU

The above findings must then be used to fine-tune the offers, the timing of the offers, the scripts, the training materials, etc. More importantly, the impact on the bottom line can be assessed, to determine what channel strategy makes sense, helping fine tune which customer is contacted by what channel (based on response and retention rates as well as % change in ARPU).

Mobile operators that haven’t yet launched their own proactive retention efforts should seriously consider doing so at this point. Such strategies are proliferating through the telecom industry, as the challenge of retaining subscribers is increasingly becoming more and more difficult. To learn more about building your own proactive retention strategies, please contact info@forteconsultancy.com.

What we as consumers all love about chains like Starbucks or Carrefour is that we know what we’re going to get from them, each and every time, in all location – be it in London, Dubai or Buenos Aires, such retail chains offer a consistent level of service and quality, factors which are very important to consumers. Aside from national-based customization (such as offering Shrimp Burgers at McDonald’s in Japan) on a product level, little varies between retail chain stores from city to city, country to country.

This level of consistency has played an important role in helping such retail chains dominate markets globally, expanding at an ever-increasing pace, killing off independent coffee shops, bookstores, grocery stores, clothing stores, etc. In almost every retail sector in most countries, a handful of brands make up a large part of the market of their respective categories.

While this cookie-cutter approach works for the most part, it fails to take into consideration local factors, variables that in this day and age of data-driven decision making is disappointing. We believe there are significant opportunities that retailers can capitalize on by customizing their retail sales points.

The concept of customization we recommend retailers pursue is not about radically changing sales points, but rather, making small changes to each one that can have a considerable impact on overall sales. The objective is to identify what is different about each sales point (in terms of its locale, its customers / prospects, even the weather) so as to capitalize on these facts. As a starting point, we believe customization can be tackled around three areas:

1. Product Location / Position Customization

Sales-related data analyses on a point-by-point basis will yield important findings that can help each store reposition the location of some of its products. This can relate to where the products are placed (i.e. in display windows or at the store entrance) or how they are placed near each other.  Analysis of sales data will show the importance of specific products to specific locations, findings that should drive the re-positioning of the products based on their importance. This analysis needs to be done down to a specific product & brand level, not just at a product category level.

As such, as an example, the findings will dictate that one Best Buy electronics store should place Apple iPads immediately at its entrance, while another should place Dell netbooks at the entrance (as these are the top moving products for those locations). Many different factors will drive variance in product sales (such as local population demographics, income, weather conditions, etc.), the key is to realize this and act upon it.

Products that are often purchased together at the same time in specific locations can also be considered for re-location in the store. For example, capitalizing on analysis of sales-data from a specific bookstore retail sales point that shows 38% of consumers who purchase The Economist magazine also purchase Businessweek in the same transaction, suggesting placing these two products right next to each other to drive up that ratio.

The above stated ratio will not be the same in every sales point though; the correlation can be non-existent, in fact. There could be a newsstand right out the bookstore which carries Businessweek, for example, a variable which creates a completely different dynamic for that store in terms of products purchased together. As stated before, sales-related data should be analyzed on a location by location basis to ensure the right decisions are made. The concept of placing products near each other can extend into considering bundling the products together, such that the consumer receives some added-benefit for purchasing both products in the same transaction.

The findings of this analysis should also be used in driving cross-sales through sales representatives in the stores. When a customer purchases a given product, the representative (either on the floor or at the register) should make a recommendation around the next best-selling product correlated with that purchase – or even offer a benefit for the extra purchase. So, for example, when a customer comes to the counter with a pair of Baby Nike Air Jordans, the representative can offer a 20% discount on a matching pair of Nike Air baby socks. The concepts discussed here around bundling and cross-selling should be tested, of course, to ensure the optimal strategy is in place to maximize on the opportunities available.

2. Advertising Customization

The method of advertising related to each store should be customized as well, related to local factors that change response rates to the methods used. As there are dozens of methods of advertising (TV, billboard, magazine, newspaper, radio, web, blog, mobile, flyers, etc.), one size definitely does not fit all here. In a given country, in different cities, some tactics will work, some won’t.

As such, for a chain with stores in different cities, analysis needs to be conducted to determine the impact of advertising via different channels. Analysis of sales relative to specific campaigns conducted in the past via specific channels will yield the desired results – based on the findings, in one city, the focus may thus shift to distributing flyers door to door, in another, relying solely on local channel TV ads. As cultural differences have a significant impact on the responsiveness of potential customers to pitches via different channels, customization is a must here.

