New customer acquisition is the top priority for many companies, as new customers are felt to be the most lucrative and generate the most revenue for the organization. But is that even true?
Every year, huge amounts of money are put into lavish marketing budgets so companies can stand out from the competition and attract new orders. One aspect that many companies hardly consider, however, is the large sales potential of their former regular customers. Customer recovery is presumed to require very high efforts, but even simple measures can help to prevent customer fluctuation or recover lost consumers.
Out of Sight, Out of Mind?
Lost customers are often forgotten or ignored by companies and receive no attention. However, this approach is fatal, given that companies sometimes lose 30% to 50% of their customers per year. Often these end up as dead files. Unfortunately, nowadays the willingness of customers to change allegiance is not uncommon. Thanks to a buyer‘s market and strong competition, customers behave erratically and are therefore difficult to bind to a company. But high turnover rates and customer churn have a devastating impact on a company’s economic stability and should not be underestimated.
When Customers Disappear into Thin Air
Business with lost customers is often neglected. This usually has emotional reasons, as one is reluctant to deal with failures. But this topic is extremely important because in most cases you have not lost customers forever. Often they are willing to give the company another chance. Therefore, providers should not let their highly profitable former customers move so easily and instead develop appropriate recovery measures to recover lost regular customers.
You Can Justify Customer Recovery for these Reasons:
- The closure rate for the reactivation of former customers is usually higher than in new business
- Compared to new customer acquisition, there are fewer costs
- Loyalty and profitability of reactivated customers is often higher than for new customers
- There is a higher chance of “Cross-Selling” (customer buys additional products or services)
9 out of 10 Customers Are Recoverable
A systematic approach is essential for effective customer recovery. Social skills and knowledge of people are just as important as sensitivity. So-called “customer recovery” begins when all localization measures have been unsuccessful. The first step in professional customer recovery is to accurately identify and distinguish between the “resting” and the truly lost customers. A clear picture of the status quo is the best prerequisite for further procedures. It is equally important to determine the motives and causes of the lack of customer trust. Only those who know both the potential reasons and the causes of termination can instigate successful recovery and make the right corrections.
Good to know
- Termination management: Preventing or reducing cancelations
- Revitalization management: Resumption of the business relationship that was broken off or „fell asleep”
Determining the Status Quo – How Have Customer Losses Been Dealt with so Far?
It is highly likely that every company already has at least some experience with customer churn. In order to benefit from this, it is important to use the testimonials of the sales, field, and internal service employees for themselves.
- Why and under what circumstances have customers been lost?
- What was the situation?
- What made them return?
- What are the sales procedures?
The Market is Booming – Causes of Customer Churn
Markets continue to grow and every day, customers can discover new products or providers in the market. It’s hard to keep track of it all, right? Thanks to a large number of special offers, customers are increasingly inclined to switch providers. In the meantime, it is becoming ever more difficult to retain consumers for the long-term and companies are increasingly struggling with customer churn.
Cancellations are also not an uncommon result of a customer complaint. Dissatisfied customers like to let their displeasure known and threaten to terminate their contract. Unprofessional complaint management of companies is often also a cause of customer churn. Due to the ever-growing range offered in the market, even the smallest negative experience can be a reason for termination. After all, it is easy for customers to find a new provider.
Caution is Better Than Hindsight
Of course, in the best case, effective measures can completely prevent customer fluctuation. Customer relationships require continual maintenance. Those who take long-term care of loyal customers and stay in contact with them can avoid an exodus. Anyone who can retain customers to their company in the long-term benefits from strong customer loyalty and with skillful recommendation marketing can even attract new consumers.
There may be several reasons for an exodus of customers. Companies should analyze them in detail in order to develop effective recovery measures or prevent customers from departing completely. There are many reasons why a consumer decides against an item or product. It can be due to the service or the products of the company, or down as to the customer themselves. For example, if the customer has a financial bottleneck, he is more likely to switch to a cheaper offer or look for alternatives with better financing options and discounts; the desire for variety or a change in their living conditions can be another reason. However, product quality defects, poor service, or the change of contact person can also be the cause of customer loss.
Tips to Avoid Losing Customers
- Existing customers should not get the feeling of being treated as “second class” citizens. Therefore, it is recommended to grant special prices, offers, discounts, or privileges to these customers and not just focus on new ones.
- Customers often feel a lack of emotional attention. Therefore, one should regularly thank the customer for their loyalty and show recognition, appreciation, and acceptance to existing customers.
- In case of dissatisfaction, customers often change providers. Therefore, it makes sense to develop a kind of early warning system and to identify typical migratory signals. The best way to prevent them is to ask specific questions: “How can we improve our service?”, or “What could we do better in the future?”
- An unpleasant topic for every company: complaints. But it is especially important to deal with them as professionally as possible. Poorly handled complaints are also a reason for customer churn. If the customer faced difficulties or inconvenience due to your products, one should not only think of compensating for the actual damage but also applying emotional reparation.
