Bain & Company is a global management consulting firm headquartered in Boston, Massachusetts, with offices in 30 countries. Bain is considered one of the most prestigious management consulting firms in the world[1], and for eight consecutive years has been named the "Best Firm to Work For" by Consulting Magazine
Bain & Company was established in 1973 by seven former partners from the Boston Consulting Group headed by Bill Bain.
Under Bain’s direction, the firm implemented a number of unconventional practices, by traditional consulting standards, in its early years. Notably, Bain would only work with one client per industry to avoid potential conflicts of interest[3]. Partners did not carry business cards and clients were referred to only in code names, further demonstrating its reputation for enforcing client confidentiality. And the company preferred to win work by boardroom referrals rather than marketing itself, sometimes landing clients by offering several weeks of work at no cost until proving the results of its services.[citation needed] Bain consultants preferred to work on increasing a company’s market value rather than simply handing clients a list of recommendations[4]. To win business, Bain showed clients the increase in stock price of Bain clients relative to the Dow Jones industrial average.[5]
The firm’s founding was followed by a period of growth in the late 1970s and early 1980s, and the firm opened offices in London, Munich, San Francisco and Tokyo.
Employee retention needs to be a major part of their calculations.
Most people have heard the noisy debate about the extent to which the health care reform legislation passed earlier this year will burden businesses. But on the flip side, the reform initiatives also underscore the necessity to re-examine social contracts between employer and employee. At this watershed moment, employers must determine how tomorrow's health benefits will help them attract and retain talent.
Employers have always played a key role in health in the U.S. as active agents on behalf of their employees. In 2008, 61% of non-elderly Americans had an employment-related health insurance policy; currently, the estimate runs at around 59%. But few companies understand how much they rely on health benefits to attract and retain quality talent. Today 74% of employees consider health benefits a key reason for their loyalty to employers, second only to their salary, according to industry research. On the flip side, most companies underestimate the true economic cost of employee churn. Bain & Company analysis shows that the "turnover tax" on corporate earnings, though invisible in most accounting systems, is larger than current state or federal tax.
Now the Patient Protection and Affordable Care Act offers companies the chance to revisit the connection between health care benefits and employee retention. At its core, the legislation pursues two goals. First, it increases access to health insurance through the expansion of public programs, employer and individual mandates and federal subsidies. Second, it pushes for greater transparency in a more regulated health insurance industry. The government has always used the tax system to encourage employer-provisioned health insurance, but the PPACA adds incentives via mandates, subsidies and transparent purchasing channels. Employers with more than 50 full-time employees must provide coverage or be subject to fines. For smaller businesses, employing fewer than 25, the PPACA promises temporary coverage subsidies for lower-income employees.
Short term the legislation feels onerous to businesses, and for good reason. Most already consider their health costs crippling. By 2015, Bain & Company estimates, employer health costs could rise more than 60% from current levels. That's almost three times the expected growth in real wages and overall inflation during the same period. A majority of employers, nearly 70% according to industry surveys, expect the reform law to lead to higher health costs, which it undoubtedly will, because of elements like expanded coverage for dependent children, the elimination of pre-existing condition clauses and the enrollment of more than 30 million uninsured. Not surprisingly, even though health reform mandates don't kick in until 2014, many employers have already begun modifying their health benefits.
Introduction: The Economics of Customer Retention
Keeping customers drives profitability. Whether we’re talking about consumers or business-to-business customers, existing customers cost less to reach, cost less to sell, are less vulnerable to attacks from the competition, and buy more over the long term. The economics of customer retention is obvious according to Frederick Reichheld of Bain & Company, and author of The Loyalty Effect: customer spending tends to accelerate over time; longer-term customers are more efficient users of the products and services they buy and have lower operational costs; long-term satisfied customers provide more referrals; and longer-term customers are less price-sensitive than newer customers. The end result is that the overall value of a customer increases the longer that customer remains a customer. Bain & Company’s research in a variety of industries suggests that a mere 5% increase in a company’s customer retention rates will increase the average lifetime profits per customer.
Making the effort to track loyalty is the first step toward profitability. In a recent study, Deloitte Research found that manufacturing companies who tracked customer retention, set loyalty goals, and made efforts to exceed their loyalty goals, were 60% more profitable than those manufacturers who made no efforts to track customer loyalty. In addition, the study found that these loyalty-conscious manufacturers were also more likely to exceed their goals for growth and shareholder value.
Similar economics exist from the perspective of business-to-business sales. In a comprehensive survey of selling costs, Sales & Marketing Magazine reported that the number of sales calls required to sell a product to a new account was more than twice the number required to sell the same product to an existing account. Overall, the study found that it costs 133% more to sell new accounts than existing ones.
The Customer Retention Challenge
In an era when technology changes are accelerating, low price competition abounds, sales channels are shifting daily, and loyal customers are in short supply, the company that invests in a customer retention strategy and makes a commitment to customer loyalty gains an important competitive edge. The key is to understand where that commitment and investment can be best applied and what tools and programs can make them work.
Empirical evidence suggests that success in retaining customers often boils down to doing the basics right, such as:
Building a customer database that identifies and characterizes loyal customers and collects their individual attributes and needs.
Using this information to segment customers and prospects based on high, medium and low value.
Building trust to get customers to give permission to receive ongoing marketing and special offers (permission-based marketing).
Matching the right type of frequency/loyalty marketing program to your customers’ needs/values. For example, loyalty programs should include elements that focus on recognizing and retaining high value customers, growing medium value customers, and either growing or disengaging low value customers.