The effectiveness of using customized advertising strategies on a local basis should be reviewed at least once a year, however. Over time, behaviors of consumers will change, altering their responsiveness to different channels of communication. Annually, local advertising strategies and each channel’s impact on campaigns / sales should be reviewed, with findings used to possibly alter tactics.

3. “Local Touch” Customization

The retail chain concept often prevents customization across the board on all matters, preventing local touches to be made to specific stores, even when such customizations can seem to be no-brainers. Little touches based on local conditions can have a positive impact on customer satisfaction, and ultimately, the bottom line.

Using the USA as an example, this can include providing complementary umbrellas to customers in cities that have significant precipitation (in Seattle, where it rains over 150 days a year, but not in Las Vegas, where it rains less than 30 days a year), or having clerks in grocery stores that will carry bags to cars in cities that have a high elder population (in Honolulu, where around 20% of citizens are over the age of 65, but not in Anchorage, where only 5% are).

Such customization can be made to an even greater degree when relevant, with concepts like opening small day-care rooms and offering home delivery considered (though such customizations can be difficult and costly to implement, and likely not allowed by the global brand).

We recommend each retail point identify what types of local customizations can and should be considered, with the suggestions reviewed and approved / denied by regional management. The small touches (the WOW factor, essentially) can truly have an impact that will be much greater than what it takes to make the customizations.

It is our belief that the concept of local customization will begin to take off in the coming years in retail chains, as companies begin to realize the wealth of data on their hands that can be tapped into for making strategic changes on a local level. We recommend retailers immediately begin examining their own data to identify opportunities for bringing such customizations to life. To learn more about designing retail sales point customization strategies, please contact info@forteconsultancy.com.

A well designed and managed loyalty program can generate significant benefits for the company offering it. Case in point – the Tesco Clubcard program, which has been cited over and over as possibly the single key reason for the grocery chain’s immense success in the UK (and more recently in other markets too).

On the flipside, poorly designed programs can cause significant harm to a company. The globally successful Air Miles program failed when it was launched in the U.S. market, mainly due to how complex it was to redeem benefits – the program lost $25 million dollars its first year and was subsequently shut down.

A loyalty program is made up of many parts, parts which work together in harmony when well designed and managed. These parts are in the communications, the rules, the processes, the gifts, the earning procedure, the spending procedure, the interaction channels, etc., all of which need to be well designed to ensure a best-in-class loyalty program.

Even some of the most recognized programs in the world have deficiencies, weaknesses that don’t necessarily cause the program to fail, but are there nonetheless. We recommend companies who have a program or are planning to launch one make every effort to avoid making the following ten mistakes…

1. Not Treating High Value Customers Differently

As we’ve stated before in regards to learnings from a prior engagement, one customer at the top of the pyramid (top 1% of customers) generates as much profits as 16 of those at the bottom end of the pyramid (bottom 50% of customers). Logic dictates that companies need to do all they can to retain such customers. Yet, some fail to do so, treating every customer the same.

Case in point – MBNA Canada’s PremierRewards program, which gives 1% back on retail purchases, regardless of how much is spent that month or year. The program has no above-the-line differentiation for high value customers, treating everyone exactly the same. One of its competitors has got it right – Capital One’s Cash Back Platinum Card gives 1% back on purchases up to $15,000, 2% back on purchases above that.

Giving more back to high value customers can also be done below-the-line, with gifts given and offers made directly with certain customers – however, an above-the-line differentiation is required – just as all airlines offer tiered benefits, all loyalty programs should have some above-the-line high-value customer differentiation aspect to them.

2. Pretending to Treat High Value Customers Differently

Some programs do have tiers, and treat customers differently once they hit a certain spending threshold. Others also have tiers but fail to provide any real differentiation once the threshold is hit.

Case in point – Emirates Airlines has three tiers to its Skywards program – Blue, Silver, and Gold. When a customer earns 25,000 tier miles in one year they are able to go from Blue to Silver – this requires 15 flights (possibly up to 30, depending on the “category” of the ticket) be made from Istanbul to Dubai in one year, not an easy feat.

