We were honoured to be invited to speak at the fabulous LITE 2015 conference last week. Mark, Customer Thermometer’s co-founder, gave a talk on “How to stop your customers from leaving you”. Mark outlined 12 critical points, the first 6 of which we’ve covered in an abridged transcript here. Part two will follow shortly. You can get hold of Mark’s deck here.
You can also watch part 1 of “How to stop your customers from leaving you” in the video below
People are more interested, generally, in worrying about what’s coming in at the top of the funnel – the big deal, the big contract, the exciting customer, the new and novel stuff. But actually, as we’ll see in a moment, keeping hold of what you already have, your existing customer base, is vitally important.
So let’s just see what it means for a business. Here’s a very quick example. A business with 400 customers, which is turning over $1m per month but has a 5% monthly churn rate. What you’ll see is, by the end of the year, after that 5% churn, you actually will lose nearly 50% of your customer base.
Every business wants to grow. But so often we turn to costly sales and marketing activity to do it. It’s a bit like putting money in a savings account earning 1% when your credit card balance is costing you 19%!
Churn stops growth in its tracks.
When it comes to growth, so many businesses focus intensively on the top line and on cost control, and forget that the gap between the customers you win and the customers you lose is a huge part of the growth equation.
Make a customer, not a sale
Sales people are obviously incentivized to win business. As a result, there is often a lot of persuasion, objection-handling, ‘massaging’ a customer to try and get them to buy a particular product or service when, actually, in two or three or four months or a week’s time, that customer walks away because the fit isn’t right. It’s not win-win. I think that’s a really important point.
The key thing for me here is, yes, the sales person may have made their quota, but actually, the cost of that sale and the length of that customer stays with you, is it really worth it? The sales people are better off being incentivized to find that real win-win as opposed to try to fit round pegs in square holes.
We read a lot around this subject, and I want to bring your attention to another fabulous online software service business called Groove. Groove HQ, led by their CEO, Alex Turnbull who writes a wonderful blog.
And in this blog, he’s writing about his journey over the last few years from zero to half a million dollars revenue per month. He talks about his epiphany a couple of years back, where he realized he just was not talking to his customers. And what he did, he cleared his diary for days, if not weeks, on end, and literally picked up the phone to as many customers as he possibly could.
He couldn’t believe the things that he learned. He got so much feedback, both good and bad. He took it on the chin. And from that moment on, he swore blind that that was the way that his business would continue. What he’s done there, of course, is truly making that customer not just that one sale. It’s too easy for companies to sell something and then never talk to a customer again, and assume that they are happy, until they leave.
Service Recovery paradox
We’re all consumers. We all experience problems with suppliers, be it retailers or service industry, wherever it may be. That’s just what happens. Problems occur everyday and it’s how you deal with those problems which sets the men from the boys. What’s fascinating is, actually, you have more chance of retaining a customer, you have more opportunity to keep them loyal if a problem has occurred.
I want to show you a graph which explains this quite nicely.
On the Y axis, you can see we have customer loyalty, and on the X axis, we have time. But when things go wrong, you see that line taking a big dip as that loyalty starts to disappear. But if you deal with it well, if you deal with it in the correct fashion, you apologized, you offered a discount, you do everything in your power to make that customer happy again, you will find they become even more loyal. There is even more chance of them actually remaining with you because of the work you’ve done.
Support is more important than sales
Here in the UK, there’s a big supermarket war going on, I think it’s fair to say, lots and lots of competition from the “Price Low Stack’em High” types, right through to the high quality supermarkets. Take Waitrose supermarket group as an example, part of the John Lewis partnership. They fascinate me because if you wander in and you ask where something is on the shelf, rather than being told that it’s in aisle three next to the bacon, actually, they will stop whatever they are doing and they will take you there. They will take you to that item and then they will ask you if you need anymore help or if you need anything else.
So there’s real buy in from all employees. And if you actually go ahead and work on that front line with your customers, if you go the extra mile from a support point of view, which once again is not the sexy stuff, it’s not the sale side of things, then you really start to learn what customers are looking for and what they’re thinking. If you apply the same model to some of our online colleagues and partners, the likes of Zapier, the likes of Jason Fried’s Basecamp, if you read around the subject, you will see that every single one of their team rotates around their support environment. They get to find out what customers are saying on the front line.
