For decades, the LTL (less than truckload) industry has focused time, money and resources on revenue growth both via new customer acquisition as well as selling more products to existing customers in an attempt to constantly fill their sales pipeline to counter the continual churn that exists in that industry. This has largely occurred as a measure to address the value proposition gap that exists where customers view the LTL industry as a commodity where loyalty from shippers is sometimes in short supply.
The other dynamic in play has been the increase in 3PLs who have squeezed the LTL carriers even further by owning the customer experience and acquisition process. If you can quote a dollar less, or call at the right time, customers will quickly defect to a new provider—then another, and another, and another.
The fact that trucking is an industry where other issues are impacting customer churn compounds this attrition dilemma. Bad weather, driver shortages, and disrupted pick-up and delivery schedules all cause delays. Break bulking, though efficient for transport, increases the opportunity for shipment damage every time the cargo is unloaded, reloaded and sent on its way. Freight damages can lead to cargo claims, which if not handled properly cause further customer dissatisfaction and can exacerbate customer churn.
All of this is bad news for customer satisfaction and, ultimately, retention. Thus, the continual account erosion further decreases revenue from existing customers requiring the LTL carrier to find new customers to replenish this lost revenue stream.
By implementing a comprehensive, 360-degree retention model that uses predictive analytics to identify and manage attrition risks, LTL shippers can transform this “earn and churn” narrative for good.
This paper explores how organizations can put an effective churn reduction program in place to retain valuable customers, identify the most prevalent reasons for attrition, increase revenue, and reduce the overall cost of sales.
Why customer retention matters
Over the past few years, companies in nearly every industry have shifted their strategies to customer retention. Modern analytics tools quickly transform a mass of data to actionable insight, so organizations can now gain a deeper understanding of each customer in less time, and recognize patterns that indicate satisfaction, dissatisfaction and need. Company leaders have also recognized that retention programs are also good for business, in terms of profitability, revenue and ROI.
The statistics tell the story:
- Acquiring a new customer may cost six to seven times more than retaining an existing customer1
- Increasing customer retention rates by as little as 5% can lead to an increase in profits by as much as 95%.2
- The likelihood of selling to an existing customer is 60%-70%, as compared to 5% to 20% for a new lead.3
A high customer retention rate is also a viable tool for acquiring more business, particularly in an industry like LTL shipping, where loyalty numbers are typically low. Spotlighting that differentiator in a sales pitch could be the factor that closes the deal.
Inside sales benefits
Top Line Impact
- Increase sales revenue
- Increase volume of shipments processed through network
- Increase revenue per shipment
- Reduce churn to maintain current shippers
- Acquisition of new accounts to expand market-share
- Expand service portfolio within accounts
- Expand channel coverage to capture smaller more transactional shippers
Bottom Line Impact
- Increased yield
- Lower cost of sale
- Lower cost of lead generation
- Lower cost of customer acquisition
- Target focus areas to expand penetration and maximize yield
- Deeper integration into accounts as part of complete supply chain management
Transitioning to a 360-Degree customer retention program: The initial steps
In an acquisition-focused environment, carriers find out that they’ve lost a customer long after the fact. Typically, outside sales teams concentrate their efforts on the larger, higher-volume customers, with no time left to call on, much less build relationships with, the thousands of transactional customers in their territories— leaving these at risk.
Even carriers that have an inside sales organization typically operate in maintenance mode, with little strategy or real customer insight guiding agent interactions. Contacts and interactions are transaction based, and very generic. If a customer starts shipping with another carrier, no one really knows, cares, or can document the reason why.
So, it follows that the first step in setting up a comprehensive retention program is to put a structure in place to support the initiative: a dynamic, analytics-driven inside sales organization that is actively focused on reducing churn.
The idea is to proactively address internal and external factors that could impact customer attrition before these actually become issues, and, if something does happen, to have the agility to react quickly enough to prevent impacted customers from leaving.