The benefits once someone finally makes it? A few extra miles (but not tier miles), some extra luggage space, priority check-in, and lounge access in Dubai. No lounge access abroad, no priority airport entrance, no priority boarding, nothing. If you are travelling to Dubai and pack light & print the boarding pass, there is not a single benefit for being a Silver Skywards member (minus the couple hundred extra miles that is earned). While the program is generally successful, its failure to differentiate how high value customers are treated is apparent, especially when comparing it to programs in the region (Turkish Airlines as a best-in-class example).

Only more disappointing than a program failing to differentiate how high value customers are treated is a program that pretends to do so. It ultimately is a big letdown for those members expecting additional benefits, and as such, careful attention should be paid to how tiers are designed.

3. Offering Too Narrow a Rewards Earning Period

Allowing a member to actually have enough time to accumulate and redeem benefits is the case here. A program can succeed only if its members feel appreciated, that the program truly rewards those who give the company their loyalty. Having too narrow a window in which to earn enough points so as to be able to redeem them before they expire is a common mistake made by companies that are more worried about liabilities rather than being fair to customers.

Case in point – JetBlue’s TrueBlue program, wherein frequent flier miles expired one year following the day they were earned. Without a doubt one of the worst programs in the world around expiry policy, most program members were unable to earn enough miles in one calendar year to redeem them before they expired. The program finally changed this outdated and draconian policy, such that now miles never expire if the member makes at least one flight a year with the airline.

It is a must for companies seeking to have successful loyalty programs to ensure points are redeemed, that benefits are realized – otherwise, the program isn’t realizing its objective of driving loyalty. Best-in-class programs have from 60 – 80% redemption rates; at a minimum, a 50% redemption rate should be the goal.

4. Being Stingy With Payout

Companies in different sectors have significantly different margins, dictating how generous they can be in terms of loyalty program payout. Grocery stores, for example, traditionally only give 1% back, while clothing retailers give 10% or more back. Companies need to be generous with their customers when it comes to their loyalty programs, especially in light of competitors’ practices.

Case in point – Starbucks My Rewards program is notoriously stingy; members need to make 15 purchases to earn 15 stars, which then gets them just one free coffee – that’s a 6.67% earnings ratio. Even worse, it takes 15 transactions, not actual cup purchases, to earn a free cup – so if a customer buys more than 1 coffee in a single transaction, it still only counts as one star. One of its key competitors – Caffe Nero, has a similar program, but theirs requires just 9 cups to be purchased to earn a free coffee. Starbuck’s My Rewards is so notorious for how stingy it is that dozens of blogs and Facebook pages have been created around boycotting it.

5. Having Complex / Confusing Rules in Place

The simpler a loyalty program is to understand and use, the more effective it is. Companies often make programs so hard to understand and benefit from that members simply don’t, lost in the complexity of it all.

Case in point – Walgreens Register Rewards, a program that gives a member a coupon when he or she checks out, if he or she buys certain products in the weekly catalog of the drugstore chain. Not only is there confusion related to earning the coupon (such that a certain amount must be purchased and the exact product / size / type must be purchased), but also around redemption. The rules are rather complex and have driven members to blog heavily regarding them. Some rules, for example, the program has in place:

• Only one register reward per promotion in a single purchase. 2 of the same item can be purchased, but must be rung up separately to earn 2 rewards.
• A Register Reward will not be given on the purchase of a product subsidized with a Register Reward.
• A coupon and a Register Reward cannot be used towards the purchase of one product, only one will count. Two separate purchases are required to benefit from both.
• Register Rewards cannot be used towards sales tax; regardless of the discount, full sales tax must be paid.

Best-in-class programs strive to ensure rules are easy to understand, points easy to earn, benefits easy to obtain. The more transparent and well-communicated the program, the more successful it will be.

6. Having Too Few Rewards Choices

Just as customers are different from each other in regards to their value, needs, and behaviors, so too are they different when it comes to the rewards they would like to obtain from their loyalty program. A well-designed loyalty program needs to take this into consideration, and offer rewards that members truly want, rather than force limited options onto them.

Case in point – Uninor recently launched its loyalty program, called Sweet Treats, whereby prepaid customers receive benefits based on how much they recharge – sadly, the benefits are limited to local minutes, long-distance minutes, or SMS. No handsets, no data, no other internal rewards, no external rewards through partnerships, essentially, just a discount program, in a day and age when telecom loyalty programs are all about innovative and unique rewards. While internal benefits around minutes and SMS may make some subscribers happy, it takes a lot more to satisfy the masses, especially high value customers.

