It costs about five times more to obtain a new customer than to retain an existing one. Though companies spend thousands of dollars to create new customers, few seem to care when they stop coming back. Spend some time plugging the leaks with a process for recapturing defecting customers. Jack Fries gives you five action steps that should make a difference.
Right now you’re losing customers. How you react to these defections could make the difference between life and death for your business. The reason: It costs about five times more to obtain a new customer than to retain an existing one. Yet, out of the multitude of companies spending thousands of dollars to create new customers, few care to know when their customers stop coming back. Instead of continuously pouring new customers into your agency, spend some time plugging some of the leaks with a standard process for recapturing defecting customers.
These five action steps should make a difference:
- Identify defections when they happen. You must know when a customer has ended a relationship with your agency. For agency businesses, it’s a non-renewal. Transactional relationships require a little more work. Knowing a customer’s average transaction size and frequency will let you identify behavior that deviates from the norm.
- Evaluate the value of a defection. Once a customer has left, you have to decide whether that customer is really worth keeping. Every agent will agree that some clients provide more value than others, and that retention of those high-value clients is crucial. At some point, every business needs to look at its clients in terms of both their potential value and of their impact on the cost of operations and marketing.
- Identify the cause. Regardless of whether you intend to keep or lose a customer, you must know why the customer is leaving. Conducting random exit interviews will give you advance warning of problems that, if left unresolved, could drive your customers to the competition in droves.
- Use a standard customer recapture process. Standard processes ensure that critical activities take place in a consistent manner. Create a consistent method of contacting defected customers and make it a part of your daily marketing activities. Always focus on direct marketing. Place new customers in the agency’s 'person who buys' bucket. Then, based on the size of the account and the number of policies written for them, send out a series of targeted letters and phone calls designed to create opportunities for account development.
- Measure the outcome of your efforts. Nothing improves unless it’s measured. An effective set of customer-recapture metrics should track the number of customers who defect in a given time period and the percentage that ultimately stay. You’ll also want to quantify the revenue from these retained customers — it will be an eye-opening figure.