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Golden Goldfish Excerpt – Retention vs Acquisition

The following is an excerpt from the upcoming book, What’s Your Golden Goldfish? (available on Amazon May 1st):

Golden Goldfish Book

Chapter 2

RETENTION VS. ACQUISITION

“The search for meaningful differentiation

is central to the marketing effort. If marketing is

about anything, it is about achieving customer

getting distinction by differentiating

what you do and how you do it.

All else is derivative of that and only that.”

– Theodore Levitt, Harvard Business School

Question: Do you focus on the funnel or fix the leaky bucket?

retention versus acquisition

Answer: Focus on the Leaky Bucket

Retention is Fast Becoming the New Acquisition

Satisfaction drives loyalty.  More importantly, it drives retention.  The key to a healthy bottom line is the ability to keep your best customers and employees.

According to the recent book Outside In by Harley Manning and Kerry Bodine, {Endnote 13} retaining customers drives revenue in three critical ways:

  1. Incremental sales from current customers.
  2. Retained sales as a result of lower churn.
  3. New sales driven by word of mouth (referrals).

Can small improvements in retention make a big difference?  Absolutely. According to Gartner Group, {Endnote 14} “A mere 5% improvement in retention can increase profitability by upwards of 25% to 125%.”

The Revolving Door Effect 

Too much focus in business is on acquisition.  The vast majority of spending is focused on getting prospects through the door and converting them to customers.  Little attention is paid to their retention.  For most companies this door represents a revolving door.

Let’s use the insurance category to illustrate the point.  The average insurance company maintains a retention rate of 80%.  USAA, a leader in customer experience, retains customers at a rate of 97% {Endnote 15}. Christine Moorman, the T. Austin Finch Professor of Business Administration at the Fuqua School of Business at Duke University, demonstrates how this plays out over a three-year time frame.

The results are eye opening.

meng-blend-image-1-300x277

Companies with 80% retention will have to replace over 50% of their customers every three years.  Comparatively USAA only needs to replace less than 9% of its customer base over a similar three-year period. 

Retention of the Vital Few

Based on the Pareto’s Law, {Endnote 16} for the vast majority of companies, 80% of profitability is driven by 20 percent of customers.  These customers are your key accounts. Retaining these customers should be your top priority.

Let’s start exploring how companies utilize the concept of the Golden Goldfish to retain these vital few. Little extras that drive loyalty and referrals.

Retention vs. Acquisition: Do you focus on the funnel or fix the leaky bucket?

retention versus acquisition

[This post was originally posted on MENG Blend. MENG is the indispensable community of executive level marketers who share their passion and expertise to ensure each member’s success]

Answer: Retention is Fast Becoming the New Acquisition

Satisfaction drives loyalty.  More importantly, it drives retention.  The key to a healthy bottom line is the ability to keep your customers.

According to the book Outside In [click here for infographic] by Harley Manning and Kerry Bodine, retaining customers drives revenue in three ways:

  1. Incremental sales from current customers.
  2. Retained sales as a result of lower churn.
  3. New sales driven by word of mouth (referrals).

Can small improvements in retention make a big difference?  Absolutely.  According to Gartner Group,

A mere 5% improvement in retention can increase profitability by upwards of 25% to 125%.”

The Revolving Door Effect 

Too much focus in marketing is on acquisition.  The vast majority of spending is focused on getting prospects through the door and converting them to customers.  Little attention is paid to their retention.  For most companies this door represents a revolving door.  Let’s use the insurance category to illustrate the point.  The average insurance company maintains a retention rate of 80%.  USAA, a leader in customer experience, retains customers at a rate of 97%.  I recently heard Christine Moorman, the T. Austin Finch Professor of Business Administration at the Fuqua School of Business at Duke University, discuss how this plays out over a three year time frame.  The results are eye opening.

Retention Impact

Companies with 80% retention will have to replace over 50% of their customers every three years.  Comparatively USAA only needs to replace less than 9% of its customer base over a similar three year period. 

Retention of the Vital Few

Based on the Pareto Principle, for the vast majority of companies, 80% of profitability is driven by 20 percent of customers.  These customers are your key accounts. Retaining these customers should be your top priority.

Coming Spring 2014Over the next ten months, I will be exploring how companies utilize the Goldfish Rule to retain these vital few.  Little extras that drive loyalty and referrals.  My findings will complete the third and final leg of the Goldfish trilogy.  Purple Goldfish focused on customers, Green Goldfish focused on employees, and now the Golden Goldfish will focus on 20% of customers and employees.

Any good examples or best practices to share?  How do you work towards retaining your Top 20%?

