Recession Strategy: Spend Money to Make Money (and Retain Customers)

The year so far has been filled with predictions of a recession on both sides of the Atlantic. Sitting at home in England, I find myself tightening my family's purse strings as heating bills grow and mortgage payments rise with interest rates (yes, I had to remortgage at a higher rate this year). Looks like we're in for a rough ride.

And it would seem that the carnage isn't close to finished. The newspapers describe the problem as one of solvency, not liquidity or operational. In an economic climate in which survival of the business is at stake, how should you plan your spending for the rest of the year? Is it very different than the way consumers prepare spending for their families?

Almost certainly. In spending for my family, I don't consider growth (except in how it affects clothing purchases for the children), retention or acquisition. But those are the things that senior managers must consider in planning investments for the balance of the year. In a contracting economy, you may not be planning for acquisition of new customers or even competing for increased spending among your existing customers. You certainly should, however, plan strategies to protect a very important business asset: your existing customer base.

When you consider the revenue cost of losing customers, or the acquisition cost of replacing them, you can make a very strong ROI case for the appropriate use of limited resources. Here's how one company tackled this challenge.

AIRMILES is one of the largest loyalty points programs in Great Britain, with more than 8 million members. While miles represent the currency of the business, the collection and redemption of AIRMILES drive the business forward. Members may redeem miles over the telephone or on the AIRMILES web site.

The business model depends upon members collecting and redeeming miles in what the company describes as a "virtuous circle," in which members spend time collecting enough miles for free travel, spend the miles at once and go through the cycle again and again. To ensure that the business doesn't lose customers as a result of a bad experience at the emotionally critical moment of booking the annual family vacation, executives decided to solicit customer feedback about the mile redemption process.

The initial approach was that of a traditional market research exercise: The project was outsourced, and a small customer group was sampled anonymously. When this failed to provide actionable information, the company worked with its agency to implement a continuous feedback management system. The technology enabled AIRMILES to solicit customer feedback within 24 hours of the customer's experience of mile redemption.

Timely contact
AIRMILES integrated the feedback management software into its CRM platform. Because of this integration, surveys could be sent to customers the morning after their online or telephone contact with AIRMILES. Additionally, the surveys were personalized with transactional and demographic customer data, imported from the CRM system. This customization enabled the correlation of transactional and opinion data in reporting.

Ultimately, the personalization of customer feedback requests, generated within 24 hours of the customer's experience, drove response rates to 35 percent.

The company created two alert systems to ensure that any actionable data is, in fact, acted upon. If a customer who didn't book with AIRMILES indicates any dissatisfaction, the feedback management system sends an email alert to the call monitoring team for follow up. Immediate follow up—closing the loop with dissatisfied customers—gives the company the opportunity to maintain relationships with customers who otherwise may have been lost to competitive programs.

The success of this first alert, and the opportunity to receive customer feedback, led AIRMILES to search for other ways to create a win for both the business and the customer.

A second alert focused on those customers who booked a flight, but not a hotel, using miles. The CRM system identified customers who fit that category and passed this data onto the feedback management system. A personalized survey asked those customers whether they still needed accommodation (it stands to reason that when you fly somewhere, you need a place to stay). Customers who answered yes were asked a single follow-up question: "Are you likely to book it with us?"

For any customers who answered yes to both questions, a warm lead email alert was sent to the outbound call center, which contacted the customer to offer the necessary accommodation. AIRMILES generates 500 warm leads with this automated system and converts them at a 32 percent rate. This drives increased revenue into the business while satisfying the needs of those customers who've booked the accommodation.

The really clever thing about this program? It works only when AIRMILES asks the question close to the customer's experience of booking. If AIRMILES had waited for a quarterly or annual customer satisfaction survey, the customer would have already gone on the vacation ... and the opportunity to cross-sell the accommodation would have been lost!

By automating the collection and subsequent follow-through on this customer feedback, thinking out of the box delivers a win-win for AIRMILES and its members. As a result, AIRMILES has created a recession-proof strategy to retain its members' business for the long haul.

Gary Schwartz serves as senior vice president, Marketing, at Confirmit. He develops applications of Confirmit's online survey, analysis and reporting platform and drives product development. He speaks regularly at customer feedback, CRM and other industry events and was awarded Best Case History at the ESOMAR Congress in London in 2006.