It’s important to note that companies don’t have to build this retention-centric organization out themselves. If they don’t have an inside sales organization, they can engage a 3rd party provider with a strong analytics infrastructure and trained agents in place. Not only does this eliminate the need for capital investment and long ramp-up times, but, often, these contracts are heavily performance based and can even be setup in an outcome based arrangement where the provider only gets paid when they generate a shipment. So, the revenue gains often offset the overall cost.
The analytics impact
By applying dynamic data capture and analytics across the inside sales landscape, the operation transforms into an end-to-end hub for retention, customer satisfaction and revenue generation.
Here are some of the different areas where analytics makes an impact:
In most organizations, territories are defined based on geography, with little regard to market concentration or ratio of inside sales personnel to customer. In a digitally transformed, retention-focused organization, analytics are used to set up evenly balanced territories from day one.
Reports pinpoint the customer concentration in each area, what those customers shipped, how frequently they shipped, as well as the associated revenue. Then, using this information, the territories are defined so that every customer gets the same, high level of care. This reduces the chance of customers abandoning the shipper based on sheer neglect or lack of contact.
LTL shipping is such a commoditized market that customers often make buying decisions depending on which provider calls on the day they have something on their dock, ready to go.
Instead of leaving the calls to a random rotation, an analytics-empowered inside sales operation bases this outreach on specific customer behavior. Pre-established algorithms are applied to the data on each account, generating reports that pinpoint:
- How often the customer ships
- What days, time of day and time of month the customer typically ships
- Whether the shipments are spread throughout the month or are more clustered in concentration patterns during certain weeks or times of the month
- Whether the shipping pattern is seasonal, or consistent throughout the year
Based on all of these elements, the agents time their calls so they connect with customers when they are most likely ready to ship. Being in front of the customer at the right time increases the opportunity for sales, reduces the chance the customer will get other quotes, and, in doing so, both decreases the risk of attrition and increases the likelihood of booking a shipment. It’s hard to lose a customer when you are intelligently calling on them at the right time when they have a need.
If the shipper offers an incentive program, with a gift card or discount earned at a certain monthly threshold, any customer within 20% of reaching that threshold receives a call. Oftentimes, a simple, “You’re $xx away from a discount on your next shipment or a $xx amount gift card. Do you have anything I can quote for you today?” is enough to generate a sale, and begin to build customer loyalty.
Using smart analytics every month, customers can be segmented into specific categories: top shippers, regular shippers, as well as transactional shippers and churn customers, and scheduled for calls accordingly. While regular shippers are contacted based on their individual shipping patterns; top shippers, who may ship daily, need more frequent contact and care, particularly at month end.
By comparing monthly penetration reports to contact goals, the inside sales area can reallocate agents to ensure the organization covers every customer segment at the right time in the month.
For example, if only 70 percent of the top shippers have been contacted at a specific threshold, agent efforts are refocused to push that number to 100 percent. Using data to not only identify need, but to manage inside sales activity, ensures that no customer is forgotten—and no revenue opportunity is lost.
One of the top reasons customers leave one provider for another is a bad shipping experience: a late pick up, late deliveries or damages. Yet, other than a reactive response to a damage claim, customers rarely hear from shippers when something goes wrong—or to make sure it all went as planned.
Using real-time data, agents can easily follow up after a scheduled shipment to make sure that the cargo was picked up on time, and that the customer is happy. If the data shows that the shipment was damaged, this also triggers a call. The faster the agent responds, the better the opportunity to regain the customer’s trust, identify the root cause of the damage, and take steps to prevent the same situation from happening to that customer again.