It is essential that programs reward not just from within, but externally as well, and across a broad range of categories – one size does not fit all. Partnering with airlines, telecoms, grocery stores, bookstores, cinemas, and even charities should be considered, offering a choice that fits the needs of all unique member groups.

7. Changing the Program for the Worse

Every so often, a company needs to change its loyalty program for one reason or another. What doesn’t work, and isn’t accepted by members, is for the program to get worse. Some benefits can be removed but offset by another, but the overall proposition must remain as good as (if not better) it was before the re-launch. Some companies, though, fail miserably at this, causing a wave of backlash from members.

Case in point – Deserving a second citation in this article for their mistakes, Starbucks re-launched its program to the version described above, whereby the key reward is one free drink for 15 purchases, an extremely weak proposition in and of itself. What makes it even worse? The fact that the program’s key benefit was a 10% discount on all purchases – thus a free drink for 10 drinks, a free muffin for ten muffins, etc.  The program has been watered down to the point it is one of the worst large-scale retail loyalty programs in the world.

Changes to programs should and when they need to be made be minor, and be perceived as beneficial by members. As such, of course, the program has to be designed effectively in the first place, a lesson Starbucks clearly didn’t take to heart.

8. Not Rewarding Every Purchase

Many loyalty programs only reward members for some of the purchases they make with the company, not recognizing total spend, failing to encourage consolidation of spend. This is particularly rampant in the telecom and banking sectors, with many loyalty programs only rewarding certain spend types (i.e. only for mobile phone or credit card spend). Any type of spend that ultimately generates profit should be rewarded, even if in a different ratio.

Case in point – Caisse D’Eparagne’s S’Miles loyalty program is a prime example of one which does not reward every behavior; rather, the program only rewards customers for their credit / debit card spend and ATM withdrawals. Current / Saving account balances, loans, etc., are not rewarded, essentially not driving customers to consolidate their assets with the bank. Further, it rewards customers not based on their full or potential value, but rather, only on how much they use their credit card or withdraw cash, transactions which don’t show a customer’s real value.

Companies should pay particular attention to rewarding those purchases which have high margins, but not neglect to reward those with low margins – a customer ultimately is not concerned with such issues; he or she only wants to be rewarded for all of their spend with a given company, not only on those purchases that the company deems appropriate.

9. Not Rewarding the Right Behavior

Customers know the effect they have on companies in terms of operating costs. A customer who doesn’t call the contact center ever, only uses online banking and never visits a branch, who recharges their mobile phone online or sets up automatic payment cost less to serve than those who overload traditional channels. As such, they deserve to be rewarded for this. Some companies have got it right, like Jet Airways, which gives it members 250 frequent flier miles extra if they check-in online, thus reducing the queues at the airport. Or, Boost Mobile, which reduces the postpaid mobile phone bill of customers who make payments in a timely manner six months in a row. Some don’t:

Case in point – Ikea Family, the global furnishing company’s loyalty program, that rewards customers only with discounts on select products and throw-ins like free coffee. There is no points system, thus no accumulation based on spend. Essentially one can get discounts on a couple products, but will not be rewarded for spending tens of thousands of dollars. Thus, the right behavior of spending more and more over several years is not rewarded at all – a truly disappointing program from a wonderful company.

10. Making Redemption Very Difficult

Some loyalty programs make it very difficult for members to redeem the benefits they earn, primarily due to a deficiency in systems that can automatically deliver rewards. This is not an excuse, however, for a poor rewards fulfillment process – members don’t care about a company’s system-related limitations.

Case in point – A final citation for Starbucks; not only is it stingy, not only did its program get worse, but it also has an awful fulfillment process. For some reason, the reward for getting 15 stars (a free drink) is distributed via mail (that’s right, mail), in the form of a coupon for a free drink. So when a member gets to 15 stars, he or she can’t get the free drink right away, but must wait for a coupon to come in the mail. Money can be loaded onto the card, it is also used to earn stars, but for some reason it can’t be used to redeem benefits? Starbucks has a great deal to learn about loyalty programs.

Programs should make the redemption process easy and instantaneous for their members. In a day and age when instant gratification is a must, real-time rewarding through SMS’, cards, or some POS system should be designed into a program’s core offering.

Not all programs pass the test on all of the above – they can’t be expected to. The perfect loyalty program doesn’t exist, and never will. Companies need to do the best they can with the resources available to ensure their programs avoid as many of the above listed pitfalls as possible, be it in designing a new program or re-designing an existing one.