Today’s Lagniappe (a little something extra thrown in for good measure) – Here’a a slideshare showcasing best in class examples focused on retention building practices. It contains 9 lessons from leading brands from Apple to Zappos:

Outside In has a simple message: You need customers more than they need you

Outside In: The Power of Putting Customers at the Center of Your Business

Outside In is a book by Harley Manning and Kerry Bodine of Forrester Research. Harley and Kerry are following in the pioneering footsteps of Forrester’s Josh Bernoff. Josh wrote Groundswell (with Charlene Li) and Empowered.

The book provides a roadmap for creating a focus on customer experience. I’d highly recommend picking it up and sharing the book with your CEO.

Here’s my review with key takeaways:

outside in book review

Today’s Lagniappe (a little something extra thrown in for good measure) – Here’s a YouTube video with Harley Manning talking about Office Depot. Of the 80+ stories in the book, this one is hands-down my favorite. The book begins and ends with it. Harley touches on the “Undercover Boss” aspect in the video, but here are the details. President Kevin Peters sits incognito in an Office Depot parking lot in New Jersey. He notices an employee standing just outside the door smoking. After watching customers leave empty handed through a cloud of smoke, Kevin can’t take it. He decides to blow his cover, walking inside to find the manager. He looks for the picture of the manager on the wall. Guess who? It’s our smoker. The book ends with Kevin Peters and Office Depot. Kevin and his team decided to give the store manager in New Jersey a second chance. A wise choice, the store eventually became on the top-ten stores in the nation for customer service. More importantly, the comparable store sales were positive for a 12-month period.

12 Effective Ways to Increase Employee Engagement

12 Effective Ways to Increase Employee Engagement

After studying 1,001 examples of companies that give little unexpected extras to employees, here are a dozen ways to drive engagement and reinforce culture from the book, What’s Your Green Goldfish:

1. Onboarding

usaa boot camp green goldfish

You never get a chance to make a first impression. Example: USAA (#456) figuratively runs a Boot Camp. The insurance provider for military members and their families has an interesting onboarding process for new employees. Training includes trying on military fatigues, eating MRE’s  (ready to eat meals) and reading letters from family members.

2. Space

The design of the workplace, the type of the work and where people are situated will influence collaboration and engagement. Example: XPLANE (#708), which was founded in 1993, has an “Inspiration Wall” — a designated space in the office kitchen where employees can post anything they have created or want to share that inspires them. “It helps us express new ideas and personal findings which foster surprising connections, creative collaborations and, at its simplest, helps us all know each other better.”  Here’s a video by XPLANE on Gamestorming:

3. Transparency

green goldfish answer lab

According to Louis Brandeis, “Sunlight is the best disinfectant.” If you want a strong culture, keep things open by default. Example: AnswerLab’s (#510) CEO schedules Walk & Talks with every employee. These one-on-one check-ins provide employees with an individual opportunity to share any concerns or brilliant ideas they have with the CEO directly. Combining wellness with one-on-ones helps achieve two important objectives simultaneously. Meeting outside the office and getting physical helps eliminate the nerves and intimidation employees might normally experience when connecting with higher-ups. According to Forbes, everyone gets a FitBit pedometer connected with an online leaderboard so all can see who’s clocking how many miles. This promotes more “walk and talk” meetings—which last generally one hour–along with monthly step competitions. The company also reimburses for gym memberships.

4. Wellness

anadarko petroleum green goldfish

Keeping fit and eating right does a body and mind good. Example: There may be no such thing as a free lunch, but at Anadarko Petroleum Corp. (#355) there is a free flu shot. Recently, an in-house doctor started at the top of the company’s 30-story office tower in The Woodlands and over three weeks worked his way down, floor by floor, giving injections to nearly 1,900 employees at their desks – at no charge.

5. Time Away

green goldfish deloitte sabbatical

Time off is regenerative. Example: Employees at New York, NY-based Deloitte (#197) don’t have to sacrifice their life’s dream for their careers because they enjoy the benefit of sabbatical leave. Deloitte offers four unpaid weeks off to do whatever they wish, and three to six months (yes, months) of partially paid leave to volunteer or pursue a career-enhancing opportunity.

6. Modern Family

Bye, Bye June and Ward Cleaver. The traditional family is now the Modern Family. Smart organization create employee programs that help with the challenges of today: Day Care, Eldercare, Infertility, Adoption, Maternity Leave, Paternity Leave, Same Sex Partner Benefits. Example: McMurry (#694), a Phoenix-based marketing communications company, gives new mothers an $800 allowance for house cleaning, home health visits, meals, lactation consulting or other services.

7. Recognition

green goldfish decision lens action figures

Action “heros” speak louder than words. Example: Decision Lens (#712) awards top-performing salespeople with custom-made action figures designed to resemble the employee.  According to Co-Founder John Saaty, “It’s a humorous way to acknowledge the great efforts of our sales team, and something that’s more memorable than the usual plaque or something like that.”  

