Using Decision Management for Customer Retention

CRM Daily had a nice little article on Customer Retention that reminded me of the example I often use for how the elements of decision management contribute to more effective customer retention decisions. Large organizations spend vast sums on retention – one bank, for instance, spends $1Bn annually – and retention is a perfect candidate for EDM for a number of reasons:

• Each retention decision is for and by a single customer
• Retention decisions must be relayed across channels
• There are lots of rules about retention
• Segmentation and other analytics can make retention more effective
• Retention rates are measured today and improvement is clearly related to better retention decision making

A number of critical elements need to be considered:

• The Value of Customer
  Ideally the future value of the customer, not just the past value. Also the likely future value given plans for new products, pricing should be included.
• Risk of churn
  Both how likely this customer to be retained if nothing is done and the overall target retention rate – after all, many companies are judged by retention rate and even retaining unprofitable customers may be necessary.
• Customer’s likelihood of accepting various offers
  Many different offers can be considered and each customer or customer segment will prefer some over others
• Regulations and Policies

It is often helpful to walk through how making a retention offer can be evolved using EDM:

1. Automate Decision
   Initially we have different channels and our approach to retention is probably different in each.
   The first step, then, is to take control of the decision so we can make it consistently across channels.
2. Apply rules
   We should also use rules to describe it so that the decision can be automated correctly and managed by business staff, not IT.
3. Close the Loop
   Before we go any further we should ensure we can track the results of our retention decisions and see how well things are going, how they change, what the impact of changes is and so on.
4. Segment customers
   Not all customers are the same so we should analyze them and segment them so we can retain them differently depending on what is going to work. This is not going to stay static so we need to make sure we can keep analyzing and improving our segmentation.
5. Adaptive Control
   We are likely to have multiple opinions as to what might work and different potential segmentation schemes so we should institute adaptive control so that we can test our “champion” approach against some “challengers” to see if any of the challengers is more effective. This needs to be part of our ongoing improvement cycle.
6. Predict risk, value
   Segmenting based only on the data we have is interesting but it would be more useful if we could also use predictions as to their risk of leaving, lifetime value of them etc as part of our decision. Back to the data, then, to build predictive insights.
7. Optimize decision
   Working to continually improve the outcomes and ultimately to build models of the trade-offs that can be optimized mathematically and we end up with an optimized decision.

Each step adds value, the final result is an optimal retention decision. What does customer retention decisioning look like where you work?