To learn more about building effective loyalty programs, please contact info@forteconsultancy.com.

The new rules of the game – Predictive models, one-to-one offers, outbound campaigns.

65% of product launches fail. That’s means that the millions of hours and millions of dollars in resources invested into developing two out of every three products is a complete waste. Visit an electronics store, a bank, or a telecom dealer, and odds are that two-thirds of the products and services you see there won’t be around the next time you visit. Rather sad, but rather avoidable as well.

Poor planning and lack of truly understanding what the marketplace desires are some of the root causes of such failures. But an overall inability to move such products and services falls on marketing and sales. The passive culture that permeates within these two groups – particularly in marketing – is inexcusable. For too long, marketing teams have been allowed to pass the buck, by blaming sales teams, by blaming executive management, by blaming anyone but themselves for the failure of a given product or service to sell.

In actuality, no one but marketing is to blame. A passive attitude whereby sales are somehow mythically driven by just increasing advertising or retail presence doesn’t cut it anymore. It’s time that marketing teams make a radical shift to the world of proactive marketing.

Proactive marketing, in all aspects, is the opposite of what’s done today by most companies in B2C sectors. Anything and everything around selling more to customers, making them more loyal, or even acquiring them is done on a one-to-one level, never on a mass-scale – be it in the form of individual offers, customized products and services, or outbound contacts , it’s about winning customers over one-by-one. It’s done below-the-line, it’s personalized, and it’s relevant – again, all characteristics that are radically different than business as usual.

Proactive marketing is not, however, an end-all solution. It does not mean an end to traditional marketing; rather, it’s a complementary effort. It’s the extra push that gives companies the edge against their competitors, it’s the little bit more that makes or breaks a product or service, a relationship, a company.

Companies ready to take the leap and begin their own proactive marketing efforts need to follow a set of steps to build the base for conducting such activities, steps that can be summarized as follows:

1. Get to Know Each Customer:  The first step is to truly understand the differences among the customer base, with each customer having his or her own set of behaviors and needs, not to mention potential value. The goal here is to take the mass base of customers and at least segment them into several dozen actionable groups.

Some of the key factors that help define and differentiate these groups are around demographics (age, nationality, gender), product usage (recency, frequency), spend (existing, potential), and needs (in terms of products and services). Companies in certain sectors traditionally have such data on hand (i.e. telecoms and banks), others need to build mechanisms for getting it (i.e. retailers through loyalty programs).

2. Build the Offers: Proactive marketing in its essence is sales, by making a relevant offer to the right person at the right time. Based on the defined target groups, products and services that are relevant to them must be identified, and offers developed around driving uptake. It is critical that the offers be relevant, otherwise, it’s no different than business as usual – trying to sell ice to an Eskimo as the saying goes.

Not only should the offer be relevant, but there should be an additional enticement for the customer to pull the trigger. A couple examples of smart and relevant offers with enticing additional benefits should make this clear:

Financial Services

Scenario: Mary Smith is one of our credit card subscribers, but does not have her salary deposited into our bank. Rather, she pays her credit card statement through another bank.

Objective: To get her to open a checking account and have her salary deposited with us each month rather than have her keep her savings elsewhere.

Behavior: An analysis of Mary’s credit card usage behavior shows that she makes numerous airline ticket purchases every quarter, and spends a great bit overseas. Mary also spends the rewards points she earns from using the card, which she earns on a “one point to one dollar” ratio.

Customized Offer, via Phone: Mrs. Smith, if you set up a checking account with our bank and make automatic salary payments into it each month, instead of one point for every dollar, you will instead earn two points for every dollar you spend on your credit card for all airline ticket purchases and overseas spend – a benefit you will enjoy as long as automatic salary payments are made each month.

Electronics Retailer

Scenario: Bill Reynolds bought an HP laptop three years ago from us, a transaction recorded via the fact he used his loyalty card when he made the purchase.

Objective: To get him to buy his next laptop with us, as analysis of similar customers has shown that it’s now time for him to replace his old one.

Behavior: Bill is an iPhone junkie. He bought two iPhone 3Gs from us the week it came out, and one iPhone 4 from us the week it came out as well.

Customized Offer, via SMS: Exclusive for you, buy an HP laptop from any of our stores this week, get $50 off your next iPhone purchase (iPhone 4 or next year’s iPhone 5).