8. Flexibility

No longer an extra, flexibility is an expectation. Example: Jeff Gunther, CEO of the Charlottesville Meddius (#182), VA-based software company Meddius, decided he would change the way his staff works by instituting a Results-Only Work Environment. Meddius employees can work any time from any place in any way, as long as they get their work done. Gunther has found that by giving employees the trust and autonomy they need, they’ve actually been more productive and loyal to the company.

9. Training and Development

green goldfish container store

Investing the development of your people. Example: The Container Store (#460) puts an emphasis on training. Employees receive on an average 160+ hours of training per year. Typical annual turnover in retail is 100%, but at Container Store it hovers around 15-20%.

10. Pay it Forward

Giving back and paying it forward. Example: Decision Analytics Corporation (#250), a military contractor, believes in giving back. Each quarter, staffers assemble care packages for soldiers overseas.

11. Team Building

snagajob green goldfish #62 office olympics

A team that plays together stays together. Example: At Virginia company Snagajob (#62), the Culture Squad organizes the annual Office Olympics, during which employees [Snaggers] are divided into competing nations—and dress the part.

12. Empowerment

15% time

Tapping into the creativity of your team powers innovation. Example: 3M (#53) launched the 15% program in 1948. Employees were given 15% of their time to work on personal project of their choosing. If it seems radical now, imagine how it played as post-war America was suiting up and going to the office, with rigid hierarchies and increasingly defined work and home roles. But it was also a logical next step. Fifteen percent time is extended to everyone. Who knows who’ll create the next Post-It Note? (a 15% time innovation)

It’s one of the things that sets 3M apart as an innovative company, by sticking to that culture of giving every one of our employees the ability to follow their instincts to take advantage of opportunities for the company,” says Technical Director Kurt Beinlich, who tries to get most of his 70-person lab team to participate.”

 Today’s Lagniappe (a little something extra thrown in for good measure) – Here’s a slideshare providing an overview of the book, What’s Your Green Goldfish:

 

The first step to employee engagement is getting off on the right foot with Onboarding

This is a draft excerpt from the upcoming book, What’s Your Green Goldfish? Beyond Dollars: 15 Ways to Create Employee Loyalty and Reinforce Culture.

You never get a second chance to make a first impression

first step

Attitudes begin to form at the initial point of contact with an organization. There is no better place to start applying G.L.U.E. than when you are welcoming new employees to your company. Smart companies take advantage of these early days in order to ensure a strong, productive, and dedicated workforce.

The way you manage the transition of somebody into your culture speaks volumes about the culture to the person coming in, because you’re making those first early impressions and they know what’s expected of them” says George Bradt, managing director at PrimeGenesis in an interview with Inc.com.

First Step

onboardingThis first step or transition process is called onboarding. According to Wikipedia, here’s the definition:

Onboarding, also known as organizational socialization, refers to the mechanism through which new employees acquire the necessary knowledge, skills, and behaviors to become effective organizational members and insiders. Tactics used in this process include formal meetings, lectures, videos, printed materials, or computer-based orientations to introduce newcomers to their new jobs and organizations.

Unfortunately less than 25% of organizations have a formal onboarding process. According to onboarding expert Bradt,

Most organizations haven’t thought things through in advance. On their first day, they are welcomed by such confidence‐building remarks as: Oh, you’re here… we’d better find you an office.

Why Onboarding? 

Research shows that employees make the critical decision to stay or leave within the first six months and that having the newest talent participate in an onboarding program can “maximize retention, engagement, and productivity.” (Source: HCI White Paper, 2008) Socialization efforts lead to positive outcomes for new employees, including higher job satisfaction, better job performance, greater organizational commitment and reduction in stress.

Yet, culturally onboarding new hires can be a real challenge. While sleek videos, laminated pocket cards and lobby placards may help employees memorize the company values, the actual understanding how to “live” the company values can be a whole other story.  Your culture is only as cohesive as the people willing to live out the shared values. Takeaway: Actions speak louder than words.

Having a diverse range of ways to welcome a new hire is critical to establishing a healthy employer-employee relationship. Here are a baker’s dozen of companies that purposefully go the extra mile to engage new team members:

Welcome Wagon

At JM Smucker (#575) new hires get a gift basket sent to their homes. (Source: Business Insider)

Intel’s (#534) new hires have dedicated greeters and gifts waiting for them when they arrive on their first days as a part of their hands-on new employee orientation. (Source: Business Insider)

Online glasses manufacturer Warby Parker (#171) gives a welcome package to new employees which includes a founder’s favorite pretzels and a gift certificate to a Thai restaurant, since the founders lived off Thai food during their startup phase.

