The New Retention Playbook - Knownwell.pdf

It goes without saying that healthy customer retention is the foundation for any strong
business. But, in our conversations with leaders at Professional Services firms, we’re
learning that customer retention is coming under fire lately

1. Putting AI to Work to Keep and Grow Customers
in Professional Services
The New
Retention Playbook

2. What we’re
hearing:
01
02
It’s as though the bottom is dropping out of the portfolio.
If you are experiencing these phenomena, there’s some small
comfort to be had in the fact that there’s company for your misery.
The retention problem is not specific to you, or, for that matter, to
any particular subsegment of Professional Services. The challenge is
broad to the sector, and the best evidence we’ve seen of it comes
from our friends at DCM Insights:
In surveying a group of roughly 100 C-level Professional Services
executives, DCM captured a troubling trend in customer buying
patterns: As recently as five years ago, 76% of buyers preferred to
buy again from partners or firms they had used in the past (sort of
the norm for the business); today that figure has declined to 53%—
just half the time; and, five years from now it is expected to fall to a
jaw-dropping 37%.
Companies are seeing higher
levels of churn overall.
Customers are departing with
little to no warning.
Knownwell
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It goes without saying that healthy customer retention is the foundation for any strong
business. But, in our conversations with leaders at Professional Services firms, we’re
learning that customer retention is coming under fire lately:
03
Even the satisfied customers that
they feel best about are at-risk.

3. 03
76% of buyers preferred to
buy again from partners or
firms they had used in the
past.
Five Years Ago
76%
53% of buyers prefer to buy
again from partners or firms
they had used in the past.
Today
53%
Re-purchase preference is
expected to fall to a jaw-
dropping 37%.*
In the Next 5 Years
37%
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* Source: DCM Insights Study

4. Buyers have troves of information on the supplier market and employ slick
approaches for mapping and benchmarking competitive offerings. In recent
years, companies have upgraded procurement leadership, best practices, and
analytics, and are putting intense pressure on all spend categories across the
business. Shopping around is standard operating procedure for any meaningful
spending consideration.
Digital and AI-powered automation are enabling new levels of efficiency in all
aspects of Professional Services work. We’ve previously referenced the Bain
study estimating 41% of labor time–nearly half the work–in Professional Services
can be automated using generative AI. Even companies using geographic labor
arbitrage to drive down delivery costs are at a disadvantage vs technology-
enabled alternatives. Savvy buyers can do the math and are demanding at least
greater economic transparency and at most a reflection of the operating cost
reduction in their pricing.
Procurement has become a cold, hard science.
Service delivery costs are plummeting.
Why on earth is this happening? Why are Professional Services buyers increasingly
casting the net far and wide on candidate providers rather than just going with their
current partners for the next project?
Honestly, in this period of such intensive change in the competitive marketplace, the
better question might be, why wouldn’t buyers shop around? Think about it:
What’s behind it?
04
Powered by AI, scrappy new competitors are showing up on the scene with new
offerings and business models, and incumbents are using their deeper pockets
to explore all manner of mechanism to create new value for customers. In some
extreme cases, AI advances hold the potential to cause businesses to wink
entirely out of existence–think here of the fate of all the hard-working systems
integrators once the platform supplier finishes up its own transformation project
on AI-powered implementation. Buyers would be foolish right now not to
explore everything the changing market has to offer.
New providers and offerings abound.
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5. knownwell.com
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Taken together, these factors explain the emerging grim reality. At least for the near
term, all the forces of nature are conspiring to put pressure on firms’ ability to sustain
and grow customer relationships. It amounts to an existential threat in the
Professional Services world, as a company’s ability to scale, control acquisition cost,
and maintain profitability (utterly) depends on reliable customer and revenue
retention.
The answer in this moment, as in all moments where the going gets tough, is to stay
one step ahead. The same technology and methods of innovation that are being used
against us shall also be our salvation. Professional Services firms need to do a
complete X-ray of the business to identify where AI-powering (or digital
transformation or even just basic process redesign) can enable meaningful strides
forward in competitiveness.
We see at least three major plays in this effort:
What to Do

6. 06
Bring AI to your
own internal
operations.
01
Use AI to create
new value for
customers.
02
Use AI to be (much)
smarter about your
customers.
03
3 Plays to Drive
Retention
In the pages that follow, you’ll find Knownwell’s
strategic planning worksheets to help you
consider questions that will impact how you run
each of these plays.
Knownwell

7. Where in the business can teams be enabled, workflows streamlined, and costs
eliminated? Remember the aforementioned 40% opportunity. Make it your objective
to become the lowest-cost or highest-value-add provider in your customers’
procurement team stack-ranking.
Bring AI to your own internal
operations.
07
01
Where in the business do teams express the most frustration with existing
processes–too slow, too many steps, rote?
Where do you have costly operations where knowledge work could be
augmented or replaced by AI to save costs?
Similarly, where are there opportunities to provide teams with better
information or better decision support individually?
Looking across each of these areas of opportunity, where could your greatest
enablement and effectiveness gains come from, and measured how?
Where would your greatest AI-automation-driven efficiency or cost savings
gains come from, and at what estimated amount?
Knownwell

8. 08
What are your customer's greatest problems to solve in (or reasonably
adjacent to) the areas where you provide products and services?
What other opportunities do you see where leveraging and powering data
with AI would create unique value for the customer and set you apart from the
competition?
What would your customers say their greatest frustrations are in working with
you or providers like you?
Looking across each of these areas of opportunity, where could your greatest
customer enablement and value creation gains come from, and how would
they be measured?
Where would your greatest AI-automation-driven efficiency or cost savings
gains come from, and at what estimated amount?
What are your customers’ greatest aspirations, needs, problems, and pain points; and,
how might you utilize AI to address each one of them? Map the value streams running
between a customer’s request of you and your act of delivery back to them, to
determine where, exactly, things could be fundamentally better–for the customer and vs
the competition.
Use AI to create new value for
customers.02
Knownwell

9. 09
In what areas of the business would improvements to customer engagement
and retention most drive improved economic performance?
What external information sources about customers do you wish you could
integrate with your internal sources, to provide a truly robust and predictive
view of customer status?
What internal information sources about customers could be tied together
that are not, with the benefit of an AI interface to surface insights and
recommend actions?
With a perfect view of the customer and both decision support and activity
prompts happening on an automated basis, how much more effective would
your team be?
With those same capabilities, how much more efficient could your team
become in covering the customer portfolio?
Our customer relationships now have far too many touchpoints with too much
information flow for even the most gifted and well-intentioned human to stay actively
current and smart. AI is the perfect technology for scaling a process of diagnosing
trouble and initiating response, such that no customer ever again crosses the threshold
to departure without our knowing there are warning signs in advance.
Use AI to be (much) smarter about
your customers.03
Knownwell

10. Taken Together:
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How would you prioritize these opportunities relative to one another in terms
of ROI to the business across relevant timelines?
How, then, does the high-ROI opportunity set layout on a strategy-linked
“Now-Next-Later” roadmap of transformation opportunities–for shopping with
leadership and colleagues?
How would you further screen the opportunities in light of the firm strategy
and exactly what you are trying to accomplish in driving internal and customer
operations?
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