Customer defection is one of the most overlooked and least understood problems facing small businesses today. Our economic environment and continuing price erosion are problems in just about every industry. This is causing customers to re-evaluate their loyalties for what are perceived to be “lower cost alternatives.”
Lost customers means lost revenues, negative word-of-mouth and a negative impact on employee moral. I thought I’d take a moment to look at some of the things that we could do to not only recapture lost customers but also keep them more loyal in the first place.
Winning Winback Strategies
Recognize that all customers are at risk. Even satisfied customers can be persuaded to defect to the competition. Do not take any customers for granted.
Consider that customer winback strategies can be more effective than finding new customers. Many experts believe that winback success rates are far higher than recruiting new prospects.
Make sure you fully understand both the revenue potential and the cost of doing business with all of your customers. Initially this may be a massive undertaking but once complete it is easy to maintain and extremely valuable when protecting your customer base from being plundered.
Calculate every customer’s life time value (LTV) and second LTV (after they are won back). This is a powerful way to identify customers that you may want to win back and how much you should invest in wooing them.
Apply CPR to customers that are threatening to bail. This kind of CPR stands for Comprehend, Propose and Respond.
Make an effort to comprehend what their issues are. What do they want? Why do they want it? Try to separate the emotions from the pragmatic realities. Sincerely make an effort to understand their side of the story.
Propose a solution that is reasonable to each party. Not a one sided solution. Truly a win-win. Rolling over and just giving in to unreasonable demands may be the worse course of action. This is why it’s so important to understand the numbers. How does your business look WITH this client as well as WITHOUT them. Their departure may be the best thing for both parties but the way it is implemented can make all the difference in the world.
Then take positive and decisive response. This means action. Try to communicate at the highest levels of the organization. Be clear and concise in your offer. Put it in writing. Don’t be afraid to apologize or admit where you or your company was wrong. But don’t respond to threats. This is a sign of a bluff. I recommend dismissing them out of hand. Finally when you have proposed the best solution give them a deadline so the deal doesn’t stay on the table forever. This weakens your bargaining power.
Make Your Company Defection Proof
While everybody is talking about customer loyalty today few are taking real action. Preventing customer defection is surely the prime motivation for building customer loyalty, but it also gives us the ability to proactively develop strategies to improve our value and service in general. Once you become a convert to customer winback efforts you can learn to prevent defection in the first place. Here’s some ways to improve your position with current customers or customers that you HAVE managed to win back:
Identify all of your products or services that could possibly be of value to your customers.
Motivate your customers to use as many of your products or services as possible.
Prove to your customers that your products and services offer value that they can not find anywhere else.
- Keep track of every sale and sort in a database
- Personally communicate with customers at regular intervals
- Establish some form of satisfaction rating system
- Sell peace of mind more than just product or service solutions
- Admit when you’re wrong and pick up the pieces quickly and effectively
I hope these ideas help you to improve customer loyalty and lessen customer defection. If employed consistently I know that they will succeed in producing greater effectiveness for your business in this difficult economy.