Everyone says the customer is important, but only the truly savvy companies invest the time, effort and financial resources needed to build a more loyal customer base. Executing a loyalty strategy takes a true understanding of what it takes to create the kinds of experiences that cause customers to come back – and tell their friends.
It also means paying attention - and responding - to customers who leave.
Companies usually lose from 15% to 20% of their customers annually. They leave for many reasons. Some move, some die, some go out of business and some are seduced by the competition. Other customers, however, leave because they feel you don’t care about them or their business. It might seem immature, childish, impulsive and emotional for the dollars-and-cents world of business, but it is true.
And even if you do care, if the customer does not feel that you do, you effectively do not.
Lost customers – an ignored opportunity. Many ofcompanies today don’t know how many customers they’ve lost, let alone attempt to bring them back. According to Frederick Reichheld, former director of Bain & Company’s customer retention program, "It is common for a business to lose 15 to 20 percent of its customers each year. When defections are cut in half, the average growth rate more than doubles. A five percent change in rate of retention swings profit increases from 25 percent all the way to 100 percent."
Call them up and ask them why they left. It’s an excellent way to find out why they left and attempt to win them back. A majority of former customers will tell you why they left and what you can do to earn their business again. If they don’t, at least they will tell you what made them so unhappy and you will have the opportunity to correct a problem within your organization.
In some cases, customers have been unintentionally pushed away because of a screw-up in the process, such as delivery, billing or service problems. Knowing whether such issues prompted a defection is important, because those customers are far easier to win back than those who left for a competitor that legitimately offers better value.
Even the latter customers can be won back. Per industry research, your chances of successfully selling to a former customer are 20 to 40 percent. That’s quite a bit higher than the 5% to 20% chance of selling to a new prospect. Your former customer already knows you and what your products or services can do. Plus, you know them. You have a huge advantage over a competitor as you have access to their past buying habits.
No one wants to hear they screwed up. Some companies won’t try to win back former customers simply because there may be some pain involved in the process. The process of winning back customers begins with finding out why they left in the first place (and that will reveal hard, negative truths about the company’s customer experience).
Do not let that concern stand in your way. Customer retention and re-acquisition are worth temporarily swallowing pride.
Set up a Defection Management program – create Swat Teams. In my book Achieving Excellence Through Customer Service, I highly recommend creating an action group of your most proficient employees (Swat Team). Their job is to contact defecting customers and to persuade them to give the company another chance. The plan for countering high defections should also include a review of the problem:
- · Cost of acquiring a new, loyal customer
- · Annual marketing and advertising budget
- · Average size of purchase by a loyal customer
- · Number of customer complaints each year
- · System for measuring and tracking defections
LISTEN carefully and then, ASK for their business. By focusing on specific details, building trust, showing respect, expressing appreciation, being competent and demonstrating courtesy, you can watch as you move your lost customer into the profit zone. Communicate with customers and discuss the issues that made them leave. Sometimes it is simple. If not, the discussion will shed light on real problems that need to be addressed.
Don’t let another customer walk out the door or hang up the phone vowing never to return to your place of business. It was previously stated that an increase of only 5% in your customer retention could mean a boost of 25% to 100% to your profits….that’s huge!
It’s at that moment of truth that you can create an awesome experience customers remember.
John Tschohl - described by Time and Entrepreneur magazines as a customer service guru and service strategist - presents strategic keynote speeches to companies worldwide. He is the author of "Empowerment, A Way of Life." Contact him at John@servicequality.com or http://www.customer-service.com/