Leveraging the retention lifecycle.

• Author: Clapp, Bruce
• Position: Customer Retention

All customers are at some stage in the retention lifecycle with the bank, and each customer has an associated lifetime value. The same holds true for retained customers and those we lose to attrition. Understanding the process and the relationship cycle of each customer is critical to increasing the retention rate and maximizing lifetime value to the bank (the revenue potential customers represent if we are able to maintain their relationship through their lifetime). Let's look at the four main parts of the retention lifecycle.

"New" household

As we have previously discussed, the single most effective way to enhance the "new" customer relationship and maximize lifetime value is to have a consistent on-boarding process. On-boarding is the process of integrating customers into your organization and ensuring that their personal data is correct, that they understand the account and services purchased, and have a clear understanding of the "true value" the bank offers beyond their initial purchase. One study concluded an on-boarding program offers clear and substantial retention and cross-sell benefits.

"Existing" household

The highest-value customer retention strategy for existing customers is to classify each type of customer (silent attrition, ideal and unhappy) and create appropriate initiatives to change his or her behavior. There are statistical models and consulting firms that can assist with the "scoring" of households with their relative attrition risk. For instance customers in "silent attrition" are those that have reduced or stopped using a product, but where the account is still open. For instance, checking accounts with debit cards that have little or no debit card activity from a previously active account. For these customers you must determine why they are no longer using your product (are you their "back of wallet" card?) and create initiatives to change their behavior. The key is integrating the score into all marketing strategies and tactics and understanding the core reasons "why" attrition risk is elevated.

"Exiting" household

Customers that are "exiting" are those customers that have started the process of...