Posted by Elena del Valle on June 14, 2007
By Tony Malaghan, CEO, Arial International
Tony Malaghan, CEO, Arial International
Photo: Arial International
I recently read a research study by Javelin Strategy & Research titled, “Reaching Underbanked Latinos: Better Product and Sub-Segment Definition Required to Realize Growth and Retention”. Whilst the research is targeted at financial institutions, the findings are applicable across many industries.
The report, published in November 2006, combined research from interviews with large and small U.S. financial institutions regarding current strategies and best practices with quantitative research on banking habits of Latino consumers in the U.S. One of the key findings of the report is that 37 percent of Latino consumers actually switch banks because of dissatisfaction with customer service compared to 18 percent for the non-Latino market! In my view, that is a significant point of difference and one that every business targeting the U.S. Hispanic market needs to be cognizant.
Studies have shown that it costs up to five times more to acquire a new customer than it does to retain an existing customer, so this issue is an important one to address and one that can be easily remedied in the U.S. Hispanic market.
It is my opinion that lack of real commitment to the U.S. Hispanic market is the fundamental reason for unsatisfactory service levels. I am by no means holding the customer service representatives responsible for less than satisfactory levels of service. The blame rests squarely on the shoulders of senior management who embark on a U.S. Hispanic market drive without fully understanding the market, the differences that exist within this market segment, and without the infrastructure and training necessary to serve this market.
Without a doubt the primary reason U.S. Hispanic customers switch service providers is that the level of bilingual service they expect does not meet their expectations. In our experience at consulting, training and “Best Practice” certification for bilingual call centers servicing the U.S. Hispanic market, we see a significant disparity in the level of customer service between the general market and the U.S. Hispanic market.
Obviously you can improve U.S. Hispanic customer service by assigning an appropriate number of fully bilingual staff and an adequate budget to undertake the following steps:
1. Spanish language testing to recruit competent and fully bilingual staff.
2. Bilingual training and certification so that your agents are able to converse with your customers in appropriate “Business Spanish”.
3. Certification of Bilingual call center operations so that your organization is benchmarked and delivering services to best practice standards.
None of this is rocket science, but you would be surprised how many organizations across industries are not utilizing the fundamentals identified above. Compounding the situation in many circumstances is that management and supervisors in charge of U.S. Hispanic customer service areas often do not speak adequate Spanish and therefore do not understand the inappropriate customer communication that is occurring. The negative impact on organizational and brand reputation from poor customer service takes many years to recover from.
OK, let us assume that your infrastructure to service Spanish-speaking customers is in place and recruitment processes and training are meeting best practice standards. What can you do to ensure retention of this valuable customer base?
Given the premise that it costs five times more to acquire a customer than retain an existing one, a U.S. Hispanic customer retention strategy is the logical next step. That said, many companies are focused on acquisition and do not have a strong customer retention program for their general market, so it is not surprising very few have one for the U.S. Hispanic market.
Customer Retention Strategies
Customer retention strategies are built around developing long-term relationships with profitable customers through:
1. Establishing and building trust.
2. Developing innovative products that customers want, need, and are affordable.
3. Providing a quality of service and responsiveness that at least meets customer expectations and often exceeds them.
In the commoditized world in which we live today, any gain achieved through product innovation or price differentiation will be short lived before it is replicated by competitors. This leaves two key points of difference companies can work with to gain a real competitive advantage, both of which are much more difficult for competitors to replicate quickly: Building trust; and quality and responsiveness of service.
To be able to provide quality and responsive service, companies must first understand how the customer defines quality e.g. the company provides reliable products, prompt and responsive service, front-line staff are empowered to resolve problems, knowledgeable staff, empathy with the customer, and an organization with a customer-centric view, etc. Behavior over time, consistent with the guidelines above, will build trust with the consumer.
Quality customer service and trust are two elements important to the U.S. Hispanic consumer and they will respond in a positive way to those organizations that demonstrate a willingness to provide the level and type of service they expect. This loyal customer base will not only reward you with their patronage, but they will inform family and friends of your company as a great service provider.
So, how do you go about developing a retention program? First, some analysis is required to better understand your customers:
• Analyze your customer base and behavior to understand your most profitable to least profitable. Remember not all customers are alike and 80% of your revenue is derived from 20 percent of your customers.
• Use lifetime value to segment your base. This will enable you to tailor relevant marketing offers to specific segments.
• Do you know your churn rate?
• Is your churn rate higher, lower or the same as your competitors?
• When customers switch, who do they go to and why?
This is not an exhaustive list, but it does give you a general idea of the type of understanding you need of your customer base. With this level of understanding, you can start to create and implement a customer retention program where you are targeting meaningful communications to the various customer segments. The focus of all your customer communication, be it in person, over the phone, in written communication via a letter, e-mail, chat, etc., must be customer-centric.
Elements of a successful U.S. Hispanic retention program
• Send a thank you and welcome letter once a new customer opens an account with your company.
• If the customer has identified that they want to be communicated with in Spanish, send all communication in Spanish.
• If the customer has not used the product or service for 3 months, send a letter advising that you’ve noticed they have not used the product. Ask if there are any issues and reiterate the benefits of using the product or service.
• Employ fully bilingual representatives and test their Spanish language ability. Empower representatives to resolve issues, to improve first call resolution rates.
• Conduct training for bilingual representatives in Spanish so they are equipped with the business vocabulary to represent your organization.
• Conduct periodic customer surveys.
• Use database marketing to tailor specific offers to customers. You want to treat your most profitable customers differently than your least profitable ones. The ultimate aim is to reward your most loyal customers, move the profitable ones further up the loyalty ladder, and minimize spending on your least profitable customers who may be costing you money.
• Develop loyalty reward and membership programs with desirable and attainable rewards.
• When a customer switches, determine the reason and work to resolve the issue to prevent future churn for the same reason.
In summary, if 37 percent of U.S. Hispanics say they switch banks due to unsatisfactory customer service, then the level of dissatisfaction with customer service within the U.S. Hispanic market is a very real issue. With the cost of acquisition versus retention, the business case for developing a U.S. Hispanic retention program speaks for itself. The competitive advantage for those organizations willing to go down the retention road is that not many in the U.S. Hispanic market are currently doing it, and those prepared to invest in retention will be rewarded by this very loyal segment of the U.S. market. © 2007. Arial International. This article has been printed with permission from Arial International.
Tony Malaghan brings over 24 years of professional experience in marketing to Arial International’s management team. He has a Bachelor of Business Studies with a major in Marketing from Massey University. Since joining Arial International in 2001, Tony’s focus has been on Hispanic marketing projects in the US. For more information visit ArialInternational
Read Tony’s chapter on “Effective Translations” in
Hispanic Marketing and Public Relations book