Winning back lost customers
Losing a valued customer is never fun.
It’s an unhappy event for everyone. Learning how to
manage the sinking feeling that occurs when one of your best
customers says “Good-bye” is a milestone for anyone
in business.
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In most cases, customers never formally
announce the termination of their relationship with your
business. The end of the customer lifecycle is typically
characterized by their passively ending trading with you.
Because of this, you must rely on
purchase behaviors and other informal signals to tell you that
defection is happening. The quicker you realize that
termination is at hand, the better you can position yourself to
turn this unhappy situation into an opportunity.
Not all lost customers make good win-back
prospects, nor do you want to win back all lost customers.
It’s important to segment lost
customers by win-back potential, with lost customers who offer
the highest probable return on your efforts given greatest
priority. Without an effective segmentation strategy, you can
waste valuable time and money pursuing lost customers who are
poor prospects for future business.
The best segmentation plan I’ve
found for lost customers is a two-step process. First, lost
customers should be segmented based on their second lifetime
value. Next, these same customers are segmented a second time
based on reason for defection.
There are at least four reasons why a
customer’s second lifecycle can be worth more than the
first lifecycle:
1. The defected customer is already
familiar with the services you offer.
2. You already know more of the likes and
dislikes of this customer than those of any first-time customer
and can offer more targeted services.
3. The strengthening of your relationship
during a successful win-back could make this customer spend
more than the typical first-time customer.
4. The cautious “new customer
phase” will be shorter in the second lifecycle than in
the first one.
Calculating the second lifetime value of
a customer can be difficult if you have not maintained a
comprehensive database during their first cycle. Generally
speaking, the lost customers with the highest second lifetime
values would be those who:
• Still live within your trade area.
• Are still white-collar workers
(have not lost their jobs or retired).
• Have multiple members of their
family who are white-collar workers.
• Have active social lives
• Are regular churchgoers.
Once you’ve estimated the potential
second lifetime value of a customer, the next step in the
win-back evaluation is determining the reason for leaving.
The five reasons a customer will stop
doing business with you are:
• They were intentionally pushed
away.
• They were unintentionally pushed
away.
• They were pulled away.
• They were bought away.
• They moved away.
Intentionally pushed away customers are
those that you’ve determined were unprofitable to serve,
and for that reason you do not want to encourage their
continued patronage. The service costs of these customers are
greater than the profits they create. Needless to say, they
should be excluded from any win-back list.
Unintentionally pushed away customers are
those you want to keep but who left because your
cleaner’s performance did not meet their expectations.
How do drycleaners unintentionally push
customers away?
A single incident is unlikely to lose a
customer, but several incidents of poor quality, late delivery
or lost clothes may do it. Improper handling of complaints can
lose customers. Someone who feels a complaint isn’t taken
seriously, or is displeased with the resolution of it may look
for another cleaner.
Whenever you make changes in your
existing services, you risk offending some customers. And
established customers, though highly profitable, are often
treated in an offhand way by counterpeople. This is a major
error. Every customer should be resold in every transaction.
A competitor may pull away customers by
offering a better value, an advantage that often goes beyond
price. Their service may be more personable or reliable or
their quality may be higher. Studies show that many customers
will switch even when the new cleaner is more expensive or less
convenient if they perceive that the value is better.
Some customers are bought away because
price is all that matters to them and competitors make
low-ball, introductory pricing offers to take them away. These
customers feel a low level of company loyalty and are open to
switching cleaners at any time.
Moved away customers can sometimes be
retrieved through pick-up and delivery service. Often customers
move but remain in the same community. Drycleaners who offer
pick-up and delivery have managed to hold onto many of these
customers.
The best news is that some win-back
customers may be so thrilled with the personal recognition they
receive in the course of a successful win-back, that they
become very strong referral sources immediately after
returning.
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