For the retail and/or B-to-B business, the not-so-funny thing about losing a client is that most sales organizations have no clue as to why the customer stopped buying. Oh, some forward-thinking companies conduct exit interviews with lost customers, but most of the time your clientele will not notify you as to the reason they are taking their business elsewhere.
What should one do? First, realize that client recovery is not an item on a to-do list. It is an ongoing process and an art form. It takes time, timing, analysis, smart decision making, skill and courage to bring a customer back into the fold, to win back their trust. Whenever your precious reputation and credibility are tarnished, there is no quick fix. Just the commitment to stem—and, hopefully, reverse—the tide of business exiting your back door. Do you have the desire to learn how? Let’s go. . . .
Hope on the horizon
Why can a business owner and sales manager ill-afford to ignore losing customers? Decreased revenues are only the tip of the iceberg. Every time a customer fails to return when he or she has the need for your goods and services—or fails to refer your company to a friend or business colleague—you are also losing goodwill and stature within your marketplace. Dissatisfied customers of bricks-and-mortar businesses will tell two to 20 people—on average—of their displeasure. If you have an e-commerce storefront and have an angry former customer, thousands—via blogs, review forums and bulletin boards—may hear about your poor service, quality or delivery practices.
Still, you have a much better chance of winning back a former customer than you might think. According to a study by the Paramus, N.J.-based consulting firm Marketing Metrics, you have a 20 to 40 percent chance of recovering a lost client versus only a five to 20 percent chance of finding and closing a new customer.
What would regaining lost business mean to your bottom line? Plenty. According to the Harvard Business Review, a mere five percent increase in client recovery can increase profits by nearly 100 percent, providing the right lost customers are targeted and re-acquired. The Review went on to conclude that cutting defections in half can more than double a company’s growth rate. It starts with adopting a hopeful attitude about client recovery and a commitment to preventing customer attrition in the first place. Jill Griffin and Michael Lowenstein, authors of the book Customer Winback: How to Recapture Lost Customers—and Keep Them Loyal, claim: “It starts with the acknowledgement that a lost customer is not necessarily a lost cause. Often the only thing a business has done wrong is stopped the dialogue. Many lost clients are blown away when a company takes the initiative to re-contact them, acknowledges past patronage, and invites them to return.”
So, who do you woo?
To begin the process, you may want to recognize that not all lost customers represent legitimate win-back prospects. While some lost clients, once recovered, may be considered crucial, others who were too costly or time-consuming when they were active customers are now better left alone.
To make things simple, compile a list of customers from the past two to four years that have not placed an order with you for eight to twelve months, and divide them into three categories: customers you’d love to have back; former customers who shall remain so; and customers you don’t know enough about to classify.
Customers you’d love to have back include clients you unintentionally pushed away—either you offended or angered them by failing to provide goods or services on specification, on time or with professionalism—and clients who pulled away because a competitor offered a better value proposition such as friendlier service, higher quality or more dependable delivery. Notice a lower price is conspicuously—and purposely—not listed as a pull-away factor.
Former customers who shall remain so include:
- Clients who were intentionally pushed away. You decided to stop serving them because they proved to be too hard to please, too much of a credit risk, or too difficult to deal with.
- Clients who were bought away. A customer that was lured by a competitor who offered lower—a.k.a. unprofitable to you—prices for similar, often lower-quality, items.
- Clients who moved away. The customer physically relocated to a place that is outside of your normal area of service or operation and it’s not feasible to attempt to address its needs any longer. Also included in this group are customers that have outgrown the need for your products or services.
- Clients that seek variety. The customers who won’t remain loyal to one vendor or product because they derive satisfaction from experiencing many different ones. Sometimes these shoppers are price-buyers incognito who can’t resist the chance to demonstrate their bargaining prowess to unsuspecting sellers.
It should be obvious that one would need to do a bit of research to analyze “Customers you don’t know enough about to classify” and categorize them appropriately. Often, one phone call to these former clients will reveal the primary decision maker has changed since the last time the customer placed an order.
