Terry Vavra's Blog

Customer Winback; Back in the News!

Posted on 30. Nov, 2011 by tvavra in Customer Winback

In tough times, businesspeople reevaluate all of their opportunities to boost sales.  So it’s no surprise that today we’re again hearing about winning back lost customers.  Even without the current financial downturn, pursuing lost customer has always made good sense.  After all, while the success rate of prospecting for new customers is generally 5% or less, our experiences show that success rates for winning back former customers ranges from 20% up to 40%!  It’s easier because we know them and they are already familiar with us.

The top five reasons customers defect?  Delivery/installation/performance issues; improper complaint handling; price/cost; dissatisfaction with organizational/procedural changes; and feeling uncared for and unwanted.  Surveys on the relative importance of these causes differ, but uniformly service issues are found to be among the most important.

Strategic Decisions

To efficiently win back customers several decisions have to be made.  Foremost among these is which customers should be targeted?  Not every lost customer will have been profitable in their first lifetime.  Winning back unprofitable customers would be ‘throwing good money after bad’.  The low frequency, low share of wallet customer demanding excessive customer service is one obvious example.  But there are others including the spinner who flips from your brand to your competitor (and back) taking advantage of every promotion and offer without ever staying long enough to let a brand earn a profit.  Boy, do they love those winback offers!

Secondly you have to consider if the reason for the customer’s original departure has been fixed.  But don’t always assume it’s a performance problem.  Curiously we find many times defection is based on misperception or misunderstanding – a communications problem.  Either performance needs to be improved or your communication of performance needs to be sharpened.  Without an exit interview or a good database, you may not know the major causes of defection or which customers defected for which reasons – complicating targeting.

Search for Root Causes

Assuming you know the key disappointments, you need to determine how they can be most efficiently fixed.  Considering service issues, “poor service” can mean lots of different things. Getting an objective measure of the total customer experience and where customers see key failures is a first necessary step.  Some problems come from poorly motivated employees (poorly trained and poorly managed).  Other cases may be the result of not setting proper expectations among customers, or poorly communicating how customers can get the most out of your product/service through correct usage.  Until or unless the specific problem is identified and corrected it’s hardly worth your creating a winback initiative.

Tags: customer winback