Call or be called? Customer retention relies on who has ‘hand’

I have just done the rounds of renegotiating my insurance and power contracts and it’s pretty clear that some businesses do it better than others when it comes to customer retention.

Having arranged through a third party to move both my current car/home insurance and power to new providers, ‘win back’ processes were triggered for both. But where one company successfully won me back the other did not. And price wasn’t the issue – how they contacted me was.

The incumbent who failed

My power company received notification that I was switching to a competitor and gave me a call to see what they could do. Despite a very professional and upbeat consultant calling with an offer to see whether they could provide a better deal, for me it was too late to revisit a decision I had made three weeks ago. In my mind, the deal had been done and I did not want to go through it again. I simply could not be bothered.

The incumbent who succeeded

In contrast, my car and home insurer was not automatically notified that I had stitched providers. Instead, I had to contact them to arrange the cancellation. Once they had me on the phone an equally professional and upbeat consultant did what he could to provide a better deal to keep my business. He succeeded.

It’s about who has ‘hand’

Both the power company and car/home insurer had similar methods of finding a better deal – the significant difference was whether they called me or I called them. Why did they have a persuasive impact?

In TV show Seinfeld terms, it’s about who has “hand” – the upper hand or power in the relationship.

When someone calls you:

• It’s an interruption
• You are not thinking about the issue
• They are asking you to do something (reconsider your decision)
• You have “hand”

In behavioural terms, a natural reaction to having your decision to switch questioned unexpectedly is to default to the decision you have already made. When we don’t want to think about something our status quo bias kicks in and we leave things as they are. Added to this, revising our decision requires us to admit we were wrong in the first place and that creates an unpleasant tension in our own mind about whether we are a good decision-maker. To reduce this tension it is easier to back our own judgment.

If you have to call:

• It’s at a time you’ve chosen
• You are thinking about your issue
• You are asking them to do something (cancel your contract)
• They have “hand”

In this scenario, we are looking to deliberately interfere with the status quo because we are calling to change something. This means we are not only more open to having our decision influenced but, ironically enough, can be drawn into leaving things as they originally were – before our decision to change – with some encouragement (like a better deal). Any tension of going back on a decision you’ve taken is alleviated because you can rationalise the benefits of staying with the incumbent (who you chose at some stage) by congratulating yourself on negotiating a better deal. You feel like a winner!

Implications for your business

I think this throws open the door for a reconsideration of inbound vs outbound retention calls. Key will be how you want to engage your customers throughout their lifecycle and the promises you are making. Making your customer contact you has potential for backlash if it is not handled well and regardless of who contacts whom, the quality of your consultants is paramount.

And anyway, I’m just waiting for incumbent businesses to win me back before I even leave – now wouldn’t that be nice?