My last few articles have provided insight on improving customer retention — taking action with current customers in order to minimize defection. It's important to note that all customers, whether they are brand new or long-term, are constantly at risk of defection. Without a doubt, the very best way to avoid having to win back customers is to ensure they don’t leave in the first place. But our research shows that customers will and do defect.
The lesson here is simple: the most effective retention programs will never eliminate or prevent all customer defection. If you are truly committed to long-term customer loyalty, you need a plan that provides effective strategies not only for retention but also for winning back lost customers.
When is a customer lost?
In some situations, customers officially communicate their intentions to end their relationship with you, for example, but cancelling their ongoing pool maintenance service. In other cases, they just slip away, buying less and less over time or stopping their purchases all at once.
As a result, retailers must rely on their memory (which we don't recommended), or their point of sale data, to recognize that purchases have stopped. The quicker you realize that a customer’s purchases have slowed, reduced or stopped, the better positioned you are to take the initiative to prevent defection or attempt to win him/her back. Leverage the situation through quick action to protect future opportunities with that customer.
The sooner you identify lost customers, the better
I spoke with one retailer who defined a lost customer as “someone who had not purchased in the last three years.” This may have lowered his percentage of lost customers, but it totally prevented him from taking any action that could have proactively motivated these customers to return. When there is no input from the former customer as to why he or she made the decision to leave, there is no possibility of addressing the problem. Some retailers may get lucky and see some customers return, but luck is not a very good business strategy.
Many pool retailers do not have a method for identifying lost customers, so they dismiss them without understanding why they left. This may work in good times, when business is growing and new customers are being added at a faster rate than customer loss. But for the retailers in our research, this was not the case.
We found that most retailers do not identify or debrief their lost customers. This is an extremely limiting perspective because:
1. Feedback from former customers is almost as important as feedback from current customers who are at risk of defecting (see recent posts). It often mirrors the reasons current customers are dissatisfied.
2. Customers who leave can provide a view of the business that is unavailable on the inside.
3. Whatever caused one individual to defect may cause others to follow. The idea is to learn from defectors and use that information to improve the business.
Is failing to plan the same as planning to fail?
If retailers fail to identify and debrief lost customers, it is possible that employees will perpetuate the very negative performance issues that are the problems. From their former customers, companies can identify:
- Concerns and complaints, whether expressed or unexpressed, leading to defection
- Quality of product and service competitors offer
- Likelihood of repurchase if complaints are addressed
With this information in hand, pool retailers will be better able to identify and prioritize areas of improvement to help retention and win-back improve. In the next post I will share a case study of how we are helping retailers in this area.
Your turn
Do you proactively identify defecting or lost customers? How do you decide when customers have defected? Are you debriefing them, and if so, what have you learned? Do you make the business mistake of thinking that lost customers can’t be sold to again? How are you using the results to improve your business? Where could you use some help?
Read the previous post in this series: Why You Need to Focus on Customer Dissatisfaction
