Do you know your employee’s lifetime value?

Have you ever tried to cancel your mobile phone contract but have ended up finishing your call to the contact centre with not just an upgrade to show for it, but some money off your tariff and the promise of further discounts down the line?

If you have, first here’s the bad news: this five-star service you’ve been given probably has more to do with the guidance the operator’s IT system gave to the operator than your charm or what you may have threatened to him or her down the line. Unbeknown to you, you’ve probably been highlighted as someone worth keeping. Maybe you exceed your free-call limits regularly, make lots of international calls or send picture texts with alacrity. In short, you make them money and they believe you will keep making them money. This means the operator has pricing packages and incentives made available to try to keep you.

I know this because I was comparing notes with a colleague who in a previous role headed a call centre with technology that did just this.

The CRM system was so advanced, it could suggest the right offers, to different clusters of customers, based on calculations about what their lifetime value would be and ensure they are on a package that makes them loyal and wanting to stay. And yes – just in case you’re wondering – that meant when other (low value) customers phoned up and threatened to leave, that’s exactly what the system would suggest they do. Blunt though it might seem, the technology identified some people as not worth keeping, those who were on too good a deal relative to their value to the operator. The organisation was happy to let them go because, when all things were said and done, these customers actually cost them money to support and they had a low lifetime value/potential to the company. It’s all about understanding and appropriately rewarding against the predicted customer lifetime value.

Lifetime Value

I find this intriguing. In the world of customer service, marketing, data and analytics, the concept of lifetime value has been around for years. There’s nothing firms don’t know about a customer’s overall value, their potential to upsell to, or what promotions and discounts they will most likely respond to most. And yet here’s the rub. HR departments – often sitting in the same room as these technology mavens – hold no such similar intelligence around employee lifetime value. Say it’s an employee – not a customer this time – that wants to leave their company. If they phone up HR, the person on the other end of the line will most probably have no idea whether everything possible needs to be done to try and stop them leaving or whether they should simply encourage them to walk. HR won’t easily know if the employee threatening to leave is the highest performer, the most revenue-making employee, someone at the very bottom of a performance or talent scale or under or overpaid relative to the market and their peers. There would be no steer on whether they are spectacular and need to be offered greater incentives to stay or unspectacular and wouldn’t really be missed if they left.

Just think about the implications of this. Good people are frequently allowed to walk; bad people are often paid more to stay. Where’s the logic in this?

The 'Right Sizing' Approach

We need to change this. There’s no reason (and arguably no excuse) why this sort of business-vital insight can’t be owned by the HR/reward function. When the telcos have this level of intelligence, they call it having a ‘right sizing’ approach – that is, not having every customer they can but attracting and retaining the right customers, and knowing why they are right. HR departments need to follow their lead and better understand who are the right people in their organisations and make appropriate compensation adjustments to keep them loyal and productive. And we need to be very clear about one thing. Technology isn’t the limiting factor in all of this. While there’s still some hang-ups about implementing HR systems, the real barrier is having an internal sponsor that can shout about this as effectively as their retail customer focused colleagues. The real reason marketing directors can report customer churn and secure the investment they need to build their CRM systems is because they’ve long built the case for why this information is so critical. HR, I feel, is still playing catch-up – they need to step up to the plate and really own the conversation about why employee data can be just as insightful as customer data. So, come on – what are you waiting for?

Reprinted with permission from Curo.



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