Telecom

Scenario: John Doe used to top up on average $50 a month each of the prior 18 months – the last 6 months he has been averaging $20.

Objective: To get John back up to $40 or $50 spend per month.

Behavior: The decline in spend has come from a complete cut-off of international calls – John used to call the UK and would generate us $20 – $30 in revenues each month from this behavior. His current revenues are comprised of data and local minutes usage.

Customized Offer, via SMS: A special offer just for you – top up $50 within the next week, enjoy half price calls to the UK for one month afterwards.

It cannot be stressed enough that for every offer that is designed, a solid business case must be built, in order to ensure the effort makes sense financially. In the above scenarios, it is assumed as such. Ultimately, any effort that generates revenue that normally would not have been realized (regardless of dip in gross margin) is an effort worth undertaking (assuming all else is equal, such that the actions are not offered to the masses and are targeted, are not made to the wrong customers, etc.).

3. Pick the Channel: There are many channels that can be used for reaching out to customers. Each has a different effectiveness rate based on the offer to be made, and obviously each has a different cost associated with it. In certain cases, making calls will make sense, in others, sending an SMS. Other alternatives such as email, mailer, and auto-dialer also can be used.

We recommend companies play around with this aspect of proactive marketing, mixing and matching offers to various channels, to determine the best blend of channel usage. Small-scale pilots with different customer segments, offers, and channels will get the job done here.

4. Gain Momentum: As daunting as it may seem to get the whole effort up and running, it has to start somewhere, and we recommend it start small. Pick a couple of hundred customers to be contacted with one or two offers to begin building momentum, to gain some visibility across the business. Successes should be shared, failures learned from, modifications made as needed. The truly hard part around shifting to a proactive marketing mode is getting the first three steps listed above completed, yet it’s often this step where things fail. Building up success by success should help ensure a full-scale rollout is ensured.

In this day and age when competition is fiercer than ever, margins are down, and customer expectations are sky-high, companies need to find an edge, that extra advantage against their competitors. We are confident they can find it in proactive marketing, a practice that will proliferate across companies and sectors over the coming years.

To learn more about shifting to a proactive marketing environment, please contact info@forteconsultancy.com.

Ever wonder why most banks’ branches are open from 9am – 4pm only on weekdays, the exact same hours and days when a significant majority of their customers are working? And then when customers are actually able to visit during their lunch breaks the branches are closed for lunch or have lines out the door?

Or, when there is a significant delay or cancellation, that airlines don’t bother telling their customers before they get to the airport? But when a passenger tries to check-in even one minute after the “45 minutes before departure” window he or she is denied and told to wait for the next flight?

The poor service we as consumers receive from companies knows no bounds – not in terms of sector, nor in terms of the levels of it – companies seem to be literally going out of their way to provide poor service every single chance they get. But some don’t. Some place value on service, on ensuring their customers are treated with respect.

The above listed service downfalls are cited for a reason – because two best-in-class companies saw the opportunities that addressing them presented, and by doing something about it, are now recognized by their customers, peers, and us at Forte Consultancy Group alike as the best of the best:

Commerce Bank: Opened in 1973 with one branch in the state of New Jersey in the USA, this bank modeled itself not after other banks, but after retailers. Realizing that customers were not being done-right by their banks, they made it a core policy to work around their customers’ schedules. The bank’s stock grew more than 2000% during the 1990’s, ultimately resulting in its’ highly profitable acquisition by TD Bank in 2007. Things setting this bank apart included:

• Being open 7 days a week, 365 days a year
• Staying open till 8pm on weekdays, until midnight on Fridays
• Always opening 10 minutes and closing ten minutes after stated branch hours

Other service differentiators included free coin-counting machines for children and adults alike, as well as free lollipops for the kids – this all on top of excellent customer service, supported by tens of thousands of mystery shops a year to ensure quality remains high, and a wow team that rewards the best-performing employees.

Qantas Airlines:  All the way back in 2001, almost before SMS became an irreplaceable part of lives, Qantas launched the “Qantas Flight Update” service – sending details of flight departure time changes to registered users with compatible mobile phones (for any delay of 30 minutes  or more). Since then, many other airlines have followed suit; others still don’t offer it – British Airways just launched their version last year, Turkish Airlines is without. Qantas has been a pioneer of the aviation industry, particularly around the service it provides – it has been recognized by Skytrax as being one of the five best airlines in the world in providing service, for five years in a row now.