Why is this important? Because you can go back to your day job and actually relate to what customers are asking for. It’s very easy to receive things from support and say, “Hey, this is what’s going on.” But when you actually experience it on the front line, it’s a completely different thing. And it actually helps you get closer to customers and it helps you do your job better to ensure that those customers remain with you.
So, be generous with your time, go the extra mile on the support side of things. At Customer Thermometer, we have a Minister of Magic. That is his department; Jake runs the support department, and he will always go the extra mile. He’ll write something cheeky. He’ll put an interesting quote in the email. The fact that he is called ‘Minister of Magic’ I think says it all. As a result of that, we have kept so many of our customers because of the over the top support which is being offered. Here’s a public thank you to him.
A final point on this one: the email, the corporate email black hole, do not have an email form, a contact us form, on your website and ignore it. It happens. It happens from the biggest companies down to the small. If you have a support and contact us form in your website, make sure you deal with it. Make sure you turn it around, because support is more important than sales.
Treat every customer equally
If you’ve seen Pretty Woman, the quote you’ll be thinking of right now is “Big mistake.”
It’s very, very easy to treat different types of customers differently, to respond to them slower, to section them up for different treatment dependent on spend, to ignore them a little, compared to an obvious bigger business. We don’t make that mistake, we aim never to make that mistake.
Online, even the smallest customer can have a huge voice. A huge impact. Both negatively and positively. We want every one of our customers to talk positively about us online, at dinner parties, on the train. That referral and that virtuous circle, is huge for us (as well as making us feel fabulous). Remember that all your customers add up to a mass of raving fans.
So treat every customer equally. Not only may they continue to buy, even if they’re small, but actually, it’s about who they’re connected to, who they work with, the referrals that might come from them as well, even if they remain a small customer, for your particular business. So treat every customer equally and do not make the same mistake that you see in that particular movie.
If you want to keep your customers, you’ve got to be prepared. Now, some people might call this risk analysis. I hate that word. I don’t want to get bogged down in that kind of bureaucracy. But what I do want to get you thinking about, is this story that Sir Clive Woodward tells…
If you remember back to the 2004 Athens Olympics, this picture depicts the men’s synchronized diving final.
Four out of five dives had occurred, and China just had to step up and basically do a simple dive and they would win the gold medal. They didn’t. And as you can see here from this particular picture, it went horribly wrong. It went horribly wrong for the people who were second, and third, and fourth as well. They each stepped up to do their fifth dive and dived incredibly badly. The net result was the people that stepped up next, who were lying in fifth position originally, were the Greek team and they went on to win that gold medal.
Sir Clive goes on to ask, “Why do you think it happened?” I’ll tell you the reason why, and it’s because of this guy.
The competition was disrupted for about two and a half hours since this particular person got up on the diving board and made a fool of himself. During that period, the reason that these other teams just performed so badly with their final dive of the competition was because their concentration, their routine, both physical and mental, had been completely disrupted. And as a result, they were totally out of sorts when it came to the final dive of the competition. Sir Clive mentions this in his coaching of the England team and their win in the rugby World Cup back in 2003.
Part of his coaching routine, Sir Clive would have a team meeting, and he would stop the meeting and he would suddenly throw in a bit of a curve ball and ask people,
“Okay, it’s the 78th minute. You are on the 22-meter line, you’re four points behind and there is a line out. What would you do?”
He would constantly interrupt meetings and throw in different scenarios so that people within the team could then figure out what they should be doing and talk it all through. Of course, when it comes to real life, they’re then able to react because they’ve done the preparation. They’ve rehearsed.
Now, this absolutely applies in business. We’ve all got situations where customers have left, but actually, if they had been thought through in advance, if there were plans in place for if a trainer didn’t turn up, if a computer system went down, if there was a data breach, what would you do? I mean it from a customer communications point of view. Literally picking up the phone, what is the process? The more you think about that, the more you’re prepared for that, the more likelihood there is that those customers will be retained. And really coming back to that service recovery concept as well, you do it well, they’ll stay with you forever. So be prepared in your business. Do not make that mistake, and do not be disrupted by the tutu man.
Enjoying this post? Read on… How to stop your customers from leaving you (part 2) is available here
If you want to talk about how Customer Thermometer can help you stop your customers from leaving, drop us a line
from leaving you (part 1)