Rightsizing retention.

• Author: Clapp, Bruce
• Position: Customer Retention

In the current economic environment, corporate staff cuts, organizational downsizing, and the euphemism of "rightsizing," I thought would be appropriate the shake the trees and compare our approach to retention with "rightsizing." Early in my career I was the retail-marketing director for a major regional bank. They knew some offices were profitable and some customers were, too. Their extended thinking in this matter led them down a path of "quartiling" their customer base and putting disincentives in place (fees, etc.) to force movement of the bottom quartile customers either up the profitability chain or out the door. In theory, a practical-sounding approach to "rightsizing" your customer base. The problem? As soon as you move the 4th quartile and you reevaluate everyone, there is a new 4th quartile. Soon, positive customers end up in the 4th quartile!

So, what do we do? How do we get negative weight customers to move up or out? I believe the answers lies on the other end of the spectrum. According to Frederick Reichheld, the author of the "Loyalty Effect," the key is "zero defection" among your most profitable customers. It seems so obvious ... keep our best and most profitable customers and we will keep profitability high. The old adage that if you have only "$1" to spend on retention, spend it on the one that brought you to the dance (your highest profitability customers!)

"Envision an organization that everyone within the bank knows the top 10 percent of customers by name, when they joined the bank, the ages of their children and what products and services they have (and do not have) at the bank."

The concept of rightsizing is perfect for today's banking industry. Rightsizing is making sure that every customer that should bank with you does. There are some folks in your market who simply are not a fit with your style of...