For SBT
Research shows that the No. 1 reason companies lose customers is because of indifference.
Not better prices; not better quality; not better selection. Customers leave because they think you don’t care about them.
More important, one third of your customers are in some phase of defection right now! Heck, you likely don’t even know which ones they are. Most companies have no formal process for spotting customers at risk.
Worse yet, nearly three-fourths of customers warn their vendors that they are thinking of leaving. They drop subtle hints, warning signals that, if you listen carefully, will tell you they soon may be former customers.
We all know that it is a lot cheaper to retain our existing customers than it is to hunt for new ones. Statistically, hunting for new customers costs 12 times as much as cultivating current clients. So retaining your existing customers can lower costs and boost profits significantly.
Following are five ways to tell if your customers are about to bolt, and how to head them off at the pass.
1. Listen to your purchasing department.
A long lapse between orders can be a tip-off that a customer is discontented. The longer the time between orders, the more likely you are to lose the customer.
Tracking your order frequency can throw up a red flag if there are problems. There are several nifty software programs that make that process relatively easy.
2. Make your invoices work for you.
Your customer makes the ultimate evaluation of your work when he is ready to pay the bill. If he’s unhappy, it may be the last check he ever writes to you. And you may never know the reasons why.
Include a questionnaire with your invoice. Ask the customer if there were any problems. One company I know of tells its customers that if they’re not satisfied with their purchase, they can write the check out for any amount they believe is fair. That gives the customer control of the situation and identifies customers near defection.
3. Set up a “trigger system.”
While research shows that only one customer in 24 actually voices a complaint, sales clerks and service reps often have a good idea when a customer is unhappy. The key is developing an action plan, such as Forrer Business Interior’s.
After Forrer installs workstations and office furniture, the customer is given a checklist of potential issues to be resolved. The list includes such questions as, “Did the installation occur in a timely manner with a minimum of disruption?” and “Were the installers courteous and efficient?” Any problems trigger a Call For Action (or CFA) and are referred directly to the VP of operations for immediate resolution. The result: over 98% customer satisfaction rate.
4. Ask your customers, “How am I doing?”
Ed Koch, the popular former mayor of New York City, made the question famous, “How am I doin’?” He didn’t always hear widespread praise. But New Yorkers loved him because they felt he cared enough to ask their opinion.
Some customers may be reluctant to criticize you directly. Offer them an opportunity to sound off by distributing a questionnaire. A questionnaire serves several purposes. It offers anonymity to the person complaining. It identifies trends, pinpoints problem areas, and may well lead to a new product or service that hadn’t occurred to you before.
Most important, it shows your customers you care about them, lets them know you value their opinion. It gives them a chance to let off steam, too. It’s better they tell you what you’re doing wrong rather than never calling you again for an order.
5. Beware the milestones.
A milestone event – contract ending, renewal, etc. – can trigger a defection. These are situations that force customers to evaluate whether or not they want to continue doing business with you.
One client of mine has a customer service representative call the account about a month before the annual renewal date. If the rep detects any unhappiness, the account is immediately referred to a “lifeguard,” a specialist trained in “save” techniques, to rescue the customer.
The result: they lose fewer than 1% of their renewal customers annually; that’s less than half the industry average.
Use an early warning system that spots defecting customers. It will reap benefits for your sales team, and your bottom line.
Robert Grede, author of Naked Marketing – The Bare Essentials (Prentice Hall), is an adjunct instructor in marketing at Marquette University and president of The Grede Co. in Wauwatosa, consultants in marketing and strategic planning. www.thegredecompany.com. His column appears in every other issue of Small Business Times, while his marketing tips appear in every issue.
April 27, 2001 Small Business Times
