It doesn t take much to convince Gene Shuldes that retention marketing works.
As vice president of Encore Marketing International s membership services, Shuldes decided to revamp the way telemarketers approached calls from thousands of credit cardholders who were dialing in to cancel travel club and other membership programs that sell for $59.95 to $99.95 a year. This can be a profit center, Shuldes says of the company s retention efforts.
Indeed, Lanham, MD-based Encore, the number two ranked seller of membership programs, has been successful at selling its programs to cardholders for everyone from First USA and MBNA to Citibank.
When he joined the company this spring, Shuldes became convinced that it could do a better job of capturing revenue that was going out the door as double-digit numbers of customers canceled after their trial memberships.
He has revamped the performance measurement and compensation of specialized customer service representatives (CSRs) for retention efforts. He has also outsourced about one-tenth of his retention business in a pilot program to Interactive Response Technologies (IRT), a Ft. Lauderdale, FL- based teleservices firm focusing exclusively on retention marketing.
So far, Shuldes is pleased with the payoff. Though he declines to discuss numbers, he says the results show a 59.6 percent increase in retention revenues since April. By his estimate, for every customer he retains, he would have to sell four new customers to capture the same amount of revenue. It is a significant difference because we ve put the focus where it should be, he says.
While retention marketing seems ideal for a product such as club memberships, experts say it has implications for many areas of financial services beyond the credit card market. As insurance, banking and brokerage products are increasingly pushed through direct channels, customers will increasingly call to buy or cancel services. Their comfort with direct channels will require special skill in selling and servicing those relationships.
Shuldes first move was to change the way performance was measured. Encore reports measured percentage increases or declines in customer retention rates, which can be misleading. What you should be focused on is revenues per paid hour, Shuldes says. It has changed the mindset of the people. They know at the end of the day what it takes to pay for their seat.
focused on retention
Some approaches Encore adopted in its retention efforts were taken from IRT. Encore historically outsourced selling of memberships to a half- dozen or so teleservices firms. While many of those companies have retention departments, Shuldes chose IRT because it is the only firm believed to focus exclusively on retention. Some people don t even have a retention effort. Usually when people cancel, (customer service representatives) help you cancel quicker, says Howard Glass, president of IRT. Retention is a whole different culture. Good retention goes with reselling the benefits and attributes of the program.
Glass estimates that his personnel cost may be as much as 25 percent higher than a typical call center, but the results are more lucrative because his teams are incented differently. Call center agents are incented individually and as a group so they have a two-tiered reason to capture more business. Each dedicated team of agents is rewarded for everything from saving more accounts to higher quality calls and script adherence to good attendance.
Sharing the risks
Most call centers are staffed with people trained in selling. At IRT the emphasis is on reminding people why they bought the membership in the first place. Our focus is to first diffuse any animosity from callers who just want to cancel and then to softly resell the benefits, Glass says.
Shuldes says the skills which are necessary for more effective retention are similar to those he looked for during his career in collections at Citibank. The profile of a good retention person is really someone from the collections side of the business who doesn t take it personally, he says.
IRT has staked its future on the demand for not only its specialized focus, but also its ability to meet peak load demands that insurers and bankers cannot handle internally. The company also uses specialized technology, including scripting software, DiverCTI, which has DINIS recognition of the call and allows for rapid access to customer information either on IRT s Oracle database or on the central system of its client.
Finally, IRT s compensation structure has the firm sharing the risk and reward of improved retention. After agreeing to a per dedicated hour pay basis, the company ultimately moves to an incentive-driven system which benchmarks a client s internal retention rate and rewards IRT for exceeding the benchmark. The plan also penalizes IRT if it falls short of the standard (Abandonment rates and service level declines also affect compensation.). My philosophy is that you pay me a premium if I do better than you, Glass says. We like to share that risk because we believe we can deliver.