Aside from the firms cited in the above examples, some other companies have become legends around delivering service, known for the best-in-class experience they provide their clients. Two of the most cited companies are:

The Ritz-Carlton: The single most cited company when it comes to service excellence, the hotel chain has won two Malcolm Baldrige Awards for the quality of the service it provides its guest. Everything starts and ends with the “Ladies and Gentlemen of The Ritz-Carlton,” the chain’s exceptionally well trained and empowered front-line staff. As one example of this empowerment, each employee is authorized to spend up to $2000 to rectify a customer problem or issue. The chain invests an extraordinary amount of time into training its employees around service excellence, particularly around its “Gold Standards,” the base in its service mantra. This service is so legendary and well recognized that non-hotel employees can even enroll for the course, to learn from the chain’s experiences and approach.

In addition, the company compiles a great deal of information regarding its customers, in order to provide better and better service in each customer stay. Ordered several diet 7-Ups on your stay last year in the Ritz-Carlton Dubai? It will be waiting for you in your room when you arrive the next time you stay at a Ritz-Carlton, regardless of location.

Nordstrom: Probably the most cited retailer when it comes to service excellence, this US chain has been renowned for the emphasis it places on service for over 100 years now. At the core of its efforts is the empowerment of employees (in line with The Ritz-Carlton), with a simple guide in place – “Use Good Judgment in All Situations.”

Every morning in every Nordstrom, employees start the day by telling stories of their customer interactions from the day before, sharing learnings and interesting examples of the ways in which they excelled in servicing the clientele. In a similar vein, employees are encouraged to recognize other employees who they believe has gone above and beyond in delivering excellent service to a customer, for which the employee is recognized and rewarded.

This excellence around service is supported by smart policies that guarantee no hassles for the customer base – for example, the merchandise refund policy is a “no questions asked” one – if a customer wants to return any given product, he or she can without having to give a reason. Another policy which in this day and age is hard to find – customers can contact the store and department they want to speak with directly – no calling a national contact center. Several books and awards later, Nordstrom continues to set the standard for the retail industry around service excellence.

For companies considering improving the level of service they are providing their customer base, we have several simple recommendations that should be followed in so doing:

• Employees Are Key – Excellence in service can only be achieved when its delivery is flawless. All the little and big things that employees do every day in their interactions with customers define this delivery and its flawlessness. From holding the door open to smiling, to using the customer’s name and setting expectations, the employees define the way customers see companies. As such, the biggest investment of time and resources around improving service quality must be with and around employees – their trainings, compensation, rewards, promotion or demotion, all tied inseparably to service excellence.

• Data is Too! – Knowing as much as possible about customers on an individual level is of critical importance – the channels they interact through, their preferred time for being contacted, their favorite products and services, their demographics, etc. Any and all data that can be used to customize the way in which a company interacts with each customer should be obtained, stored, analyzed, and used – just as The Ritz Carlton is ensure Diet 7-Up is waiting in certain guests’ rooms when they arrive, so too should any company tap into its customer data to go above and beyond in terms of service delivery.

• Wow Factor – Every company should look to do something for its customers that no other company does, something that resonates with the base, and with market observers, becoming legend. A couple examples – The Ritz-Carlton even trusts its janitors to spend $2,000 on guests to satisfy them…a no-cost version – Southwest Airlines’ hostesses sing songs before flights take off to put on a smile on their passengers’ faces.

• Get the Basics Right – The best service in the world wouldn’t help a company that doesn’t have the basics right – a competitive set of products and services, offered through a variety of channels, at a competitive price, promoted in an effect manner. Those companies that aren’t up to par around the basics shouldn’t try to tackle their service issues.

We recommend companies in the service industry examine their own operations and the way they do business to determine whether they are more like the banks and airlines mentioned at the beginning of this article, or more like The Ritz-Carltons and Nordstroms of the world. The findings will unfortunately be likely disappointing.

To learn more about improving the level of service provided to customers, please contact us at info@forteconsultancy.com.

Crisis in the business world can take many shapes and forms. It can come in the form of fraud, the collapse of Barings Bank being an example, whereby a several hundred year old company can be wiped out over a weekend due to the secret trading and subsequent losses of just one trader. Or, it can come in the form of an oil spill, a possibly avoidable catastrophe that almost wiped out one of the largest companies in the world just last year, BP.

