Pay Customers to Stay

The airline industry figured out how to retain customers a long time ago: Pay them to stay. By creating a strong incentive for customers to do their business with one airline, frequent flier programs have helped retain customers. Hotels, casinos and car rental companies have followed suit with loyalty marketing programs that have produced impressive results. For instance, Harrah’s Entertainment’s Total Rewards program is credited with increasing repeat business at its casinos, resulting in $50 million of added profit and 14 percent same-store revenue growth in 1999.

Why don’t banks and telecom companies do the same and create incentives for their most valuable customers to stay with them? First of all, most of these companies don’t even know who their most valuable customers are, because they don’t know how much business a customer does with the entire company. Airlines have it easy. They offer one product and have one relationship with each customer. But banks and telecom companies sell many products through different business units. Because these business units don’t talk to each other, the company cannot assess the true value of each customer relationship. And business units find it difficult to cross-sell products because their marketing, sales and customer-care operations aren’t integrated. Even if they do cross-promote products, as AT&T attempted, the customer experience with pricing, billing and customer service remains fractured across products, channels and business units.

Show One Face, One Voice

The problem of silos plagues most companies that sell products and services through different business units. To become customer-focused, companies need to connect their silos. To do this, companies need to create a unified repository for customer and product information and a multichannel customer interaction platform that integrates Web, call center and in-person customer service channels. The single repository allows companies to see customer relationships across product silos, and the integrated interaction platform allows them to talk to customers across channels. Companies such as 3M are building enterprisewide data warehouses that combine customer data from different business units: It now organizes its website and customer service organization into 10 centers, each of which covers products for specific groups of customers. For the first time, 3M knows how much business each customer does with the company as a whole. By tracking all transactions and interactions with customers in one place, companies can finally begin to see the whole elephant.

Once you see one view of your customers, you need to act on this information by giving them incentives to broaden and deepen the business they do with your company. To broaden customer relationships, you need to create interlocking incentives?inducements for customers to maintain multiple relationships with your company. For instance, when I use my MCI calling card to call home, I pay the same long-distance rate as if I were calling from home, but only if MCI is my long-distance carrier. This encourages me to keep my calling card and long-distance service with the same company. To deepen customer relationships, you need to reward customers for doing more business with your company. Citicorp combines my small business account balance with my individual checking account balance to determine the fees they charge me. This gives me an incentive to keep a large combined balance with the bank.