The Value Of A Customer
Do you know how much each of your customers is worth to you? “Sure I do,” many will say. “We put customers first.” Or they'll say, “The customer is always right.” But I'll bet that your company loses customers every day over minor problems and issues that could have been easily solved if someone was just paying attention.
What is a customer worth? On the average, each one is worth the price of the advertising, the cost of the salesperson, the extra cost of your prime location, or the years of good reputation and recommendations it took to gain that customer. So, regardless of how much business they do with you, each customer has been gained at great cost, and each one you lose is just money down the drain.
I don't know about you, but I'm faithful to those who I like doing business with, even if they charge a bit more, and I'll vote with my feet in a heartbeat, by walking out the door and buying from someone else - even if I have to go miles out of my way - if I think I've been cheated or dealt with unfairly. And there are many companies that I will no longer buy from or recommend as the result.
What surprises me is that companies have been willing to lose my business over negligible things. A nearby builder supply store, for example, went out of their way to cheat me out of a $50 rebate on an appliance shipping charge, just weeks after I had purchased $7,500 worth of kitchen cabinets and appliances from them. Let's see, they saved less than 1% of my total business to that point, and lost all of my future business. Do you think that they know what each customer is worth?
Oh, but they're big, and someone else will soon enter their doors. Yet, do they understand how much more business has been lost in a dispute over 1% of sales?
The problem with this company - like most companies - is that no one is paying attention to customers. I wrote them a letter and complained, showing how I was unfairly treated in an open attempt to defraud, but no one cared to reply.
So, what about your company? What process do you have in place to make it easy for customers to let you know when they're unhappy, and to get disputes or problems resolved to retain customers? And even when the customer is in the wrong, how much would it take to keep them happy and retain their business?
Of course, there truly are customers who you're better off just letting go. You may already know who they are. They're the chiselers, whiners, and discount buyers - the 10% of your customers who create 90% of your headaches! But, don't create unfriendly policies for all your customers because of them. Empower your counter people to make wise decisions on what is reasonably needed to retain customers, and encourage customers to contact you whenever they're dissatisfied.
Have you looked at your books to see which customers you've lost over the past year, or whose business with you has declined? Do you care enough to find out why and then make the needed corrections? You will, if you realize how much your company has already paid out to gain him or her, and how much it will cost to buy someone to replace that customer.