Catching up on some unread Sunday papers, I came across an article in the Sunday Times by journalist Matt Rudd. He and his wife had been a customer of Lloyds Bank for over 20 years, his wife went overdrawn by a few pounds for a few hours and was charged for the misdemeanour. Realising that Lloyds would not reimburse the charge – even for a loyal customer – Matt and his wife decided to move banks and sign up with First Direct.

First Direct have a great reputation but the whole process of changing went from what he presumed would just be a phone call, to phone call, online, forms, more phone calls etc.  The journey took him around six hours and that didn’t include Lloyds getting in the way during the process.

Silo organisations often miss the point

It got me thinking about how organisations tend to be so silo driven, they frequently miss the whole point of their existence.

Let’s just look at the basics of this example. Been a customer for 20 years. Been overdrawn for a few hours. Join the dots. Do you charge for the error or find a way of politely reminding the loyal customer to try and stay in credit?

The former results in aggravation and quite possibly defection. Defection not only loses Lloyds money, but will have cost them administrative time as well. But not everyone at Lloyds loses. The budget holder for bank charges has little interest in customer service – accountability here is revenue from those charges.

If we ignore the “charges department”, joining the dots with a polite request about trying not to do this in future takes practically no time (can be automated), doesn’t result in defection and therefore maintains revenue. Now think about the acquiring company, in this case First Direct. Yes of course I know that banks are terrified of being hauled over the coals for mis-selling and therefore will want to make sure that the transferring customer really wants to do so. But in these days of technology,  speed and time poorness, does moving banks really have to be so tortuous? And surely the banks could save administrative costs by streamlining the process?

Task or job?

But silos don’t work like that because people rarely think about the overall purpose of their job, just the overall purpose of their task. And there’s a difference. We work (supposedly) to give value to our customers and to keep them. But in reality we don’t do that. We have parts of organisations whose job it is to “manage” customers, parts to do the exciting recruitment and then parts, frequently tucked away, whose job it is to do the retention work.

Retention is key

And you would be surprised at how little effort is put into customer retention. Think about the last time you renewed your car insurance. Your existing company sent you a quote. It was too expensive. So you called to say you would not be renewing. Did they try and keep you? Not often. What did they say? “Thanks for letting us know, good-bye”.

Think about what that costs the company. A small bit of dealing might retain customers and, at least in insurance, enable some cross selling. But it doesn’t happen that often because retention just seems to get lost.

Is it the fault of the people on the frontline? Of course it’s not. It’s the fault of the people who manage them. They don’t understand that relationship marketing is not about some fancy CRM system (or in the examples I gave earlier, the absence of any fancy CRM system), but rather the ability to guide customers through the relationship journey, often known as the” Relationship Ladder” , where prospects eventually become supporters.

I learnt all this years ago at Eurocamp where we prided ourselves that over 90% of our customers were repeats or personal recommendations.

And it’s never left me.

At business schools we teach people that it can be eight times more expensive to recruit a new customer than to retain an existing one. It’s obvious, but somehow it seems to pass companies by.

So what’s to be done?

1. Understand that real sustainability in business is about keeping customers for the long term.
2.  Appreciate that technologists don’t always understand customers. Develop great CRM systems, but base them on what customers want and how they’d expect to be treated.
3. Calculate the time spent in your company administering customers for negative reasons – how much does it actually cost?
4. Evaluate your own retention strategies… honestly.
5. Dig deep. Are there certain silos whose success is measured  by disappointing customers?
6. Think about your own personal consumer experiences – would you want to be treated the way you possibly treat your own customers?

Obvious questions. Should all be down to best practice really. Problem is, it’s rarely implemented. That’s why I set up Market Echoes.

What’s your experience? Is retention a strategic function or does it lag behind recruitment? Please comment.

Now back to the papers….