Monday, 12 July 2010

Why customers leave

- The most-often quoted study is one attributed to, variously, The American Society for Quality, the US Chambers of Commerce and a book called “Lessons from the Field” by Howard Feiertag and John Hogan. This gives the following reasons for customers leaving:

o Death or moving away – 4%

o The influence of friends and relatives – 5%

o Competitor marketing and special offers – 9%

o Dissatisfaction with product or price – 14%

o Perceived indifference of the supplier – 68%

- A study by RightNow Technologies says

o 73% of customers leave because of poor customer service but the supplier thinks that only 21% leave because of customer service

o The supplier thinks 48% leave because of price when in fact only 25% do so

- Mercer Management Consulting research shows that for a selection of retail outlets, only 15% to 30% of customers are price sensitive – that is, they would change supplier for a better price

- So retaining customers is not (usually) about price – it’s about letting the customer know you care

So if you love your customers can you charge what you like?

- No. You have to be competitive in your market - but superior customer care and marketing mix (USP, positioning and so forth) means you get to keep most of your customers and still charge a premium

- Low prices won’t keep customers if they think you are indifferent to them. Worse, using low prices attracts disloyal customers. The worst strategy of all is using low prices to make up for the fact that you and your staff really don’t care

It’s really difficult and expensive to get all my staff to provide great customer service

- It might seem so to start with – but the rewards are huge

o According to a study by the global business consulting firm Baines a 5% increase in customer retention can increase a company’s profitability by 75%

o Reichheld and Sasser reported that when MBNA America reduced its 10% defection rate to 5% their profits rose by 125%

- What we’re really talking about is values and beliefs. It’s the way you behave and what gets measured and what gets rewarded.

More business advice for business owners.

How do you value your business?

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