Strategic Outsourcing Professionals

It has been my experience that product management will measure the success of inbound customer cancellation requests by capturing retention metrics for call center resources. The important metrics would include cancellation rate, retention rate, customer persistency rate, reacquisition costs and future value of saved customers. When Product Managers assess these metrics, pressure to increase retention rates can often lead to poor customer handling that can be detrimental to the product growth and brand equity. It is at this point where the operations group needs to challenge product management to identify success metrics and goals for improvement.

Recently, we worked with one of our offshore providers to assess the quality of our retention program and to map the findings back to the metrics reported for two separate products. We leveraged different products with identical benefits, but where the products had different retention strategies. Product A performed at a 25% call center retention rate and Product B performed at 14% call center retention rate. At first glance, it may seem that Product A had a far better program in the call center to retain customers; however, our findings proved that to be slightly untrue.

The retention plan of Product A was to defer benefits and cancellation in hopes of booking one or two months of extra billing from our customers. The product manager was under pressure to increase the retention metrics and had made adjustments to the way a customer acquired their product and how the product was provisioned. While this strategy increased short-term retention metrics, the product’s customer satisfaction and persistency rates starting trending adversely. Additionally, this increased customer re-acquisition costs because the change in product fulfillment generated a higher frequency of calls and disgruntled customers. By delaying the inevitable (customer cancellation), Product A actually proved to be a lower performing product.

The retention plan of Product B was to reinforce product benefits and brand equity to the customer in hopes of generating long-term subscribers that would be satisfied with their purchase. The Product Manager for Product B decided to provision the benefits immediately to the customer. While this strategy demonstrated a lower retention rate, the customer persistency rate increased, which produced a positive trend towards revenue and growth over time. Further, it did not appear that customer satisfaction and brand equity were adversely impacted. Product B actually turned out to be a higher performing product because of the reduced operating margin, lower re-acquisition costs and increased customer persistency over time.

Now, given I am reasonably intelligent I was prepared for the executive response after this presentation - Get Product B’s retention rate to 25%.