If a customer falls in the woods – do they make a sound? Would you hear them if they
did? More importantly, how did they end up there in the first place?
When does a customer stop being a customer? Seems like a simple question – but it
depends on how you look at it. The standard answer is when they stop doing business
with you. Right? But what if I told you that a customer is always a customer, whether
they are currently doing business with you or not? That makes sense too, doesn’t it?
It depends on whether you are focused on their current value or their life-time value to
With everyone being focused on the current month or quarter, the
customers who aren’t working with you today run the risk of falling through the
cracks. Here is a secret: there is money stuffed in those cracks, if you care to look there.
When we work with a new company, we often do a mini-assessment of the
organization’s messaging. Is the value proposition customer-focused or product/service
focused? Over 90% of the time, we find market messaging that is entirely focused on
the product or service without much reference to the target consumers. The messaging
is also frequently not in customer language either. To retool the focus, we often ask to
speak to the company’s customers: some happy, some challenging, and some lost. We
always ask why the lost customers left. More often than not, our clients don’t know for
sure why a customer was lost. We usually hear one of the following comments:
- They just stopped calling us.
- They went to a competitor. We’re not sure why – but it probably was price.
- We dropped the ball on a job, so they left.
- They stopped returning our calls.
- We don’t know why.
The mindset is generally that they are “no longer” customers, or that given they are not
contributing any new business they are not worth resources or time. So they drop off
the radar screen. When we talk to these “lost” customers, we find all sorts of interesting
reasons for their “departure.”
- We didn’t have a need for a period of time. Then the company just disappeared.
We haven’t heard from them in a long time.
- There were customer service issues – we couldn’t get the support we needed.
- We only heard from them when they needed something from us.
- They wouldn’t work with us on price.
- Another vendor was more proactive in soliciting our business.
- We felt like we weren’t that important to them.
- There was no negative reason really. Another local vendor just made a bigger
Unless you are in the position where you have more business than you can handle,
then it behooves you to take a critical look at the customers that you’ve lost. Here are
some ideas to consider:
1. Calculate the lifetime value of that customer
How much total revenue did the customer represent in the past? Estimate the potential
revenue for the next 5 – 10 years. Do this for all of the “lost” customers on your list to
get a view of the impact their disappearance has had on your business. Now think
about the positive impact they would have if they returned.
2. Create a “Customer Fit Index”
Not all customers are created equal. What makes a good customer for your company?
Beyond revenue, there are a number of other criteria that make for a good fit. Things
like size of opportunity, core product penetration, level of support needed, referral
and/or reference potential, industry fit. Develop your own set of criteria to supplement
the life-time revenue analysis, and prioritize by overall value to your business.
3. Renew your acquaintance with them
The analysis in the last two steps should show you who should be a target for recovery.
Before contacting them, do some internal due diligence to try and find out any
information about the circumstances of their leaving you. Did they leave for a concrete
reason that you can address? If there seems to be no information, then be honest and
ask to reconnect to find out why. You may have to make several tries to get their
attention, but keep in mind what you now understand about their value to you. It’s
worth the effort.
4. Figure out an incentive for them to come back
Once you’ve had your conversations with them, figure how you can move them back in
your direction. Is there something they need you can either provide or guide them to?
Is there something you need to fix in order to get them to trust you again? Be sure you
come out of your meetings with a solid understanding of what happened so you can
come back with a tangible reason for them to consider working with you again.
Sometimes the reason is so simple, you’d be surprised. I once met with a client who
had not done any business with me in a year. And to be honest, I didn’t really know
why. Prior to our lunch, I thought hard about what the possibilities might be and came
up with two potential reasons:
- Somehow, I had done something wrong inadvertently which they never told me
- The size of their current projects was much smaller than our typical project, and
they felt were not worth of my time.
I walked in prepared to hear something in answer to # 1. But I had a hunch that it could
possibly be # 2. In our conversation, I noted that we hadn’t worked together in awhile
and I was hoping to figure out why. I offered the first reason with an assurance that I
would do what it took to remedy any potential problem. They told me that was not the
case. So I offered the second reason, couched as a “hunch.” The reality was that the
customer did feel uncomfortable asking me to bid on projects that were a fraction of our
past work together. Needless to say, I assured her that this was no problem at all! We
started working together again the following week- and the lifetime value of that customer just keeps growing.
5. Be ready to re-earn their business
If you’re given a new chance to move forward, be prepared to earn their business as if
they were a brand new customer. The second time around often requires doing more
and proving that you’re committed to them. You also need to be aware that the benefits
of these increased efforts may not be realized this month or this quarter. That doesn’t
make the customer less valuable in the least. It is an investment in next month or next
quarter that will add up year over year. It’s true that it is much less expensive to keep a
customer than to find a new one. But you need to analyze the costs of new customer
acquisition versus the investment in retaining them. Sometimes the costs outweigh the
revenue gain – and you have to review this carefully to be sure. It’s not the revenue
you earn that makes a difference, it’s the profit you keep.
6. Are any other customers close to the woods?
Use the process of recovering lost customers as the reality check for your relations with
all your current customers. If a customer gets lost in the woods, they do make a sound!
In fact, they typically make some sort of noise just before they disappear – you just have
to be listening. On the other hand, what if they make no sounds whatsoever? That
could be a warning sign as well. If you are so focused on the month or quarter to the
exclusion of customers not on this month’s revenue report, beware. They may not end
up on next month’s by default.
– Lisa Dennis
© Knowledgence Associates, 2011 / All Rights Reserved