Using Segmentation in Customer Retention
The basic approach to retention-based segmentation is that a company tags each of its active customers with 3 values:
Tag #1: Is this customer at high risk of canceling the company's service? One of the most common indicators of high-risk customers is a drop off in usage of the company's service. For example, in the credit card industry this could be signaled through a customer's decline in spending on his or her card.
Tag #2: Is this customer worth retaining? This determination boils down to whether the post-retention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer. Managing Customers as Investments.
Tag #3: What retention tactics should be used to retain this customer? For customers who are deemed “save-worthy”, it’s essential for the company to know which save tactics are most likely to be successful. Tactics commonly used range from providing “special” customer discounts to sending customers communications that reinforce the value proposition of the given service.
Read more about this topic: Market Segmentation
Famous quotes containing the words customer and/or retention:
“A good customer should not change his shop, nor a good shop change its customers.”
—Chinese proverb.
“Unless a group of workers know their work is under surveillance, that they are being rated as fairly as human beings, with the fallibility that goes with human judgment, can rate them, and that at least an attempt is made to measure their worth to an organization in relative terms, they are likely to sink back on length of service as the sole reason for retention and promotion.”
—Mary Barnett Gilson (1877–?)