WHY do new customers buy from your business, and why do existing ones stay with you?
If you cannot give immediate and compelling answers to these
questions, then you are operating blindly.
If you can answer these questions, ask yourself: “If those reasons are really strong enough for them to buy
from me, then why don’t ALL the potential customers buy from me?”
The truth is that very few businesses have any kind of
clarity about why customers come on board and then stay or go. A great deal of new
business development relies on energy and luck.
A lot of customer retention has more to do with inertia and
relationships than product and service superiority. Lost customers are blamed
on unfair competition.
The risk is that any competitor who finds a really
compelling factor to attract customers is likely to grab them all.
This is an unnecessary risk, because the reasons customers
join, stay or go are frequently in the business, but the information is not
analysed or acted on.
This leads to an ongoing loss of customers for reasons which are little
understood, and an inability to duplicate the factors that brought new
It is very similar to the development of a customer
database. All the information for a customer database resides in the company
The problem is that it is scattered in debtors’ records and cellphone
contacts, emais, address books, sales analysis and in notes or in the minds
of salespeople and warehousemen. Too often this information is not collated
into a database and used.
In exactly the same manner the reasons customers join, stay
or go are often available in the business, but unused. For example when a
customer is lost, the sales pattern can generate actions to reduce the risk of
losing other customers.
Before a customer stopped buying, did his orders taper off
or did he stop buying products he previously purchased? Which other customers
are displaying the first signs of this trend? It is time to talk to them, they
may be looking elsewhere.
Other information about the lost customer can be as easy to
use. Was there a change in management? Were there complaints or a change in the
pattern of payment? Was a change in price or terms a factor?
When was the
previous review with their management? Unless this information is extracted and
examined, there is no way of eliminating the causes of this loss and so
preventing other customers from leaving.
New customer gains can be made by duplicating the factors
that motivated recent new customers to join.
Which products did they buy first?
Which manager or staff member was involved in securing the first order? Which
competitor did they switch from? Are there patterns? Now duplicate the pattern.
In very large businesses they speak of data mining –
extracting valuable business information which is in the records, but not
SMEs can do exactly the same, without the expensive
software systems. Make it your mission in 2013 not to miss opportunities simply
because you did not look for and collate the available information.
*Ed Hatton, a business
consultant and owner of The Marketing Director
wrote this column for the Sanlam Business Tips newsletter. Ed’s business advice blog is here.