Existing customers seldom jump ship because of price or functionality. Here's the real reason they booted you out.
Most people think that selling means getting new customers. That's part of the job, of course, but truly successful companies thrive on their ability to keep the customers they've already acquired.
The reason is simple. Finding new customers is expensive and time consuming. Many companies consider a "get new customers" campaign successful if more than 5% of the companies contacted end up buying.
By contrast, selling to existing customers is cheap and easy. Sales campaigns launched at a base of existing customers often have success rates as high as 70%, according to the fascinating book Customer Winback.
That's why losing a good customer to the competition is always a bad thing: You have to work more than 10 times as hard to get enough new customers just to make up the revenue that you lost--and forget about profit.
Why Customers Leave You
Curiously, most business owners and managers have the exact wrong idea about why customers leave. Most people believe that customers leave because:
They found a lower price elsewhere.
Their needs changed.
According to a classic study by the research firm CRMGuru, here are the reasons that customers give for jumping ship (respondents allowed multiple selections):
As you can see, when it comes to keeping your existing customers, customer service is three times more important than price--and five times more important than functionality.
That's ironic, because most companies, especially smaller ones, are obsessed with functionality and price. Quality and customer service are often afterthoughts.
Case Study: Getting It Wrong
A good example of this kind of flawed thinking is the software business. Most software companies push out products that are full of features but also full of bugs, priced at rock bottom. If you call support, half the time you're asked to leave a voice mail--or even charged money to report the problem.
Is it any wonder so many customers have absolutely no real loyalty to their software vendors?
If you want to keep the customers that you've got, you should reverse priorities and pay more attention to customer service and quality--and, consequently, less attention to functionality and price.
I fully realize that this runs contrary to 90% of what most people think is important, probably because price and functionality can play a large role in customer acquisition.
However, regardless of what you're selling, your long-term profitability is largely dependent upon your ability to keep current customers, rather than your ability to acquire new ones.
And that means keeping your existing customers happy--which is mostly about how you treat them once they're already customers.
GEOFFREY JAMES writes "Sales Source on Inc.com," the world's most-read sales-oriented blog. His new book, Business Without the Bullsh*t, will be published in early 2014. To get weekly blog updates, sign up for his free "Insider" newsletter. @Sales_Source