Tuesday, January 31, 2012

Loyalty and CKCH: When is it that you really lose a customer?

When do you lose a customer?
When does a customer decide to quit using your services? Does it happen right at the moment your customer picks up the phone to call you and say he doesn’t want your services anymore? Is this the best time for you to start taking actions to keep your customers from saying good-bye and signing up with your competition?

It's a bit funny (or sad, depending on your point of view) to see how much money companies - especially larger ones - invest in recovering customers after they have dropped out. This is what experts call "Customer Recovery Cost" and for me, it seems particularly ill-spent money, not to say that it’s simply thrown away.

If you've tried to unsubscribe from a telephone operator, for instance, you have already had the opportunity to see how, as soon as you say "I want to unsubscribe from your services", one of two things happens:

  • You can be told "Yes, sir, we’d like to let you know from this time on you’re free to go  and fry tomatoes with any of our competitors"
  • Or, suddenly, they begin to soothe your life with an extraordinary array of bids that you can’t do anything but ask yourself "if they can offer this to me now that I want to drop out, why they haven’t done it before?

If they can offer me this now that I want to drop out, why they haven’t done it before?

And here I think we can truly find the "heart" of the matter. Why do you have to wait for your clients to threat you with their unsubscription, to offer them the best of your services? Why don’t you take this actions before, while you still have the customer on your side, allowing them to be very happy with you, love you, and recommend you to their friends, and buy all your products, regardless of the pricing you have?

Do you see now why I think that investing money to get customers coming back to you after they get burned out, is throwing money away? And I’m sorry for having released three questions in a row, but it seems to be even a matter of common sense.

And it happens even in personal relationships. Many divorcing couples begin to get along better after separation. It would be worth asking why this happens, right?

But back to our topic. I think it's time to reconsider some fundamental marketing concepts which will prove to be very important in your business’ development: You can gain your customer’s loyalty while they are your customers, not after they drop out.

Gain your customer’s loyalty while they are your customers.

It's only when you lose a customer, that you have to recover it. But once the client makes the decision to drop out, you have very little left to do.

Look at it from this point of view: When a customer buys your product, he is satisfied with it, with the price, with the presentation, with all the "P's" that we like to mention. But along the way, something goes wrong. Something happens that your client is no longer as happy as he was before. It could have been a single incident, or it may have been more than one, the fact is that your client started to accumulate negative emotions about your product: fatigue, frustration, disappointment, disillusionment, boredom, ... and you can continue the list.

When do you think this is all going to end? Well, we already talked about it. It all ends the day your customer calls you to say he’s not happy and that no longer wants your services.

That's why you have to recover him. Because the guy is already tired of you, the company or your product and decided to drop out and sign up with the competition. That's why your work is more difficult and expensive now, because you have to climb the steep slope created by the bad experience your customer has had with your product.

Dedicate yourself to having happy, satisfied customers.

Instead of calculating the "CRC" (how much it costs you to recover a customer) devote yourself to invest your money and efforts into the "CKCH" - caution, this term is an invention of mine. What does CKCH stand for? It’s really easy to find out and you must have been thinking about it for a while.

The CKCH is the "Cost to Keep Customers Happy." I can assure you it’s a much lower cost than the recovery one and has a very strong argument backing it up: A satisfied customer will generate more sales, will recommend you, will engage with you and your product. An unhappy customer, doesn’t do any of this, and the worse part, he will make sure that others know he did have a bad experience with you.

What do you expect then? Are you still going to go with the "CRC" or you’re moving once and for all to the newest "CKCH"?

Related post: Can your company exist without customers?

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