Focus on World-Class, Part 11: When customers walk out on you
Sep 26 2017
In this 12-part series, each blog examines one of the 12 best practices identified in the 2017 CSO Insights World-Class Sales Practices Report. Today’s best practice: “Our sales teams are effective at surfacing the specific reasons why certain customers stop doing business with us.”
This week’s best practice brought to mind a favorite quote: 80% of all relationships die from neglect. You may have experienced this as a buyer if you’ve worked with a seller who is all about being in touch, and acts like your best friend right up until you become a customer. Then you never hear from them again.
But sometimes it goes the other way: an established customer/client goes quiet, decides a competitive offering is more appropriate, valuable and/or useful, and fails to renew. Where does the responsibility lie and who owns the ongoing relationship that suddenly ends? Suddenly, account management takes on a whole new meaning, and all manner of hand wringing and “is there anything we can do?” takes place. Sorry, it’s too late.
But there is a lesson to be learned. The obvious, of course, is stay in closer touch, don’t neglect the relationship or take it for granted, and work to always be bringing value. In other words, live account management. However, as they say, even good things must come to an end. What can the World-Class performers tell us?
It turns out, quite a lot, particularly if we look at differences between those who do surface reasons for departures and those who do not. The chart below shows the distribution of responses to this survey question, showing just over 30% of respondents (including World-Class) agreed/strongly agreed they effectively surface reasons customers leave. World-Class performers more than double this figure (70%), suggesting they give it a lot more attention.
Does it matter, once the decision has been made to change? One metric associated with departing customers is, of course, churn rate. For those companies that fall into the two rightmost columns (agree/strongly agree), the churn rate is 11.5%. For respondents that answered neutral on this question, 13.4%. For the two leftmost columns, 16.2%, 4.7 points (41%) higher than firms effective at surfacing why customers vote with their feet.
In line with these defections, the percentage of salespeople meeting quota for the two left columns: 41.8%; for the two right columns: 58.1%.
While the numbers are useful, in that they’re consistent, what is the takeaway for today? First, if you bother to ask why customers are leaving you, you may learn something. In an upcoming discussion, we’ll look at those firms doing win/loss analyses when they lose an opportunity. Even more important, what do you need to discover when you lose a customer?
Everyone’s heard the cost of gaining a new client/customer versus retaining an existing one. Generally, the figure for cost of sales is four times greater. Hanging onto existing customers is a good for business.
Second, not all customers are created equal. Some will be more profitable, less difficult (e.g., fewer service calls), or more flexible. These are all important and valuable qualities. Identifying which of your total customer base are closest to this ideal customer profile and really understanding why any of these leave and what can be done to keep them around is a great place to start.
Third, companies tend to celebrate new customers, while taking existing customers’ business in stride. Yes, you need to grow your base and new customer acquisition has the thrill of the chase, the excitement of something new. Celebrate!
But don’t be lulled into assuming your existing customer base is fixed. Do the hard work now of identifying your best customers (or top two tiers, and not just by revenue), and commit: a) to really understand them; and b) truly feel the pain of every departure. Determine to learn, really learn, what, if anything, could have caused them to stay.