If you run any type of repeat or subscriber business, where you have an existing contract or agreed price, then your deals and marketing efforts to acquire new customers, can sometimes be perceived as negative marketing to existing customers if they aren’t offered any deals at all. Especially, if they are not happy or at risk of churn.
The industry that does this notoriously badly is mobile carriers and converged operators. At least, it’s true here in Canada where they lock people into 3 year contracts. They are forever offering deals to potential new customers to switch. If you call into your operator, complain and threaten to leave them, they offer you a discount or change in plan to stay. But they don’t go out of their way to do this while you are an existing customer in good standing, paying each month.
Of course there are costs to running any kind of existing customer deal. There is loss of potential future revenue, if you bring down prices when the customer would have paid it anyway. There can be marketing, sales, administrative and possible IT costs to implement a discount plan.
The cost of not doing it, or only doing it reactively, is churn. If the only time that you re-open a discussion on rates is at renewal time or after they have left, then it might be too little too late.
So how do you balance these potential costs out.
I believe that you should consider “deals” a tactic that you can use, and tie giving deals to what your metrics are telling you about churn. Use deals as a retention tactic, and decide on parameters when you would use it.
It might also mean, deciding on something like a threshold of acceptable churn on the system, and look at implementing a deal campaign if the overall level of churn is falling. It also means, looking at customers individually to measure when you think they might be at risk of churn.
The point is to tie these to what your metrics are telling you. Have it be a possible tactic, when your metrics show you when you are at risk. This is probably why the phone and cable industry doesn’t do it proactively – with locked-in contracts, they don’t have a strong enough business incentive to do it. (You can also tie it a loyalty program, but that’s another discussion.)
So what are some ways that you can use deals to help you reduce churn, increase customer retention and renewal?
One way might be to run a rebate campaign – offering a discount or credit on some other future purchases. This is also a good upsell tactic, as a way to upsell existing customers on other products. Apple runs a regularly schedule rebate campaign where you can get discounts or iTunes gift cards when making purchases. Staying with the mobile carriers, they do use this type of tactic to have you trade-up to a more expensive phone. Basically it’s offering a deal to existing customers, but offering it as an incentive to continue.
Another thing to consider, if your service also has a consumption level charge, is to look at a customer’s overall spend and offer them a deal when you think that they are at a point where a different rate or package would benefit them.
It might be giving some kind of compensation gift, if there has been a big service problem, individually or platform-wide. This would be like a restaurant manager giving a free dessert if they screwed up your reservation and kept you waiting for a table.
Also, your customer health reporting should consider tracking pre-cancel events to factor into the measure of an account status. Every industry would have different indicators that a customer might be considering leaving. For some it might be not using the system at all. For others, it actually might be downloading or backing up the system more than usual. For your service, it’s good to know what users might do if they are preparing to leave. And then this event should trigger some type of activity on your part to reach out to the customer to find out what is a problem, or offer them some kind of deal to stay.
I’m sure there are probably a host of creative ways that you can help your customers out with discounts and incentives. The point is to make this part of your arsenal of tactics, and decide when to use it.
Photo credit: Microsoft clip art