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The Perils of Treating Different Customers Differently

February 1, 2010

The Perils of Treating Different Customers Differently

As I write this, I am recovering in my hotel room from an early-morning run several times up and down each of the four different staircases in this hotel, in a foreign city (not going to tell you what city, but it's way far away from the US - virtually opposite side of the world). Something I noticed about this modern hotel is that the number of steps between floors varies with each stairwell! While the floors are all level and have no ups or downs in the hallways, the stairwells themselves each have the same number of steps between each of the principal hotel room floors but that number is 21 steps for one of the stairwells, and 22, 23, or 24 steps for the other three (go figure). I don't know the explanation for this, and truth is I'm not even very interested in it, but when you have to run up and down stairwells in a hotel because it's too early for the fitness center to be open, then you have to occupy your mind somehow.

Nevertheless, this got me thinking about today's consulting assignment. Our firm is meeting later this morning with a large mobile phone carrier regarding their customer retention efforts. If you know anything about this subject, you know that customer retention can be thought of as both proactive and reactive. Proactive efforts are those service improvements, process enhancements, and quality initiatives that encourage loyalty by removing many of the causes of defection. Proactive retention measures could also include a loyalty program of some kind, along with customized service treatments and the like.

Reactive retention efforts, on the other hand, are those policies and practices aimed at intercepting customer defections - either by convincing people not to leave when they contact the firm to disconnect, or by using analytics to detect the kinds of behaviors that normally precede defection, and then actively intervening with a customer contact or offer.

It is the reactive retention efforts that I came to wonder about as I was pondering the irregularities in my hotel's stairwells. The thing is, a good proactive effort is one that arms the customer service agent with a number of different types of offers and communications to deploy for different types of customer situations. And sometimes the only real difference between one situation and the next is the intensity of a customer's desire to leave, and therefore the "price" required to retain. What this means is that - theoretically at least - different customers could communicate with each other about the kinds of "win back" offers they each received, and the result would not be economically helpful to the carrier. On the other hand, not making the "best offer" to a customer at any point in time is clearly flirting with untrustworthy behavior.

What we usually advise clients is that they have to have some objective reason they can cite for making any customer-specific offer - a reason that would allow any other customer who met those particular conditions to receive that offer, also. But this advice only really applies to the kinds of initial offers that are made to a customer in a reactive retention situation. What happens, however, when a customer improves his offer simply through negotiation? When a business customer does this, a contract typically will have a confidentiality clause, so the seller can protect overall pricing with other customers. But this obviously would be difficult to apply to consumer customers, even if you wanted to.

Reason I'm posting this is to see if anyone out there has a view on how to handle this issue. What are the best practices, what are the worst cases, what are the issues? Anyone?



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