How to Spot Defectors In Advance

Apr 28, 2008 11:03 PM  By

It finally happened. I filled my tank at the gas pumps of a membership-only discount retailer. For my entire life, I’ve sworn by the majors – a BP, a Mobil, a Shell, a Texaco. Why? because Dad went to those types of stations.
But I have crossed over to the dark side, going to the discount pump on at least a few Saturdays.

Granted, I didn’t do this without some angst.

For one thing, there were lines—I was worried about the time. And given that I had to use the membership card for fueling, I needed to learn a new process.

But switching really wasn’t so hard. It didn’t take long. And thanks to that first trial, I’m now going to the discounter once a month.

And what did Major GasCo do?

As a loyalty consultant, I know that Major GasCo could have recognized this turning point and stopped me from defecting. Suppose that after a couple of fill-ups at the discounter, Major GasCo e-mailed me a reminder of the benefits of filling up at my regular pit stop, or offered a free car wash with my next purchase. Instead of filling up at the discounter on Saturday, I would have topped off my jalopy on Thursday at my regular station.
How would Major GasCo have spotted me sneaking away to the dark side? By noticing my absence in its customer database. Capitalizing on simple transactional data, it could have diagnosed me as a defector early enough to stop a new habit from forming.

Whether you’re a fuel retailer, a grocery chain, a credit card issuer or a supplier of some other everyday-spend product or service, you can rig a strategic safety net by assigning a defection defense score to your customers. When customers begin to fall away, the defection defense score identifies them and triggers the net.

Most companies already store the information needed to create a defection defense. There are several approaches to create a dynamic defection scoring model. You’ll of course need a database platform that can sweep your entire customer file for customers who exhibit warning signs. Its rules engine must also trigger e- or snail-mailings, presenting targeted offers to at-risk customers based on their profitability.

As a best practice, you should trigger a series of mailings to your highest-value customers. Using my experience as example, Major GasCo might offer richer rewards – like a fun partner reward such as free movie tickets – for a fill-up in the next two weeks. Mid-level customers might get a couple of communications offering in-kind rewards such as a free car wash or a six-pack of soda. Lower-value customers might simply receive one e-mail – perhaps a reminder that Major GasCo values their business, or maybe a free cup of joe.

The key to defection defense, of course, is paying early attention to the red warning lights. In my case, the lights were my car’s receding tail-lights the first few times I drove down the street to a competitor, and made the right turn to the dark side. Only a sound customer strategy can turn me back to the light – and help my Dad rest easy.

COLLOQUY Managing Partner Kelly Hlavinka has the shiniest car on the block and can be reached at Kelly.hlavinka@colloquy.com.