Losing customers and customer churn are a huge concern for businesses everywhere, yet many leaders don’t know what to do about it. Many companies don’t even realize they’ve lost customers, let alone the reason why. Many leaders consider a lost customer as completely lost and just part of doing business.
Here are just a few of the powerful statistics on the financial impact of customer churn as cited by getfeedback.com.
Customer retention statistics:
- U.S. companies lose $136.8 billion per year due to avoidable consumer switching. (CallMiner)
- More than half of Americans have scrapped a planned purchase or transaction because of bad service. (American Express)
- 33% of Americans say they’ll consider switching companies after just a single instance of poor service. (American Express)
- One in three customers will pay more to receive a higher level of service. (Genesys)
- 69% of U.S. online adults shop more with retailers that offer consistent customer service both online and offline. (Forrester)
- 78% of consumers have bailed on a transaction because of a bad service interaction. (American Express)
- 67% of customer churn could be avoided if the business resolved the customer’s issue during their first interaction. (Kolsky)
- 11% of customer churn could be avoided if the business simply reached out to the customer. (Kolsky)
According to a study by Marketing Metrics, you have a 20-40% chance of winning back a former customer, compared to a 5-20% chance of gaining a new customer. Those odds are worth the effort, especially if your company already spends extensive resources attracting new customers.
Winning customers back needs to be a new mindset for all employees at all levels within your company. Everyone needs to understand and integrate efforts to consider the customer’s point of view at every juncture and in every discussion.
In Jill Griffin’s book – Customer Winback – she outlines a method to calculate the lost customer’s SECOND lifetime value… or SLTV.
A regained customer’s SLTV differs from his or her LTV as an active customer. These differences make targeting defected customers more profitable than new prospects because:
- Defected customers are familiar with your products or services.
- You already have information on these customers’ preferences.
- You have the ability to personally address these customers in a winback effort, unlike acquisition efforts.
- The length of the prospect and new customer phase is likely to be shorter with regained customers.
Determine which customers you actually want back. Have the C-Suite or the highest level management possible personally reach out to the lost customer and say something along the lines of…
We see that we’ve lost you as a customer. We are sorry that we fell short in your eyes and /or expectations. I’m not trying to resell you. I would, however, truly appreciate knowing why you left and if there was anything we could or should have done to prevent it.
And LISTEN. Take copious notes and listen.
Do not get defensive. Do not explain what happened.
Listen to their stories.
When you feel they’ve told you everything they can, truly thank them for sharing the details as it will now give you an area to focus on for current and prospective customers.
My suggested wording….
I really do appreciate you taking the time to share this with me. Since this happened to you and caused you to leave, I want to be sure we address this to see if can prevent it from happening again and losing any more customers.
You haven’t made any promises, but you have promised to address it.
You can absolutely offer the customer the option to try again with you. You need to make it as EASY as possible for them… even offer to do much of the leg work or paperwork yourself, and yes, you can even incentivize them for it.
So what about when you notice levels of current customer engagement dropping?
Reach out to them personally. Listen to them and their reasons. Don’t get defensive. Don’t explain. Just listen.
It is important to understand that each and every customer is at risk at some point for defection. NPS considers any customer ranking you at an 7-8 as passive and easily lured away. 6 and below are looking to leave and will likely encourage others to do so as well.
Train your staff for indications of dissatisfaction or defection. Train them how to ask probing questions for a better understanding.
Empower your frontline staff to resolve issues whenever possible.
Encourage staff to regularly pass along information to leadership they heard from customers that indicates frustration or possible defection.
So again, track customer movement and behavior as much as possible with your IT resources.
Talk to your customers. Listen to them. They’ll tell you exactly what you want to know.