Another important point that should not be overseen is to regularly evaluate the mood of your clientele. In this way, an exodus can be prevented at an early stage and possible preventative measures are undertaken. Capturing the customer mood and relative satisfaction is particularly easy with the Net Promoter Score® of zenloop. The NPS® analyzes the probability of customers recommending a company’s product or service. If there are more detractors, i.e. customers who would not recommend the product as promoters, one should act quickly and take appropriate measures. With the help of this customer satisfaction index, customers who tend towards migration can be easily identified and counteracted at an early stage.
Effective Measures for Customer Recovery
If these procedures are not effective and customer loyalty cannot be further consolidated or expanded, measures for customer recovery are needed instead. Customer recovery management starts at this very point. Everyone deserves a second chance, right? That is why it is all the more important to make use of them because there is almost never a third. It is now necessary to build a “second loyalty” and the reasons – this time – to stay should be better than the reasons to leave.
- Reviving dead files:
Identify customers with potential that you want to bring back and define the reasons for the churn. - Quick response:
In the best-case scenario, you react immediately to a termination. However, not with a confirmation, but with a return attempt. - Return bait:
For this purpose, material, financial (welcome back premiums & discounts), or emotional (appreciation) return measures are available. All three are not mutually exclusive but can be combined. - Correct address:
Whether a face-to-face conversation, smart mailing, or a telephone campaign – professional preparation opens up good recovery opportunities and leads to success. - First transaction:
Immediately after the customer‘s return, everything should run perfectly. At this stage, it is important to keep as close a contact with the customer as possible.
How to Reach out to Departed Customers?
If a customer has canceled their contract, speed is required of the essence. Contracts often include notice periods, which companies can take advantage of to reach out to the customer. In most cases, the customer has not yet sealed a new deal elsewhere and may be persuaded to return. The faster you make this recall attempt, the better. If companies react quickly to termination, this conveys a sense of customer appreciation.
The simplest method, which usually only generates a small return (maximum 10-20%), is the written survey. To do this, customers who have canceled their agreements are sent a questionnaire:
“Is there a special reason for your termination?”
Another measure is a telephone consultation. Although this requires more time and therefore money, you usually get much better and more informed information.
Employees can accurately identify the reasons for churning and personalize possible starting points under which conditions the customer would return, then directly present a suitable offer
Customers usually perceive it very positively when a company makes this effort and enquires about the exact reasons for termination. With a personal call, one proves your appreciation of the customer, which then makes recovery much easier. Here the tone of the call makes all the difference – the communication quality of the conversation should be taken into account. Sales staff should always react confidently and in no way acidic or offended. What is important is a balanced relationship between speaking and listening, empathy, and a solution-oriented, friendly behavior of the employee.
An invitation to a personal meeting goes one step further. This direct approach allows one to have direct contact/dialogue with the customer and gives time for detailed questions and reports. Empathic employees should be able to read between the lines. If the conversation to establish the motivation behind termination develops well, the salesman can even try to make an immediate, direct offer. The most important thing, however, is to approach the matter with sensitivity and not to put pressure on the customer, because this only reduces the chances of recovery.
Customer Recovery – It Works Like This!
The measures for customer recovery differ from one another depending on what caused the exodus. Whether it be inflexible customer service, long delivery times, or impersonal customer communication – sales and marketing should be aware of the various reasons for customer loss. However, if reasons can be successfully defined, it is worthwhile to develop appropriate measures for customer recovery and to use the knowledge gained to apply them to on-going processes:
Quality defects of the product & poor quality of service
- Letter of apology to customers
- Rapid troubleshooting
- Compensation (plus possible loss compensation)
- Discounts
- Replacements
- Guarantees for the next delivery
„Not-spots“ – Gaps in location
- Direct delivery
- Special delivery service
- Cooperation with local partners
Competitors have lower prices
- Show specific performance characteristics that justify your higher price
- One-off return offer
- Promotions
Successful Customer Recovery Calls for Self-Criticism
”Welcome back” rewards, counter-advertising, marketing, or retention bonuses – all this is only effective if you deal intensively with your own weaknesses in advance. Companies need to identify their sales process and their own service level in a differentiated way. Only if one can when one understands customer motives can one develop effective measures for their recovery.
Customer Recovery Checklist
- Identification of lost customers: Who actively canceled and who has just not made a purchase for a long time?
- Analysis of the reasons for loss: What were the customer motives?
- Recovery measures: emotional, material, and financial approaches – in this order
- Check the success of and optimize the procedure
- Prevention: Proactive measures help keep customers.
Identifying, retaining, and recovering lost customers – professional customer recovery has a lasting positive effect on the handling of existing customers. The analysis of customer behavior can be used to optimize one’s own processes. In this way, the rate of churn can be reduced and potential turnover increased. Even if it is unpleasant for many companies to deal with their own weaknesses, it is essential for further action. If it has been possible to identify vulnerabilities, it is necessary to address them in order to prevent future customer churn. If it is possible to keep strong and loyal customers, this has a positive effect on the marketing budget and the effort required in sales. If a departure could not be prevented, it makes sense to invest in suitable recovery measures, as lost regular customers often carry underestimated potential.
Tags: Customer Retention
