Working on Customer Retention

With an unlimited budget, it is possible to devote your resources to almost any aspect of CRM. You can work on outstanding customer service, try your best to bring your customers with value, etc.

But budgets are not unlimited. You need to find the best place to manage your resources. When your budget is limited, it may be in your best interests to put your greatest efforts into creating a customer defection model.

Through your survey research and data mining, you can develop some predictive strategies for figuring out when a customer is starting on a path for defection. Staples does something just like this – they track customer buying habits over time through its membership cards. Over time, they have created their own predictive strategies for telling when a customer may leave.

Once the data starts to tell them that a customer may leave, Staples gets notified, and puts their customer retention strategy in effect. The strategy has also been perfected over time. If it is unable to motivate customers to stay, it is scrapped.

If it shows effectiveness in reaching out to customers and improving customer retention, it is kept in order to continue to retain customers.

Though all businesses are different, this type of strategy indicates that the best use of resources may not be on customers that are happy with your company and unlikely to defect to a new company. Instead, it may be on customers that are about to leave – customers that your model shows are the most at risk for becoming lost clients. Of course, the only way to do this is to also build a predictive model of customer retention.

Unless you can pinpoint exact signs within the data that a customer is becoming more and more likely to defect, there is no way to do this effectively, and it may be a more valuable use of resources to try to build the relationship with all of your possible customers, regardless of whether or not they may be leave soon. But if you can build a predictive model that notifies you of customers you may be losing successfully, that may be a much better use of your resources. The customers that are satisfied with your company will continue bringing you business, and those that you were about to lose will go back to being profitable customers without defecting to one of your competitors.