I have been working with a client in the health club industry to improve customer retention — always a critical factor in that industry (even more than most). We were planning a series of communications to clients based on a model that would indicate the risk of attrition based on participation in different activities, visit frequency, spending levels, etc. The results of this model would lead the company to implement a series of trigger campaigns designed to reengage members, personalized based on their interests and behaviors.
You can imagine how surprised I was when he told me that the strategy was great, but that we could not contact his customers at all from June until August!
It turns out that in the Health Club industry, there is an adage that members should never be contacted from May until August because those members might realize that they do not need a health club in the summer and cancel their memberships. So many health clubs essentially “go dark” on their customers, aside from required mailings, for fear of their customers realizing that they do not need them and leaving.
This raises a series of interesting issues for me, and for marketers in general:
- Are there times NOT to contact customers?
- Is avoidance a retention strategy?
- What can marketers do to engage customers at a potentially risky time in their relationship?
Let me first start out by saying that there are ALWAYS risky times in customer relationships. Customers do reach points where they have to conduct a recalculation of the value of their relationship with you, compared to available alternatives. It can be when a new competitor comes to the market, or when they have faced a service failure on your part or when their financial position changes, etc. Change is inevitable. The question is whether we will capitalize on that moment of vulnerability or not.
For the health club situation, our options look like this — “duck and cover,” ignore the issues or address them directly.
- “Duck and cover” – some customers leave; others do not think about leaving and stay. Brand perception — “they don’t even know I am there.”
- Ignore the issues – more customers leave, since you call attention to their situation. Brand perception — “they are clueless to my needs.”
- Address the issues head-on – some customers will leave and others will stay (not surprising). Some will stay that would have left. Brand perception — “straighforward company caring for my needs; if I leave then I may come back; if I stay, it is because they care.”
We should not assume that as many people stay in group 1 as previously; social media has increased the sharing of information and the transparency of prices, benefits, etc. between health club alternatives. Strategies that are based on customer ignorance of alternatives are ultimately destined to failure today and in the future due to such technology.
How do you address the issues head-on? “We know you have alternatives every day; we want to make our clubs special places where you can achieve your fitness goals, build community and enjoy leisure time. Tell us how we can improve your experience.” Recognize the issues, state a differentiating goal and then engage the customer in a process to share information and interact with the company.
Take this approach and test it to determine the impact, since all data-driven marketing should be test-and-control based. Test a couple variations of offers and messages. Retention bonuses, community events, special access or benefits — try them all and see what happens.
Then let me know.
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Very interesting article, thanks. Keep up the good work.
Great article, Mark. I wholeheartedly agree with your point that there are times when companies should consider whether contacting their customers can cause more harm than good.
It’s a great example (that I’ll shamelessly borrow, if you don’t mind) of what we call “Sleeping Dogs”. In general, these are customers that have a negative reaction to some marketing action, whether it’s because they were just annoyed, given the opportunity to defect, or because an impulse decision became a creative one.
We use uplift modeling to predict directly how marketing actions (like email or DM) will impact customer behavior (like retention). This helps marketers avoid contacting such “Sleeping Dogs” (as well as the indifferent customers we call “Lost Causes” and “Sure Things”) and focusing instead on “Persuadables” where the marketing touch produces a positive impact. This can often reduce volumes by 50%+ and increase campaign impact several-fold.
If you’re interested in learning more about how uplift modeling helps marketers know when to avoid contacting customers, please check out my recent blog posts where I expand on some of the issues around uplift modeling.
Cheers,
Patrick Surry
Portrait Software