Improve client retention by analyzing the reasons why customers leave
Customer retention is the cornerstone upon which you build profitable growth. And one of the fundamental steps in growing a business is to stop losing business. The following facts are just a few of the reasons why client retention is so important:
• It is five times more expensive to bring on new business than it is to retain an existing customer.
• A slight amount of effort in retention lifts profits by a substantial percentage.
• Increased customer retention touches all parts of your business including growth, profits, more (your team) and future sales (your reputation) and most of all your mental health.
Analyze your lost accounts
Your goal should be 100-percent retention of all customers you want to keep. After all attempts to keep the customer have failed, do you just accept the loss or do you analyze what happened and how to avoid it in the future? A thorough analysis (or autopsy) should be done for every lost account to determine the actual reasons the loss occurred and what could have been done differently to prevent it.
For the autopsy to be effective and result in improved best practices, your examination needs to be brutally honest. You must get past the traditional, self-serving excuses that we normally employ to make us feel better. Bo Bennett said it well, “An excuse becomes an obstacle in your journey to success when it is made in place of your best effort or when it is used as the object of the blame.” An autopsy—typically known as a post-mortem examination—is a highly specialized procedure that consists of a thorough examination of a corpse to determine the cause and manner of death. I’m suggesting that autopsies should be done in business for several purposes. For example, to analyze and correct when a budget is missed, a new hire does not work out, a sale is not closed, or a customer cancels. Such business autopsies only work if you, as a leader, are committed to Four Agreements:
1. Be impeccable with your word Say what you mean and mean what you say. Be confident with your words, and others will trust what you say. Don’t speak half-truths or gossip—these things will harm not only your reputation, but your sense of self as well. Lying is unacceptable; it is much more than an action, it can become a ritual.
2. Don’t make assumptions Our world is replete with assumptions. We use non-verbal communication to assume what we do not express with spoken language. We assume others know what we are thinking, and we assume we know what they are thinking about us. We make judgments. But things are not always as they seem, so don’t convince yourself that you have all the answers. If you don’t understand something, or feel uncertain about whether something is true, just ask.
3. Don’t take things personally As individuals, we are all trapped in our own thoughts, and sometimes we forget that the world does not, in fact, revolve around us. If your partner, your friend or your boss gets upset with you, don’t automatically assume the negative mood is a reflection of something you did. Maybe something independent of you is happening in their lives, and you are just the unfortunate destination of misguided anger. If the anger is a reaction to something you did, just speak impeccably, but construct your words out of love and not anger.
4. Always do your best This is a recipe for success. Doing too little is lazy, but doing too much will burn you out and make you an easy target for someone to take advantage. Doing your best at whatever it is that you do will not only create a sense of personal satisfaction, but it also will impress those around you.
I completely agree with Colin Powell when he said, “There are no secrets to success. It is the result of preparation, hard work, and learning from failure.”
For example it is usually easier to say…
• “the customer was unfair,”
• “the competition underbid,”
• “the customer had a friend in the business,”
• “they have to rebid,” or
• “they found a cheaper price,” …than to face facts and make the necessary corrections.
Develop a matrix
Gathering appropriate information in a matrix should be used to ensure improved customer retention and increased profitability. The autopsy will get you and your team past the superficial excuses and disclose the real reasons for the failure.
Following the loss of a customer, upper level management should meet immediately, create a matrix, and analyze using the following data:
• Customer name
• Owner name
• The date the account was placed in focus
• Date the contract began
• All customer points of contact you utilized during the life of the account
• Monthly revenue of the account
• Gross margin of the account
• All analysis data for the entire history of the account should include:
◊ Customer visits
◊ Additional service requests
◊ Billing questions
◊ All other case reasons that apply to this account
• Quarterly review ratings (if they are conducted)
• All written correspondence (including e-mails) to and from this customer for the last 12 months of the account
• The plan of action you created to remove the account from focus after you identified it as ‘at-risk’
• The results of your plan for corrective actions
• The total number of MLB’s (multi-level bonding) conducted for this account and which executive(s) were involved in the customer bonding process
• Any other information that you believe contributed to the loss
• Make the assessment, measure, manage, make corrections, and start over again.
As an ongoing new best practice, autopsies should occur monthly in order to improve the collective knowledge of all managers and change company procedures so that these identifiable mistakes will not reoccur. This is a never-ending process. But, if done correctly and frequently in the beginning, it could just become an irregular part of your meetings. It takes serious soul-searching and ego strength to go through this exercise.
For more information on developing a specific customer cancellation autopsy, visit Gershen Consulting at www.gershenconsulting.com.