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Bringing back lost customers

Ideas from your employeesAt first glance, the company didn't look like the kind of client anyone would want back. The records in the accounting department showed it was no longer a customer because it hadn't paid their bill. But the advertising director of the Austin Business Journal had a hunch that the former advertiser might be worth bringing back into the fold. He went to the business for a chat.

The company hadn't stopped advertising because it couldn't pay its bills; it didn't pay the bill because the paper had run the wrong ads and the wrong dates. When company officials complained, they were assured the problem would be fixed, so when the bill arrived, they withheld payment because they were waiting for the amount to be adjusted. No one told the accounts receivable staff, which began sending past due notices. Now seriously annoyed, the construction company stopped doing business with the newspaper completely.

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With the new information in hand, the ad director managed to convince the customer to give the paper another try.

Lost customers -- an ignored opportunity
The Austin Business Journal's story, shared in the new book Customer Winback: How To Recapture Lost Customers -- and Keep Them Loyal, is a rarity in American business. Most companies today don't know how many customers they've lost, much less attempt to bring them back. The average company, the authors estimate, loses 20 to 40 percent of its customers each year. Nearly half of them don't even know why the customers left.

Co-author Michael Lowenstein says most small businesses ignore former customers in their zeal to gain new customers and retain the ones they have.

"They never go back to former customers to find out why the left and they don't identify customers at risk," Lowenstein says, "because there has always been the feeling that a customer who is gone is gone. They see lost customers as dead opportunities."

Well, aren't they?

Not by a long shot. According to research from Marketing Metrics, a Paramus, N.J.-based consulting firm, your chances of successfully selling to a former customer is 20 to 40 percent. That's significantly higher than the 5- to 20-percent chance of selling to a new prospect. Your chances are better, Lowenstein says, because former customers already know you and what your products or services can do. Plus, you know them. You have access to their past buying behavior, so you have a significant advantage over a competitor who doesn't know they bought a thousand blue widgets last year -- but not a single red one.

No pain, no regain
Another reason many companies don't try to win back former customers is simply because there may be some pain involved in the process. No one likes to hear that they've screwed up.

"These signals come up early, but our natural tendency is to ignore them because they're uncomfortable," says Daniel Pitlik, a California-based management consultant who works with companies trying to save major accounts. "I think fundamentally there's fear behind of all of it. There is a certain level of, 'Am I not measuring up? What does it say about me?'"

The process of winning back customers begins with finding out why they left. Britt Beemer, CEO of America's Research Group, a leading retail research company, says customer relationships break up for the same reasons personal ones do.

"It's all based upon communication," Beemer says. "Too much isolation means divorce. The two ways you can end the relationship is do something they don't think is trustworthy or you quit talking."

Two out of five ain't bad
Lowenstein has identified five basic reasons companies lose customers, and three of the five categories are probably not good prospects for win-back. Those are:

  • Customers you intentionally push away because they suck the life out of your business;
  • Customers who jump ship any time they find a lower price; and
  • Customers who physically or demographically leave your marketplace.

The customers you have the best shot with are those you unintentionally pushed away because of a glitch in the process, such as delivery, billing or service problems, and those who are pulled away by competitors who offered them what they perceived as a better value.

Conduct exit interviews with former customers. It's an excellent way to find out why they left and attempt to win them back. Marketing Metrics found that at least half of former customers will agree to an exit interview and about 30 percent will tell you what you can do to earn their business again.

"Ask intelligent questions, like, 'What was it that brought you here in the first place? What did you want? What's changed? Where have we disappointed you?'" Lowenstein says. "You need to be a good researcher. Listen and ask intelligent questions. If you don't do that, you're letting a good opportunity pass you by."

Your chances for a win-back also depend on your timing. Lowenstein's co-author, Jill Griffin, heads a research firm that focuses on customer and staff loyalty. She's found that customers may be reluctant initially to give their real reasons for leaving. Contacts made 30 to 60 days after customers leave lets them know you haven't forgotten them and the door remains open to come back. It's also given them time to assess the competition.

Listen, then ask
Pitlik agrees that sitting down with clients to discuss the issues that made them leave is critical. Sometimes it may be as simple as a salesperson left your company without passing along vital information about an account. Sometimes, though, there are real problems that need to be addressed. Avoid the temptation to make rash promises you can't keep. Listen carefully.

"Demonstrate that you've listened -- it's the customer who's not being heard who goes ballistic," he says. "Having one person who is listening is so powerful."

Then, finally, just ask for their business.

"We have presidents who stand up and say, 'Give me another chance,' and we give it to them," Pitlik says. "Businesses will give you another chance if your work has been good in the past."

Pat Curry is a freelance writer based in Georgia

-- Posted: May 7, 2001

 

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See Also
PLUS: Warning signs of fleeing customers
Face it -- some customers are worth losing
Good customers bring good business -- reward them!
Top 6 ways to 'Net customer satisfaction
Lessons from SBA's best businesses
10 lessons to learn from dead dot-coms

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