Why losing a customer should never be a surprise

Reproduced with permission from The Times. To subscribe click here.

Losing a customer can often feel like an emotional punch to the gut. It’s not simply a business loss, it’s a form of rejection. Even after many years in business, I find the pain of customer attrition still hurts every time. And then there is the direct hit to the bottom line as typically it costs up to seven times more to win a customer than to retain an existing one.

Regardless of sector, whether we sell products or services, we are all offering a total customer experience, so, if the customer is not enjoying it, it’s essential to spot the early warning signs and turn the situation around.

The truth is that customers don’t generally leave overnight. The retention stats that you should follow are merely the final output on the scoreboard and I defy anybody simply to accept the typical “churn” for their sector without trying to address it.

There are often many qualitative and quantitative indicators to identify a deteriorating relationship and a well-managed CRM (customer relationship management) system can help, including segmenting customers by size, value and much more (including cross-selling opportunities). Which customers contact you the most and the least? Did they accept training? What is the best interaction for a happy relationship? What can you learn from tracking complaint levels, credit notes and discounts?

Occasionally this will identify lossmaking customers where a decision has to be made on whether the business is worth having or can be renegotiated. Above all, it’s about active listening, as I have learnt many times from visiting “difficult customers” only to (on occasions) discover how we can easily improve their experience.

When I ran a company called Iris Software, we had more than 35,000 business customers and a consistent 98 per cent customer retention rate annually. This didn’t happen by accident. Every time we lost a customer, we dug deep to ask ourselves and them: “What could we have done differently?”

As a software-as-a-service business with recurring subscription revenue, it was essential to understand not only in-year customer profitability but also the lifetime value of every customer. Our monthly retention statistics measured both the number and value of customer lapses, with the customer service team targeted on renewal rates, so there was direct accountability for our performance. Once we won a new customer, we had a clear plan for nurturing and managing the relationship. We found that having the original salesperson handle the account for the first year, then transitioning to an account management team for proactive, early contact about annual renewals, helped to maintain continuity and accountability. This approach also reduced the risk of overselling and ensured a smoother handover, reinforcing the relationship from the start.

There’s generally a correlation between employee engagement and customer retention as the relationship with your customer depends upon having engaged employees. One way to ensure this is to have a clear purpose behind your company: at Ground Control, caring for the environment supports everything we do.

We also use customer net promoter scores as a reality check on our performance and a benchmark to compare ourselves against other industries. It’s a simple but powerful question: “Would you recommend us, on a scale of 0 to 10?” The results help to tell you what your customers are thinking and ways you might influence it. To achieve high scores, you need to follow up with every customer who responds to the survey. Detractors need attention to turn their negative experience around, promoters can become advocates and those in the middle can be converted into loyal customers with some extra effort.

Another consideration at Ground Control, where we manage outside spaces for corporate clients, is the weather. It can throw a wrench into our logistics and can result in missed visits and delayed landscape construction work. This makes communication and scheduling crucial. If we’re not clear with our customers about when we can work, they can quickly lose trust if the teams don’t turn up.

To avoid surprises, we have put in place systems to track missed jobs, provide photographic before-and-after evidence and ensure we proactively notify our customers about our plans. It’s not just about logistics, though: it’s about ensuring the customer feels valued and heard. When you take care of the small details, you build a stronger relationship.

Data lets you personalise things. It informs you about ways you can make your service more flexible and responsive to the needs of different customers. It should be used, often more than it is, in the development of new products and management of existing ones. Markets change and your early warning system is the data coming in from your existing customers.