Making sure that employees deliver the promises made by marketing and sales departments.
Bain & Company was established in 1973 by seven former partners from the Boston Consulting Group headed by Bill Bain.
Under Bain’s direction, the firm implemented a number of unconventional practices, by traditional consulting standards, in its early years. Notably, Bain would only work with one client per industry to avoid potential conflicts of interest[3]. Partners did not carry business cards and clients were referred to only in code names, further demonstrating its reputation for enforcing client confidentiality. And the company preferred to win work by boardroom referrals rather than marketing itself, sometimes landing clients by offering several weeks of work at no cost until proving the results of its services.[citation needed] Bain consultants preferred to work on increasing a company’s market value rather than simply handing clients a list of recommendations[4]. To win business, Bain showed clients the increase in stock price of Bain clients relative to the Dow Jones industrial average.[5]
The firm’s founding was followed by a period of growth in the late 1970s and early 1980s, and the firm opened offices in London, Munich, San Francisco and Tokyo.
Employee retention needs to be a major part of their calculations.
Most people have heard the noisy debate about the extent to which the health care reform legislation passed earlier this year will burden businesses. But on the flip side, the reform initiatives also underscore the necessity to re-examine social contracts between employer and employee. At this watershed moment, employers must determine how tomorrow's health benefits will help them attract and retain talent.
Employers have always played a key role in health in the U.S. as active agents on behalf of their employees. In 2008, 61% of non-elderly Americans had an employment-related health insurance policy; currently, the estimate runs at around 59%. But few companies understand how much they rely on health benefits to attract and retain quality talent. Today 74% of employees consider health benefits a key reason for their loyalty to employers, second only to their salary, according to industry research. On the flip side, most companies underestimate the true economic cost of employee churn. Bain & Company analysis shows that the "turnover tax" on corporate earnings, though invisible in most accounting systems, is larger than current state or federal tax.
Now the Patient Protection and Affordable Care Act offers companies the chance to revisit the connection between health care benefits and employee retention. At its core, the legislation pursues two goals. First, it increases access to health insurance through the expansion of public programs, employer and individual mandates and federal subsidies. Second, it pushes for greater transparency in a more regulated health insurance industry. The government has always used the tax system to encourage employer-provisioned health insurance, but the PPACA adds incentives via mandates, subsidies and transparent purchasing channels. Employers with more than 50 full-time employees must provide coverage or be subject to fines. For smaller businesses, employing fewer than 25, the PPACA promises temporary coverage subsidies for lower-income employees.
Short term the legislation feels onerous to businesses, and for good reason. Most already consider their health costs crippling. By 2015, Bain & Company estimates, employer health costs could rise more than 60% from current levels. That's almost three times the expected growth in real wages and overall inflation during the same period. A majority of employers, nearly 70% according to industry surveys, expect the reform law to lead to higher health costs, which it undoubtedly will, because of elements like expanded coverage for dependent children, the elimination of pre-existing condition clauses and the enrollment of more than 30 million uninsured. Not surprisingly, even though health reform mandates don't kick in until 2014, many employers have already begun modifying their health benefits.
Introduction: The Economics of Customer Retention
Keeping customers drives profitability. Whether we’re talking about consumers or business-to-business customers, existing customers cost less to reach, cost less to sell, are less vulnerable to attacks from the competition, and buy more over the long term. The economics of customer retention is obvious according to Frederick Reichheld of Bain & Company, and author of The Loyalty Effect: customer spending tends to accelerate over time; longer-term customers are more efficient users of the products and services they buy and have lower operational costs; long-term satisfied customers provide more referrals; and longer-term customers are less price-sensitive than newer customers. The end result is that the overall value of a customer increases the longer that customer remains a customer. Bain & Company’s research in a variety of industries suggests that a mere 5% increase in a company’s customer retention rates will increase the average lifetime profits per customer.
Making the effort to track loyalty is the first step toward profitability. In a recent study, Deloitte Research found that manufacturing companies who tracked customer retention, set loyalty goals, and made efforts to exceed their loyalty goals, were 60% more profitable than those manufacturers who made no efforts to track customer loyalty. In addition, the study found that these loyalty-conscious manufacturers were also more likely to exceed their goals for growth and shareholder value.
Similar economics exist from the perspective of business-to-business sales. In a comprehensive survey of selling costs, Sales & Marketing Magazine reported that the number of sales calls required to sell a product to a new account was more than twice the number required to sell the same product to an existing account. Overall, the study found that it costs 133% more to sell new accounts than existing ones.
The Customer Retention Challenge
In an era when technology changes are accelerating, low price competition abounds, sales channels are shifting daily, and loyal customers are in short supply, the company that invests in a customer retention strategy and makes a commitment to customer loyalty gains an important competitive edge. The key is to understand where that commitment and investment can be best applied and what tools and programs can make them work.
Empirical evidence suggests that success in retaining customers often boils down to doing the basics right, such as:
Building a customer database that identifies and characterizes loyal customers and collects their individual attributes and needs.
Using this information to segment customers and prospects based on high, medium and low value.
Building trust to get customers to give permission to receive ongoing marketing and special offers (permission-based marketing).
Matching the right type of frequency/loyalty marketing program to your customers’ needs/values. For example, loyalty programs should include elements that focus on recognizing and retaining high value customers, growing medium value customers, and either growing or disengaging low value customers.
Making sure that employees deliver the promises made by marketing and sales departments.