Here’s what that scenario looks like in an analytics driven LTL carrier:
The daily report shows that a particular account has had a series of shipments damaged, including one the day before. The agent reaches out to acknowledge the damage, and find out the root cause. He or she:
- Asks how the sender is packaging shipments, to determine if any education is needed
- Finds out if the customer has labeled boxes as “do not stack” or “fragile freight” to call attention to the package
- Identifies if the shipment has been given the correct classification for its weight and fragility, so it’s properly handled and billed
- Asks the customer to send pictures of the packaging the next time they ship. This enables the agent to correct any packaging problems, if these exist, before subsequent shipments are damaged. It also helps determine if the damage is due to the way the shipper is handling the item, so the appropriate corrections can be made if this is the case
The worst thing that can happen after this contact is a subsequent damaged shipment. So, the agent also contacts the shipper’s terminal manager to discuss what he or she could do on that end to correct the problem.
In some cases, a “handle with care” note to the driver on the bill of lading is all that’s needed. In other cases, the manager might find a better shipping route that reduces the number of times the shipment is loaded and unloaded before reaching its final destination.
These efforts accomplish two critical things. First, they let customers know that the shipper actually cares about their business, and is actively working to make their experience better. As a result, even high-risk customers end up staying with the shipper, and often increase spend going forward. Second, they uncover the root cause of delays or damages or other issues that typically cause attrition. By pinpointing and addressing these with systemic changes, the shipper can reduce the number of incidents that occur, ultimately improving overall customer satisfaction and retention as well as brand reputation.
Combatting the most common causes of customer distress
Understanding exactly why customers leave is critical to preventing churn. Using analytics, shippers can identify the specific parameters that cause distress to a customer, then match these with the current customer profiles to prevent a bad experience before it occurs.
In this instance, the inside sales operation takes on a consultative role, from helping the customer more clearly understand the impact of classification on product handling, ensuring more accurate quotes, to adjusting ship dates to reduce the opportunity for damage. With some customers, that means, instead of arranging for a Friday pickup, which requires an offload into a warehouse for the weekend and a reload the following Monday; the agent might suggest moving to a Thursday pickup with a Friday delivery, with no offloading. For others, it’s helping novice senders provide the necessary information to get a more accurate quote.
The agents also take time to talk to customers to find out what is more important to them, and use that information to further personalize contact going forward.
All of these efforts help companies hold and grow the accounts they have, instead of continually having to backfill due to attrition.
Acquiring new customers via an analytics-driven inside sales environment
In addition to churn reduction with existing customers, the benefits of an analytics-empowered, digitally transformed inside sales organization extends beyond keeping existing clients actively purchasing services.
Instead of blindly smiling and dialing through a list of unqualified trade show leads, analytics shift cold calling from a numbers game to a calculated strategy, enabling agents to acquire more profitable customers in less time.
The process starts with pulling data on the company’s best customers, what they’re shipping and where they are located. The compiled data is used to create a comprehensive profile of the organization’s target customer. This profile is run through a database of prospective customers to cull a calling list of “lookalike” prospects for agents to contact.
Each call has a higher probability to result in sale, not only because the prospects fit the existing customer demographic, but because the agent can speak directly to what’s important to this group, instead of launching into a generic pitch.
In addition, analytics can equip agents to more effectively convert dormant accounts back to active status. Again, by fully utilizing the existing data, agents can determine why each customer left and address those concerns directly, as well as offer reasons for that customer to try the shipper again, based on what’s important to that individual sender.
From commodity to differentiated brand
With a comprehensive retention strategy, LTL shipping companies can gain the actionable insight they need to retain transactional customers, grow revenue within that customer base, and proactively address the most common reasons for attrition. Additionally they can use smart analytics to drive new customer acquisition in a manner that increases sales conversion.
By taking a holistic, data-driven approach to reducing churn, organizations have the opportunity to improve operations and outcomes while realizing the financial gains that come from having a loyal, more consistent customer base. With the right program and strategic approach, LTL shippers can transform from commodity to valued customer brand—gaining a strategic advantage in a competitive industry by keeping, growing and building on the business they already have.
Written by: EXL Service