“To make up for the loss of one existing customer, companies have to acquire three new customers.”
Harald Fanderl: Mckinsey
This is a quote from one of my morning newsletters. Although I am writing this in August 2023 it could have been from any newsletter over the last 20 years.
The statistics appear to remain relatively consistent throughout the years, don’t they? I must admit that in my early days of business when I held a flawed and misguided seller-centric perspective, I didn’t really care. We said things to each other like:
“There are plenty of fish in the sea.”
“Losing one customer just means another customer will come along.”
“They’ll come back.”
The Thing About Replacing Lost Customers
The Thing is (because there always is a thing) we were right in the short term about replacing lost customers. In the long term, we were nauseatingly wrong.
- They didn’t come back. They went somewhere else where someone did care about them.
- The “another customer” read the bad reviews from the lost customer and knew better and didn’t “come along”.
- The ocean of bountiful and potential customers was not as big as we thought.
Replacing Customers is Hard and Expensive
This represents one of the universal truths in business and in my opinion can be put next to the following universal truths.
- More people complain about companies than compliment them.
- Its really difficult to get a customer back after you have lost them.
- It’s really expensive to find new customers.
Losing Customers is Really Bad News and It can Begin at the Sales Pitch
The dissatisfaction of many customers often begins when their expectations are being formed – right at the beginning of their interaction with the company. It consistently surprises me how scanty the information recorded about initial conversations with customers is. What is far more prevalent is a complaint report, which provides a post-mortem review of what everyone thinks went wrong, as the customer complained and demanded a refund or cancellation of the deal.
I’ve never been a proponent of self-report surveys as a definitive measurement tool for understanding people’s motivations. There are two primary reasons for this.
Firstly, most disgruntled customers have little to no interest in assisting you by providing accurate information about where the deal went wrong.
Secondly, even if the customer is indeed motivated to share the truth with you, you’re relying on their memory and comprehension, which isn’t ideal even under the best of circumstances.
Lastly, if you’re depending on a staff member to relay accurate information AFTER the complaint, within a seller-centric system, you’ll likely receive a biased and self-serving report at worst, and a vague and watered-down version at best.
Therefore, exit interviews and complaint reports generated about terminated staff members are not reliable sources of information. They are seriously tainted.
What are the Root Causes of The Problem?
Seller-centric and product-centric selling place the company at the center of the selling equation, rather than focusing on the customer and solving their problems.
Customer complaints often start as mere whispers before they escalate into blood-curdling screams. Ill-trained staff in both sales and after-sales are frequently not taught how to listen for these whispers and address them before they escalate into something more serious.
Seller-centric organizations tend to compartmentalize their departments and skill sets. Sellers are pressured to increase sales, while after-sales teams are tasked with cleaning up the aftermath.
The focal point of revenue growth tends to be on market penetration and market development, rather than emphasizing product development and diversification.
What Can You Do?
Initiate the implementation of a more customer-centric and problem-centric selling approach. Understand the actual problems your product solves.
Pipeline management systems and CRM systems can be kept up to date with crucial information from the outset of customer interactions. Red flags can be identified along the path to purchase and addressed in real-time. Interdepartmental cooperation and collaboration are crucial for this to take place. This is an effective Path to Purchase management.
Explore potential additional ways you could serve your customers using your current resources and capabilities. For example, some stationery supply companies are expanding their offerings to include a broader range of “office supplies” (whatever that encompasses). Now, you can order not only pencils and paper but also milk, coffee, and groceries from the same company. Furthermore, these companies are capitalizing on the profit potential. We are all aware of how much more customers are willing to pay for the convenience of delivery.
Encourage all team members to inquire (and listen) to customers as they share their reflections on the challenges they encounter in the “Real World.”
In a Nutshell
- Losing customers is an expensive exercise.
- By adjusting your sales and customer service approach from a seller-centric approach to a customer-centric approach will help.
I hope that you find some of these tips useful for either improving the health of your sales efforts or beginning to create yours from scratch. Let me know if you have any burning questions or topics around influence, sales skills, strategic change or improving your work performance.
