In previous blogs I’ve talked about the high costs of “buying” a customer through marketing… And that generally you won’t make a profit on a customer until 5-6 transactions. In most businesses, the first transaction is actually at a loss. So to help increase profits I blogged about creating consistent recurring revenue in any business by offering flat-rate services for monthly, quarterly, or even annual fees. So now that you’ve invested all of that time optimizing your marketing and sales system to retain customers and get them signed up for recurring services, what do you do if they request a cancellation? Bottom line – Your business needs a retention policy.

Let me give you a few examples of the power of a retention policy. Many companies have entire departments prepped and ready to handle any cancellation requests. As a matter of fact, I’ve been a Sprint customer for over a decade and have talked to their retention department several times and here’s what I learned:

1. There’s no wait to talk to someone. When I tell the automated system I’m interested in canceling – a live, native-English speaker picks up the call very quickly. It might not be instant but it’s fast.
2. They are trained in both customer service (how to diffuse situations and ask questions using appropriate NLP techniques) and retention (how to get to the root of the problem and offer a better solution then canceling).
3. They generally have special discounts, phone prices, pricing plans, and additional free minutes available that not only aren’t available from any other department… No other department even knows they exist.

Granted it has been a few years since I’ve called to “cancel” and policies and procedures may have changed, but on more than one occasion I’ve called and gotten discounts, statement credits, additional minutes and phone upgrades beyond what was available online, in a retail store, or even from a phone representative in the customer service department.  One time I called because my bill was double the normal rate and I was upset. Come to find out, I simply had been traveling and forgotten to pay the bill. 😮  Ooops… Oh well, if I have them on the phone I’m gonna talk to the cancellation department anyway. So I did and ended up getting most of my bill credited back and additional minutes added to my account at no charge just as a courtesy. Now if they told me, “Sorry, we can’t help you.” I would have probably kept the service (even though my contract had expired) but started shopping around. Since they did invest in me as a customer (a cost to them of less than $100) I’ve remained a customer for at least another 6 years and know that if I have a problem there’s someone who can help me. So was it worth giving me ~$100 in credits and upgrades to keep me happy???

Why do they invest so heavily in retention? Because it’s cheaper than buying a new customer. It’s always cheaper to save an existing customer from canceling than to attract a new customer.

As an example, my small business averaged over $272 in marketing expenses alone to attract each new client. Factor in sales commissions, office time, and overhead and you can see a new client isn’t cheap. In return, a new customer on a recurring service would pay anywhere from $40 to $100/month to my business. So if someone was having a tough time financially, it would be a lot cheaper for me to offer them 3 months of free service while they’re getting back on their feet than to simply cancel their service and try to find a new customer.

That’s exactly what happened when I called Sirius satellite radio to cancel my radio service with them. Twice.

The first time I called to cancel I was moving across the country and money was getting tight. I had just bought a business, hadn’t yet sold my house, and wanted to keep expenses to a minimum. So when I called to cancel, I got right on the phone with a representative, who agreed to cancel my service and then asked me if I was satisfied with Sirius. After explaining my situation, she then asked if 3 months of free service with the ability to cancel at any time would help me. Well yeah, that’d work. So I kept the 3 free months and never called back to cancel… Until I bought a new car that didn’t have a satellite radio. Again, I call Sirius, tell them I need to cancel because my new car doesn’t have a satellite receiver… They thank me for my patronage and then asked me if I was satisfied with their service. I confirmed that indeed I was, just didn’t want to buy another radio. She then asked, “If we sent you a new radio, would you keep the service.” Of course I asked, how much? She said for free. Well heck yeah I’ll keep the service! But how hard will it be to install? “We’ll give you a gift card to get it installed at your local Best Buy at no charge.” That was almost 2 years ago and they’ve gotten my payment every month since.

Was it worth it for Sirius to give me $45 in free service and then a free radio and installation about a year later to keep me as a customer??? I’ve now been with them nearly 4 years, including 3 years past the first time I called to cancel.

So let’s break this down and look at the best way to create a stellar retention policy for your small business.

1. Determine how much time you have to save an account. In other words, if you provide a service that can be canceled remotely such as cell phones or satellite radio, the person on the phone is going to be your only chance to save the account. If your business instead provides bottled water delivery where you have to go get your bottles and cooler from the customer, you have a bit more time and can even call them back or visit them face-to-face.
2. Determine who needs to be trained on retention. You don’t necessarily want everyone in your small office aware of the special offers, deals, or discounts you’re willing to give to keep an account. If you run your business and are also the owner, you probably need to be the first person to learn how to become a retention expert. In medium-sized businesses, focus on a few key people and train them first so you can learn what does and doesn’t work and improve the process before you expand.
3. Track every single request for cancellation. Put them in your computer system and review them on a daily or weekly basis. Use this information as a training exercise to continually learn what worked to save customers and what didn’t and brainstorm with your team on ways to do better next time.
4. Teach each retention specialist the basics of Neuro-Linguistic Programming, in particular to ask questions to diffuse situations with upset customers.
5. When they ask to cancel do NOT fight them on that point. Your goal is not to create a division between you and the customer but to work with them and in that process see if you can work out a solution that will happily retain them as a customer.
6. Once you’ve agreed to cancel, ask questions. Start by determining if they’ve been happy with the service or product. If they unenthusiastically say “sure”, “yes”, “it’s been fine” or something along those lines you’ll have to dig a bit deeper. So transition with something like, “While I’m scheduling your removal, have you enjoyed your new Blackberry phone? Have you lost any calls lately? Have you had your plan evaluated recently to see if there’s a cheaper solution?” The majority of the time, a few basic questions from a representative who GENUINELY CARES are enough to get your customer to tell the whole story. The keys to great questions are the voice tone and inflection of the retention specialist as well as her specific word choice so pay careful attention to both.
7. Get to the root of the problem and then offer a solution. For instance, Sirius didn’t say. “Well Bryan, don’t worry about the radio cause we’ll send you a free one with free installation.” Instead they said, “Well Bryan, we can understand not needing the service in a car without it so would you still be interested if you new car had a radio?” See the difference? The question makes sure they’re getting to the root of the problem BEFORE offering a solution.
8. Script everything but make sure it doesn’t sound scripted. Keep a list of the best questions to ask a customer to get to the root of his problem, the best questions to ask before offering a solution, and what potential solutions will work best with each potential problem. Provide your people with the tools necessary to be both consistent and effective by scripting the proper words to use. Again, don’t underestimate the importance of having the right words.
9. Measure and improve. Get feedback on a regular basis from all of your specialists and figure out ways to keep getting better. Share with each individual their personal performance as well as the performance of the team as a whole.

Every business will have different needs when implementing a retention policy so if you have any specific questions, be sure to post a comment on this blog or Facebook Fan Page or email me directly.

To your customer-retention success, Bryan