January 2009

Can better bills reduce churn
and even generate revenue?
Service providers are recognizing the persuasive powers of bills to reduce churn and improve communication. By Jeffrey Abray

The ever-shifting competitive business landscape presents challenges to marketers and consumers alike. As marketing departments grapple with how to build their brand, consumers wonder, “Does this company care about my business?” Are there cost-effective ways to build customer loyalty and
reduce client turnover under these conditions?

One answer is already under your customer’s nose—the bill. Until just recently, bills were sent exclusively to collect money. Bill production was relegated to the print operations group—a cost center. But as service providers recognize that the bill is often the only interaction they have with customers, companies across a wide range of industries, including financial services, telecommunications and utilities are gaining a new perspective from their bills. At last, the bill is seen as an effective communication channel that can reduce churn and make for improved, more efficient customer service and communication—even in highly competitive markets. Bills also provide increased opportunities to generate sales. White space on a statement is a valuable resource for generating external, top-line advertising revenue. Companies are using the bill to build loyalty, improve customer service and sell additional products and services.

Building loyalty one customer at a time
The cost of attracting a new customer is often extremely high. A company’s advertising and marketing budget in a competitive marketplace averages between five and eight percent of revenue.
Advertising campaigns can cost hundreds of thousands of dollars, not to mention the multitude of other costs associated with new customer acquisition. That’s why marketers must take a hard look at
developing a relationship with existing customers so as to retain them longer. Increasingly, marketers are turning to 1:1 communications and using knowledge about their customers’ preferences and habits to develop powerful messages.

Inattention to customers can cost both large and small companies significantly. For example, a phone company may have five million customers who have an average monthly bill of $70.00. If the company experiences a two percent churn rate, that’s 100,000 deactivations per month – representing a loss of $700,000. Extended out over a year, that means 1.2 million deactivations and lost revenue of more than $8.4 million. Better communications with existing clients can substantially
reduce client turnover and, if properly implemented, even drive revenue.

Designing “friendly” bills
Although no one relishes receiving a bill, some invoices are easier on the customer than others. Technological improvements in bill composition software and laser printing allow billers to produce attractive, relevant, and easy-to-read bills without making any changes to the upstream billing system (most composition systems accept unformatted data directly from the billing system). High-speed colour laser printers let billers highlight important information, such as targeted cross-selling
messages or “How much I owe.”

All-points-addressable (APA) printing allows billers to fully tailor bill content for the individual recipient. For example, a company can strengthen customer loyalty by offering its visually-impaired customers a large-print bill. Companies can also print its “big spender” bills on full-colour laser
printers, while using black & white bills for its “mid-tier” clients, thereby differentiating between your highly profitable customers and the other segments.

Speaking to your customer – precision communication
Companies in a variety of industries, including financial services, insurance and telecommunications, are increasingly using location-based, demographic and psychographic information to better
target messages to customer groups. By maintaining a database of information about customers’ age, income, life stage, etc., companies can personalize billing, adding to overall customer satisfaction and long-term retention. In addition to effective communication and customer
service, targeted communications are also a powerful way to maximize the impact of marketing by sending messages to those customers that may be most receptive, based on this data.

Improved service reaps big rewards
A significant amount of calls into customer service centers are billing related. Though personalization and one-to-one content are attractive features, the true path to call reduction is how quickly companies can improve customer service and the dramatic impact that can have on retention.
Lowering customer service costs is also one of the driving economic forces for service providers to improve billing. Increasingly, companies are turning to location customer data quality and interactive document solutions to more efficiently and effectively service customers.

One recent trend has been to provide bills over the Internet. Interactive systems allow customers to dispute calls online, which can reduce customer call center costs significantly. Also, to reduce both
cost and calls to the customer service center, tools are available to archive bills and account statements, allowing customer service staff to access an online version of the customer’s bill. When
receiving a customer call, staff members are able to quickly access and view the same bill as the customer, providing a more personalized interaction and allowing for much quicker resolution of
discrepancies or questions.

Reduce costs and churn
Maintaining accurate customer information is another aspect of the billing process which can yield rewards. A high volume of return mail is an indication of thousands, possibly millions, of dollars in waste. Commonly, with the cost of production and postage presenting a customer with a bill costs approximately $4. Given this cost, a company with five million customers and eight percent of
their addresses incorrect can be wasting almost $20 million dollars a year.

A billing system with cleansed, accurate customer data can also lead to other benefits including a reduction in the days outstanding (the amount of time it takes a customer to pay a bill) as well as a reduction in the number of calls to customer service centers pertaining to incorrect addresses.
In addition to better and more efficient customer service, customer data quality, name-matching and data cleansing technology can save smart companies millions of dollars every year.

Clearer, more easily understandable billing statements, whether print or electronic, represent an often overlooked channel of communicating with customers. By cutting down on the number of calls to the customer service center, as well as aiding customer service staff to resolve issues more quickly through an improved bill, companies can help increase customer satisfaction and
retention.

Making it happen – working with IT
Ask a marketing manager if these ideas make sense, and you will receive a resounding “yes”. Ask that same person if they have implemented these ideas and you might get another answer. Changes
to billing systems and improvements in data quality often reside in a completely different business silo and seem daunting to address. This no longer needs to be the case. Non-intrusive software can enable these changes with little disruption to existing databases. The ability to merge and cleanse multiple disparate databases, while preserving the existing workflow, is possible and even easy.

Cross-selling with an eye on retention Companies who crosssell additional products on the bill have a distinct competitive advantage. Customers read their bills and often keep them for reference. And since you’re paying for postage and paper costs anyway, there’s no better place to print targeted, one-toone marketing messages. Statement-based marketing is extremely cost-effective. The cost
to deliver a cross-selling message via direct mail is at least $0.40 when you add up the creative, printing and postage costs. Should statementbased marketing replace all direct mail? Of course not, but it can certainly reinforce messages delivered to customers via other media.

Does statement-based marketing work? Results from American Express, who pioneered “relationship statementing” in the mid-1990s, suggest it does. AMEX’s “customer relationship statement” for cardholders contains customized promotional offers that are tailored to the individual’s spending patterns. Response rates for an airline offer jumped from 0.65% to 1.89% and from 0.06% to 9.32%
for a car rental offer.

Putting the bill to work The bill can act as marketing’s work horse— an additional means of
differentiating your firm from its competitors—while improving your ability to sell to and service your customers. All that adds up to reduced churn, cost savings and top-line revenue.

Jeffrey Abray is Business Development director, Canada, for Pitney Bowes Business Insight (formerly MapInfo and Group 1 Software). He earned his Bachelor of Economics at the University of Western
Ontario and has over 20 years of achievement in management and new business development. He is based in Toronto.