Buddies and Sponsors

Capital One (#361) runs a Buddy Assimilation Program. The program matches veterans with newcomers. “Buddies” like show the newbies around, have lunch with them and act as a resource.  After a month of training, new employees work “in the nest” for two weeks, fielding incoming calls with plenty of support. Hands go up whenever a trainee has a question, and a roving supervisor runs over to help. Once on their own, employees work within teams. But they’re never far from a helping hand as team leaders and “floor walkers” decked in bright red and yellow vests are always available to answer questions. (Source: Tampa Bay Tribune)

Every associate at ladder(less) W. L. Gore & Associates (#539) has a sponsor who coaches, mentors, and commits to helping that person succeed at the company. (Source: Business Insider)

Understanding the Business

USAA (#456) figuratively runs a Boot Camp. The insurance provider for military members and their families has an interesting onboarding process for new employees. Training includes trying on military fatigues, eating MRE’s  (ready to eat meals) and reading letters from family members. (Source: Jeanne Bliss)

Exposure makes a difference in performance. According to Fast Company, that’s the finding of Adam Grant, a Wharton professor who studied the training given to 71 new call center employees of a Midwestern software firm:

One group of trainees was chosen to meet an “internal customer”– an employee of another department whose salary depends on the sales that the new hires make–during their initial training. In combination with some inspirational words from the CEO, this contact with a real live beneficiary significantly improved both sales and revenue during the employees’ first seven weeks. The difference? A not-insignificant 20% improvement in revenue per shift. Leadership messages from the CEO about purpose, vision, mission, and meaning, however, had no such effect on their own.

Writing the ship

According to Harvard Professor and noted author Teresa Amabile, the ability to track small wins can help to motivate big accomplishments. Rituals like writing in a diary can be a strong influencer. The number one driver for inner worklife is making progress on meaningful work. Reflection can become an important part of the process.

New hires at custom t-shirt company CustomInk (#514) receive a blank journal. They are encouraged to record any interesting things they learn about the company in their notebook during their orientation or any questions they would like to ask.  New hires are also asked to record instances where they’ve seen CustomInk’s values in action.  At the 30 day mark, new hires convene to share what they’ve noted in their journals.  Making new hires accountable for noticing how their colleagues and managers live those values every day helps brings those behaviors to life.  (Source: Great Places to Work)

Gamify

New employees at Snagajob (#703), are asked to share their unique talents and experiences in a brief questionnaire and the answers are shared among employees over the company’s employee-only online network. When new hires are introduced at weekly company-wide meetings, employees are quizzed about the responses and get token rewards such as candy for each correct answer. “It’s a fun way to hold our employees accountable for learning about our new snaggers,” says Betsy Kersey, whose title at Snagajob is Director of People. (Source: Entreprenuer.com)

Returnships

TD Bank (#489) worked with the University of Toronto’s Rotman School of Management to develop the Rotman Back to Work program for women who have been out of the workforce for over eight years — and operates the in-house “Back to Business” rotational work program for women returning to work.

Check-Ins

When employees join Davies PR (#723), they are given a 3-month, 6-month, 9-month and annual review to ensure they get a “Best Start” at Davies. After one year at the company, employees receive annual 360 degree reviews in which they are assessed by their co-workers. (Source: PR News Online)

Technology Spurring Dialogue

Companies are using new tools and procedures to assimilate its latest hires. Veson Nautical (#827), a Boston-based software developer for risk management for the maritime industry, just instituted a new program in January called “FastStart,” an online tool from consulting firm BlessingWhite that aligns work styles and priorities between new employees and managers.

“The manager ranks the skills important and less important to the job, and the employee does the same,” says Sarah Taffee, director of human resources and organization effectiveness at Veson Nautical. “The employee has the opportunity to compare their own answers with their manager’s answers, and then the system guides them through how to have an open discussion about those things.” (Source: Inc.com)

Finding Your Way & Lost in Space

Box.net (#825) gives entry level employees three months to explore all the different departments of the company and you train them so that they know your products and services backward and forward—and then you allow the employee to choose what department they feel is the best fit for them. (Source: Inc.com)

There is one program at Brazilian manufacturer Semco (#787) that allows people to act like entrepreneurs at the company.  Called “Lost in Space”, it assumes that young recruits don’t know what they want to do with their lives. The program lets them roam the company for a year. They do what they want to do, move when they want to move, go where their interests take them; work for one, two, or six different units. At the end of the year, anyone they’ve worked for can offer them a job, or they can seek an opening in an area that interests them. If neither happens… we thank them for the year. (Source: Ricardo Semler The Seven Day Weekend)

Today’s Lagniappe (a little something extra thrown in for good measure) – Here’s a four minute video from Wells Fargo on onboarding:

All of the examples in this post were taken from the  Green Goldfish Project. The Project is a quest to find 1,001 examples of marketing lagniappe for employees. Green goldfish are the little signature extras given to employees. They help differentiate a company, reinforce culture, increase retention and drive positive WoM. The book, “What’s Your Green Goldfish?” will be published on March 29, 2013.