These types of shocks to the system are not uncommon, and lately, are happening in rather high frequency around the world, across dozens of different sectors. Many companies have in place crisis management strategies, tactics they will deploy in case such catastrophes befall them. Be it financial reserves to get them through hard times or a boardroom full of lawyers on standby, companies are rather prepared to handle adverse situations.

It’s the rare company, though, that has a plan in place to seize on the failures of its competitors. Such incidents present golden opportunities for companies in sectors that have had a key competitor take a hit, opportunities that can change the dynamics and structure of that sector for a time to come. Just as companies have crisis management strategies on standby to deploy should they be needed, so too should they have them ready if and when a competitor is hit with a crisis.

On a high level, every company should examine their own sector, from both a local and global perspective, to identify past crises that have caused a shock to the system. The key purpose of such an effort would be to identify learnings to take away from the outcomes of the crisis – what happened, how did the company respond, how did its competitors respond, what happened to the company and its competitors, what was the long-term outcome, etc.

Aside from learnings to be had from examining such past crises, we recommend companies also take the following four principles to heart, adhering to them if and when a shock to the system does occur in the form of competitor failure:

1. Maintain Neutrality – Taking a shot at a competitor when they’re down, as tempting as it may be, should be avoided at all costs. Failure of a competitor to maintain ethical standards, have proper oversight, manage risk, or take the right precautions are all the kinds of things that can happen to any company at any given time. Criticizing a company for a failure today will be impossible to explain should the same failure affect one’s own company down the road. Not only is it dangerous in this manner, but it also can come off as petty and unnecessary. A final negative outcome of such behavior can be the long-term grudge it can create between the parties, should the company under fire survive the crisis.

Companies should maintain neutrality on such issues at all costs, leaving the criticism to the media and sector watchdogs. Avoiding press exposure as much as possible is highly recommended at such times.

2. Be on Acquisition Standby – Should the company in crisis collapse, be ready to acquire their client base, their assets, etc. Ultimately, some value is left behind in the wake of a company going under, value that one’s competitors will be after as well. Companies need to be ready at all times to make a move should such a situation occur, before their competitors do. This is exactly what happened in the case of XL, one of the biggest leisure companies in the UK, which collapsed in January, 2009. Virgin Holidays swooped in to acquire its customer base, which it brought under a new brand it launched called TCD (as XL’s customer segments were quite different than Virgins, thus the launch of a new brand). The acquisition brought over one million new customers to Virgin Holidays, nearly one third of its current base.

Such a strategy should even be in place even if bankruptcy is not in play – GM, Ford, Chrysler, and Hyundai all went after Toyota’s base, targeting them with cash rebates, when the car-maker suffered its accelerator scandal, which caused them to suspend sales for a period of time. Toyota’s competitors saw a significant opportunity and went after to it, benefiting from this shock to the auto sector.

Whatever the strategy, it should be sustainable. Goodyear, for example, saw an opportunity to replace Firestone as the key tire supplier of Ford automobiles, when that relationship fell into crisis due to Firestone’s tire failures. However, though Goodyear benefited in the short-term, their inability to produce the necessary quantities due to capacity issues prevented long-term success from occurring.

3. Consider Competitor Coalitions – Crises occasionally present an opportunity for competitors of the company in jeopardy to unite, to take a group stand or action as a statement for the positive. Such was the case when Exxon-Mobil, Chevron, Shell, and ConocoPhillips teamed up to put together  $1 billion USD into a venture called “Marine Well Containment Company,” shortly after BP’s Gulf of Mexico disaster – a venture aiming to develop technology and response plans for capturing and containing oil spills. BP has since requested to join the coalition.

4. Become Transparent –When Lehman Brothers collapsed in 2008, consumer confidence in all financial services companies also collapsed, with assets being withdrawn at unprecedented rates. The fear consumers had during those days that their own financial services institutions would also collapse drove this panic. Competitors in such situations who have nothing to hide should become as transparent as possible, making it clear in every possibly way that they won’t also collapse. This can be done in the form of new and transparent audits, communicated with phone calls to high value customers, and press conferences / releases conveying that there is nothing to worry about. Corporate communications need to be ready, with a comprehensive plan as to how to handle such situations.

Ultimately every company in every sector, no matter how local, regional, or global, should take the time and effort to make sure they are ready for shocks to the system. It can take only one such incident to forever change the future path of a company, for the better or worse.

To learn more about how to prepare a comprehensive plan around such situations, please contact us at info@forteconsultancy.com.