Ignore customer churn at your Peril




We all know that keeping customers is a business basic, but we don’t always recognise just how many good reasons are behind this.   Firstly, there is the rather large matter of your business’s reputation.   Gone are the days when a customer will stay with you for loyalty’s sake alone.   Now, they stay if they 100% buy in to what you do and the values behind your company.  Your staff care more about their company’s reputation.  Loss of customers is any easy gauge of that reputation going downhill.

There is then the actual cost of getting new customers to take into account, as new ones are much more expensive to acquire.  There is all that work to find and research them, to make the initial introduction and show them what you do, to negotiate a first sale.  That is a lot of costly man hours.   With an existing customer, however unhappy, all that is done already:  Far quicker and cheaper to put the problem right.    The prospect of losing a customer can be even more frightening when you consider that the average business tends to get 80% of its orders from the top 20% of its customers.   That means losing one of them is really going to hurt.

You need to measure your churn both in quantity and in terms of the cause.  When you are analysing customer loss, don’t forget to take into account season factors, and a better picture is also often gained by splitting new and old customers.  The regulars will give a truer picture, as some newbies may be for one off orders depending on your business.

There are several main causes of customer churn.   You will suffer some natural loss from circumstances outside your control, a company going bust to the owner retiring perhaps.  The last thing you need is adding to that number.    There is the remote possibility that you are selling something that is absolutely awful.   Few will buy a bad product or service a second time and no-one a third.   Then, there is bad service, which is a huge customer loser, no matter at which point it occurs in the relationship, from sale to delivery to after sales care.

The next reason is poor customer engagement; most of us have had that unpleasant experience of having been sold something and seen the supplier totally lose interest in our existence the moment the deal is signed.  With increased emphasis on the whole buying experience now, ensuring your customer enjoys the experience, and relates to the company and its ethics, has all become much more crucial.

Staff turnover endangers customer retention.   People buy from people.  When an existing relationship is dissolved, your customer will be at risk, ripe for poaching.   You need to ensure a smooth handover period, allowing for trust in the new member of your team to be built by the person your customer already trusts.  The same applies if your contact at the customer’s company leaves.   A new buyer will not have that personal trust in you.  They may even wish to bring their own supplier in.

While you are analysing, do reserve a small space for the rare “bad” customer.  Sadly, they do exist.  These are the customers who complain no matter what you do, who are continually abusive to you or your staff, who always refuse to pay at all or help themselves to massive discounts when the invoice falls due.  These customers are the exception to the rule.  Their negativity about you, and what you are selling, will fast rub off on you and your team.  It can also affect the way you view your customers as a whole.  It is important to have a system in place enabling you to identify and consciously loose a terrorist customer of this sort.

Most CRM systems will measure churn for you.   As with all data, don’t let it just sit there.   Regularly review it and re-act to it.  A good system will make it very easy to spot patterns of where you are falling short.   Spotting them and putting them right, will ensure you retain your customers and have a more profitable future.

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