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We explore reconciliation strategies to identify at-risk customers, as well as win back profitable defectors. |
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How much are lost customers costing your company?
If you are like many marketers, you may have no idea. In a recent survey, 68 percent of sales and marketing executives said they have no process for identifying customers at risk for defection, and 46 percent don’t know how many customers they lose each year. Ignoring lost and at-risk customers means not only waving goodbye to sales and market share, it also means missing a valuable opportunity to gain information for increased customer satisfaction and retention in the future. As billionaire businessman Bill Gates advises, “Your most unhappy customers are your greatest source of learning.” Yet, 60 percent of marketing executives said they don’t get feedback from at-risk or lost customers.
Don’t let goodbye be the last word
The implications of customer defections can be far-reaching. First, replacing lost customers with new ones is expensive. According to a Gartner survey, financial service companies’ average customer acquisition cost is $280 while the average cost of keeping an existing customer was only $57. While those costs may vary for other industries, the ratio is usually about five to one.
Second, long-term customers are often more profitable. Over time, acquisition costs are recouped and customer service costs drop as customers become familiar with your company and products.
Finally, your history and relationship with lost customers, along with your customer data, may make it easier to win back a lost customer than to attract a new prospect you know little or nothing about. Also, by regaining the loyalty and goodwill of lost or unhappy customers, you minimize negative word of mouth that can have a significant effect on new customer sales. In a Wharton Business School study, 62 percent of consumers said they would not patronize a company if a friend told them of a bad experience.
Start by asking
Some companies assume that the reasons customers leave are beyond their control. Actually, one survey found that nearly 70 percent of defecting customers leave for “no special reason.” You might save many of these customers by simply asking for their business again and communicating how important their relationship is to you. Here are some other strategies that can help:
> Identify at-risk customers before they defect. The most obvious at-risk customers are those who’ve had negative experiences. A less obvious indication is downward customer migration when customer spending is reduced and/or purchases become less frequent. Surveys of customers who have migrated downward, as well as of inactive or lost customers, can help you understand their motivations, suggest tactics for repairing at-risk or broken relationships and avoid similar problems with future customers.
> Stay in touch. If losing the customer is inevitable, try to part on a friendly note and leave the door open for future business. Ask for feedback to learn the reasons for the customer’s defection. Then, continue to communicate regularly. Your newsletter or occasional targeted e-mails can help you maintain top-of-mind awareness and educate lost or inactive customers about new products or special offers. These communications also make it easy to come back if customers change their minds.
> Make coming back worthwhile. Win-back promotions often feature discounts, but the long-term effectiveness of discounting is questionable. Customers you win back with a lower price may be customers you’ll lose again to a lower price. Instead, use your major competitive advantage — the information you have about your customers. With the personal data, purchase histories and other information acquired throughout the customer lifecycle, you can create sales messages or offers that are more relevant to individual customers. Personalized messages also remind lost customers that your company knows them and understands their needs.
> Celebrate their return. A “welcome back” communication can create excitement, reemphasize the value of the relationship and show appreciation. It can also communicate how you’ve solved any problems and offer additional avenues of access for expressing future concerns.
Some customer attrition is inevitable. Losing unprofitable customers may sometimes even be desirable. However, relationship marketing strategies can help you win back the loyalty of profitable customers, provide new insights that allow you to develop a deeper understanding of individual needs, and communicate with even more personal, compelling messages. As the lifecycle begins again, that understanding brings new opportunities to increase customer loyalty and grow more profitable relationships.
First Marketing offers customer communications expertise combined with the latest technology to provide marketing solutions for every stage of the customer lifecycle. For more information, please contact marketing@first-marketing.com or call 800.736.0145.  |
