Whilst marketing gurus say that we should spend a lot of time working out our USP (Unique Selling Proposition), it is a sobering thought that no business is unique to the extent that their customers have literally nowhere else to go. It is a good thing that this is the case, because this is what keeps standards of service high for all of us.
In my opinion trying to “cook up” a USP is a waste of time, unless you really have found something that is truly unique, like Dyson when he invented a bagless vacuum cleaner. He had a head start for a while.
The economics of retaining customers
It takes a lot more time, effort and money to try and win a new customer than it takes to retain your existing customers, so it makes financial sense to make this your priority.
Even if it made no financial sense, it is a good thing to hold on to your existing customers because, to put it simply, they deserve it. They have chosen to do business with you and have earned the right to be treated with care and respect. One of the reasons for losing customers is not treating them with the respect they deserve for their continued loyalty.
Chris Cardell of Cardell Media often quotes the statistics of why customers stop buying from their existing supplier.
- 1% die
- 3% move away
- 5% follow a friends or relative’s recommendation
- 9% find somewhere that they think will be better quality or value
- 14% are dissatisfied with the products or services you supply
- 68% move because of indifference
These are staggering numbers and it is worth dwelling on them for a moment.
The first three reasons, which make up only 9% of your customer loss, you can do little about. In fact, it is not worth the time and effort as it is just part of natural wastage in business.
For people that think that they can get better value or quality elsewhere, there are some measures that you can take. It comes down to communication and genuine attempts to look after them. When it comes to being perceived as value for money, the onus is on you to prove it rather than on the customer to search for the facts.
But the biggest single reason for people moving away is not because you are not competitive or let your customers down, but apparent indifference. The big question is how you stop losing these customers.
Why some businesses deserve to lose customers
Some businesses fail to grasp the fundamentals of looking after their customers – and they demonstrate this in a very public way.
The finance industry fails considerably in this respect. I know that they have taken a lot of criticism in the Press over recent years, but sometimes they deserve all they get. If we ignore all the excessive risk taking that took place in the build-up to the 2008 financial crisis, they are still making the same mistakes in customer service today.
For example, interest rates have been at historically low levels for years. The banks decided that the best way of getting new customers was to offer accounts with interest rates that were 1% or more higher than people could get in their existing accounts. In the very small print, they showed that this would be for a year.
What message does this send out to customers?
For me, it says “We don’t care about you. The fact that you have your account with us means nothing. We are interested in new customers and when we have had them on higher rates for a year we can peg them to lower rates and treat them just like we treat you”.
They do this in the secure knowledge that most people do not switch their accounts. For those customers that do take the trouble to look at the finer details, the effect is to stop them from being loyal customers. They switch to another bank, get higher rates for the year and then switch again.
What about the effect on the banks?
This process means that they are on a permanent merry-go-round to replace customers that they should never have lost in the first place. Since it costs at least 10 times more to find a customer than to retain an existing one, this makes no financial sense – and they are in the finance industry. I suspect, however, that the people who pay for this process are the hapless customers that do not switch.
Why treat existing customers worse than strangers? Another example is magazine subscriptions. If you look at most magazines, they have a page which gives you a chance to subscribe, usually at a slightly reduced rate than if you bought the magazine in a store every month and, of course, delivered to your door. Every month, the subscription page has wonderful free gifts such as a photographic bag or a tripod – often looking as expensive as a year’s subscription itself. For the loyal, existing subscribers? Nothing!
This brings us back to the staggering figure that 68% of the customers that you lose will be down to your apparent indifference. Remember, most people do not complain before they stop doing business with you (only 9% do that) – they simply walk away.
This means that if you are monitoring complaints in order to retain your customers, this will only deal with less than 10% of your problems.
How to overcome the impression of indifference
Most businesses do care about their customers, they just become too busy doing other things to let the customers know. It is not good enough to feel hurt when a customer walks away and say, “why didn’t they tell me how they felt?” It is not the responsibility of the customer to tell you how to treat them.
To prevent losing your customers, here are 14 ways to prove to them that you appreciate them:
- If you are glad to have them as regular customers – tell them. Say “Thank You”, often. If you can’t say it often, say it occasionally.
- Call them occasionally – not to sell them anything but to ask them how they are.
- Find out more about them and what their interests are, such as what sport or teams they are interested in, where they have travelled or what their hobbies are. Show them you think about them by sending an occasional email about the things that interest them.
- Send them information about things that affect their business – it doesn’t have to be information that you produce – it could be an article from a magazine or a web clipping.
- Keep finding ways to make the service better and delight in telling them. Ask them directly if they could think of anything else you could do to improve things.
- Send them an occasional “freebie”.
- Introduce them to people that could help them in their business whenever you get the opportunity.
- Send them birthday cards or seasonal cards, signed personally – not pre-printed.
- If you make a mistake, admit it, apologise and rectify it – in that order!
- Make sure your phone is answered promptly, professionally and in a friendly manner.
- Deal with emails and letters from them quickly.
- Surprise them. Deliver something sooner than you promised or give them an unexpected discount on a particular order. Never over-promise and under-deliver!
- Make it as easy as possible for them to do business by giving them different ways to pay, putting their information online etc.
- Get them out. If you are a provider of services or high cost goods, you should cement the relationship by inviting your customer out. It could be for a simple cup of coffee before work.
Very few of these 14 points cost any money at all and the costs attached to the others are negligible.
Losing customers is a loss of continued profit. It is worth investing a little of your time and money to easily cut out 68% of your potentially lost customers.
For more information on business growth and development like the main reason for losing customers, have a look at our other management guides and insights.