In any case, assign the most industrious and curious sleuth on your staff to carefully review the purchase history of past customers no longer doing business with you. Keep an eye out for lagging order frequency and smaller orders toward the end of the relationship or an abrupt end to a fairly regular order pattern that went unnoticed. Typically, a curt termination of a relatively small but steady customer was caused by a frustrating encounter with a staff member that your employee wished to go unnoticed.
Once you’ve completed the grading and segmenting of your lost clients list, shuffle the “Customers you’d love to have back” list using an A-B-C approach: “A” accounts are very important, large, or profitable; “B” accounts are medium-sized, slightly above average profitability, or otherwise “great to have”; and “C” accounts are smaller with average profitability. Don’t be surprised if the distribution of As, Bs and Cs form a 25-50-25 percent pattern.
Now your real work begins: devising a strategic plan to win them back.
No pain, no regain
This step will take a significant investment of time and effort. Start by researching the present needs of your best (As and Bs) win-back candidates. “Google” the company or organization, study its website, and call around to your business connections—even within the lost customer’s organization—to gather updated information. Chronicle details of any major problems with the account from the past. Anticipate what the client’s current needs are and begin to brainstorm how you will position your company to revisit the dormant relationship. Could a product offering that is new to your company be just what the former customer needs? Would an “olive branch” discount smooth over a past shortcoming of your quality, service or delivery?
Next, create a formal communications strategy that will be deployed once you are given an opportunity to salvage the relationship. If you are going back in, you’d better have your “pitch” well-developed, well-practiced and down pat. And it needs to specifically include asking for their business. You are, in effect, asking for a second chance. You won’t get a third chance . . . ever. Make this one count.
These lost customers need to believe you tailored your humble, “hat in hand” approach to their particular circumstances, history and current needs. Here’s a good tip: If an apology is appropriate, don’t just say “We are sorry,” which assumes all is forgiven just because you said you were sorry. Instead, say something like “On behalf of my company, I apologize. Can you forgive us?” The latter approach is very subtle but places the onus of forgiveness on the person who was hurt: the former customer.
Timing as to when you will place your strategy into action plays a major role in a win-back attempt. Wait too long after you lost the business and you are all but forgotten as a viable vendor. Try too soon after the parting of ways and the wounds may be too fresh. Whatever and whenever you do attempt to regain a lost customer, be honest, sincere and accountable for your words and actions.
If you are new to the notion of launching a campaign to win back customers, start with “B” and “C” accounts from your list. You still want to think big, but start small and you will get a better understanding of the dynamics of re-engaging clients. Better to make small errors at first, carefully analyze and evaluate the effectiveness of your strategy, and adjust your approach accordingly than to get blown out of the boat trying to land a big fish on your first attempt.
Don’t let it get that far
Taking care of your current customers is the best way to keep them from becoming former. The Marketing Metrics study indicated that a business has a 60 to 70 percent chance of selling again, selling more, and selling something new to a current customer. Over 70 percent of the time, the “last straw” reason a client stops dealing with you and moves its business elsewhere is the result of a non-delivery issue. If you have difficulty keeping your promises and delivering on time, you’d better fix it . . . immediately.
There are six common “warning signals” that may place a current customer account in jeopardy of becoming lost:
- real or perceived problems in the account—either technical or personnel-related;
- recent change in the decision maker;
- recent change in the assigned sales representative or key contact;
- planned expansion or contraction in the customer account;
- planned change in the customer’s normal operations or the way they conduct business; and
- complacency on the part of the supplying vendor—that is, taking the business for granted and/or a sharp decline in customer contact or communications.
If any of these conditions exist in current customer accounts, ask for a sit-down, face-to-face business review meeting with the principle players on each side. During the review, set short- and long-term goals that answer the four continuous-improvement questions: Where are we now? Where do we want to be? How will we get there? How will we measure progress along the way?
An action plan should emerge from such a meeting, complete with who will do what and by when. Even without the presence of a warning signal, you should initiate a business review with your top customer accounts—that likely constitute over 75 percent of your total revenues and profits every year. Good luck!
