Retention Perfection

You perfected your pitch for weeks, maybe months. You delivered a flawless presentation. The prospect has chosen your product. You got the sale. Finally, you can relax. Right? Wrong. The sales process has just begun. Once a customer signs on the dotted line, you need to keep selling that product every day if you want to continue winning the account.

Customer retention may be last on a salesperson’s list of priorities. When salespeople grab the sale then move on to the next prospect, they focus on the moment instead of the future and figure the eggs already in the basket will remain there. But failure to continually delight your customers may soon have them eyeing your competition. And customers who are mistreated or ignored not only will leave, they’ll pass on their experience to other potential clients. According to one study, a dissatisfied customer will relate a negative experience to 72 people, while a satisfied customer will pass on a positive encounter to only 12 people – which means that a company has to do six great things to make up for one oversight.

“As markets become saturated, the lifeline of your company is repeat business,” says Ramon Avila, a Ball State University professor of marketing and director of the university’s Professional Selling Institute. “Good customer service is the key to retaining and attracting consumers, and many companies are missing that point.”

One company that has not missed the point is USAA, a San Antonio, Texas-based insurance and financial services provider serving the military community. The multibillion-dollar association has been built upon customer retention, and its leaders recognize that happy customers are those who not only will keep expanding the number of USAA services they use, but will pass on word of their satisfaction to others. The typical member, between the ages of 55 and 64, has been with the 77-year-old company for 32 years. USAA’s overall annual retention rate is a whopping 97 percent, and today between 75 and 80 percent of calls inquiring about USAA’s services are from people referred by current members.

The company understands that a major component of acquiring new customers is keeping current customers happy. It’s simple mathematics, says Del Chisolm, senior vice president of PRIDE, plans and member acquisition and development. “If you’re doing the right things and providing the service people expect, they’re going to buy more and more products over time. The more products they’re buying, the more likely you are to retain them. And in the end, it’s cheaper to retain than to acquire members.”

Although USAA works slightly differently from most businesses in that customers automatically become members of the association, the company is nonetheless up against stiff competition in all sectors of its business. To survive, it embraces the following “customer-first” principles throughout every level of the company.

1. Take care of your employees. USAA has discovered that taking care of customers means first taking care of employees. Chilsolm’s title itself is evidence of that. He is senior vice president of PRIDE (originally Professionalism Results in Dedication to Excellence), a decade-old initiative aimed at teambuilding and creation of an upbeat, enjoyable work environment. The theory is that customers can be served best if workers are happy and motivated. To further this effort, representatives who deal with customers are given no sales goals. “We’re aware of the mind-set that filling sales quotas would create,” says Chisolm. With the pressure of meeting financial targets eliminated, reps can relax and focus on customer needs rather than on pushing those customers for a sale. So far, this strategy is working: Fortune magazine named USAA one of the “100 Best Companies to work for in America” in 1999.

2. Make customers feel welcome and appreciated. The moment a new client signs on with USAA, the company sends a welcoming letter discussing the benefits of joining the association, a packet detailing other products and services it can provide and, if the new member is young and coming in with just an auto insurance policy, suggests ways to keep premiums low.

Recently, the organization added a calling program for new high-risk customers: if a new member falls into a demographic with a high risk of leaving the company (generally young people using only one service, usually auto insurance), a USAA rep will call that person “to welcome them and ask if there’s anything else we can provide for them,” says Chisolm. While it’s too early to know if this calling program is working, USAA is tracking the retention rates of people called to see how those rates compare to others in the same demographic. With this younger group, USAA also focuses on building up trust and confidence and on letting them know their business is important. “Before their first renewal,” says Chisolm, “we’ll send them notes telling them how much we appreciate their business and look forward to their continued renewal.” The company also throws in a 30-minute phone card for good measure.

The bottom line is that USAA keeps a long-term view, aiming to turn new customers into lifelong customers by letting them know they are appreciated.

3. Get to know your customers. USAA keeps track of its members’ “life events” such as buying a house, purchasing a car, getting married or divorced or having children. And it uses those opportunities to notify customers about available products or services they now may need, knowing that the more services customers use, the more likely they are to stay with the company. For instance, if someone calls inquiring about home loans, USAA may inform the member about its realtor service, the company’s alliance with Sprint for long-distance services, or its partnership with ADT for home security at reduced cost. About 13 percent of the time, USAA is able to cross-sell a product using this method. The result is that these customers gain a product they need – even though they might not have been aware that they needed it – and they are drawn deeper into the USAA family, increasing their chances of remaining with the company for life.

If you’re having a tough time deciding how much time to devote to taking care of and getting to know your customers, Ball State’s Avila suggests using the 80-20 rule: Spend at least 20 percent of your time taking care of existing customers and 80 percent looking for new business.

4. Use technology to your advantage. Technology is the key to USAA’s productivity and customer service. Its strategy? The company stays on the cutting edge of computers, telecommunications, image processing and other information technology and management tools and molds them all to meet its needs. The latest computer program USAA recently began implementing is one that looks at a customer’s current account and identifies gaps in coverage. For instance, if a member has insurance for a home with a basement but does not have water damage coverage for that house, the new system will flag it. It then takes all the gaps and prioritizes them in the order that reps should address them.

Today, nearly 95 percent of USAA’s business is conducted over toll-free telephone lines and direct mail, and in the near future more transactions will be handled via the Internet.

5. Keep an open channel to your customers. One of the technologies that came out of PRIDE is a system called ECHO. It allows USAA reps who deal with customers to enter any complaints, suggestions, compliments or other feedback into a computer, which sends it to higher levels. The data is then used to address issues of customer concern and register interest in products, among other things.

Avila gives this initiative a big thumbs-up. “You need to have an open channel to your customer. The worst customer in the world is a silent complainer. Your customers need to not be afraid to tell you if they got a late delivery or were overcharged, etc. To maintain that open channel you need to keep the touches going – let your customers know you care and take each complaint seriously,” he advises.

If you do goof up somewhere along the line, fix it and then add value, insists Avila. “Give the customer whatever he wanted, and then give him 10 percent off his next order, or make sure his next order is early. Use common sense as opposed to just trying to get someone’s business.”

6. Be sensitive to customers’ time and needs. Rather than concentrating on sales training for its customer service reps, USAA works on teaching its people to assess customers’ moods. Reps who pull up the prioritized list of gaps in a person’s coverage “may or may not choose to use that information, depending on the mood of the person, how much time they have to talk, etc.,” explains Chisolm.

The association is also cognizant of where members are in their lives and tries to anticipate what they’ll need next. As those anticipated needs arrive, USAA mails out information about the services that match those needs. But it’s a well-managed effort. “We’re very conscious of how much mailing we do,” says Chisolm. “We make sure we coordinate those mailings and don’t inundate anyone.”

In the end, Chisolm sums up the USAA outlook in one sentence: “Our focus is not to sell products and increase market share; it’s to best serve our members with the products and services they need.” Of course, the upshot of that philosophy is that the company does sell products and increase market share. Its customer base has risen from 16.6 million in 1996 to 20.1 million in 1998; it loses only 1.2 percent of its regular customers each year; and its loss rate for a newly-added demographic group, the toughest group to hold on to, is 9.8 percent, down from about 17 percent last year.

Want further proof of the fact that a truly customer-oriented environment works? Look no further than John Glenn and Buzz Aldrin, who have been USAA members for 50 years.

The public is becoming more and more disgruntled with service in the United States and companies that make good service more important than saving a few dollars will be the ones that will thrive. “I’m convinced we’re a nation that overpromises and underdelivers,” Avila concludes. “Those who take care of their customers will be the ones to survive into the next century.”