Lost Customers Can Mean Found Revenue

by Marcia Yudkin

Do you routinely purge customers from your database when they haven't bought from you in ages? If so, you're discarding an incredibly cost-effective source of revenue.

Studies show that previous customers, even if inactive or dissatisfied, respond to sales pitches at a rate several times higher than customers who have never bought before. That's why I drop people from my mailing list only when they request removal, die or become unreachable after moving. Even better: investigating why they're no longer buying.

When you take the time to find out why people defected from your customer ranks, customer retention improves, even before you fix whatever problems they complained about. Why? Besides specific gripes about things that went wrong in a buying relationship, the most common reason for defection is a feeling that the company just didn't care whether or not it had their business.

McKinsey and Company discovered that simply having a forum in which to express dissatisfaction doubled the percentage of customers who said they would repurchase from a company they had complained about. That forum might be an old-fashioned suggestion box, postage-paid comment cards, an 800-number on packaging or an email address for feedback.

Customers whose complaint was resolved had a repurchase intention rate of 54 percent. Of those who had their complaints resolved quickly, 82 percent expressed the intention to buy again. 

These statistics help explain why Ruppert Landscape in Ashton, Maryland, goes to extraordinary lengths to find out how customers feel about the company's service. Twice a year when it sends out a customer satisfaction survey, 40 percent don't respond. A followup letter nets another 15 percent, and Ruppert personnel phone or visit the other 25 percent. As a result, they enjoyed fewer lost customers, larger renewal contracts and fewer bad debts.

You can also motivate inactive customers to buy again with a win-back letter. Report on customer service changes, describe new products or services, relate success stories, make revealing comparisons with competitors or extend an irresistible offer. Make the letter as personal as possible, not only individually addressed but also with the name and extension of some real individual for them to call. In our increasingly impersonal business environment, personal contact makes a difference.  

The need to prevent and pursue lost customers also applies 
to those who once expressed an interest but never bought anything. Marianne Smith, a Houston-based corporate trainer, learned several years ago to keep contacting non-responders. She had developed a habit of deleting people from her database if she called them three or four times and got either a negative response or no response. Then a potential client she'd deleted called her more than five years after no contact and hired Smith for one of her best and largest projects up to that time.

"That was three and a half years ago," Smith reminiscences. "Has this client contacted me again after that project? No. Is she still in my database? You bet!"

Copyright 2005 Marcia Yudkin.  All rights reserved.

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