Customer churn is something we all know happens, just as we recognize customer success is key. 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 into what you do and the values behind your company. Your staff cares more about the company’s reputation. Loss of customers is an easy gauge of that reputation going downhill.
Customer churn is a costly business. New customers are expensive to get. There is all that work to find and research them, to make the initial introduction and show them what you do, to negotiate the first sale. That is a lot of costly man-hours.
With an existing customer, however unhappy, all that is done already. This means avoiding customer churn by spending money on putting it right is still cheaper. Remember 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 customer churn both in quantity and in terms of the cause. When you are analyzing 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 always give a truer picture, as some newbies may be for one-off orders depending on your business.
Customer Churn – main causes
- The ones you can’t help loosing, those who retire or go bust.
- A poor product or service that no one will buy more than once
- Poor service – the biggest cause from the sale, to delivery to after-care
- 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.
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 analyzing your customer churn, 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 lose a terrorist customer of this sort.
Most CRM systems will measure churn for you. The only problem I have found with CRM systems is the data is only as good as the people who have (or haven’t bothered to) put it in. As with all data, don’t let it just sit there. Regularly review it and react to it. A good system will make it very easy to spot patterns of where you are falling short.
Once you have spotted them, you can both aim to rescue as many as possible of the ones you have lost, but also put right any and all areas you may be falling short in. This process will ensure you retain your customers, have only natural customer churn, and a much more profitable future.
Parts of this post first appeared for Wire
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