It's one thing everyone hates to do. Well, almost everyone.

"We kind of look forward to it," offers Bruce Grench, CEO of a small mail-order operation in Olivette, Mo. But a moment later he adds, "It's tough medicine."

He is referring to the bittersweet regimen of interviewing inactive customers.

Grench, owner of HDIS, a 30-employee provider of personal-care products, takes six approaches -- including in-home focus groups -- to solicit comments from would-be, current, and lost customers. "The hope," he says, "is that we can find something we're not doing right, because it offers us an opportunity."

Because most company owners hate to hear harsh words about their babies, they find the hardest part of tracking lost customers is picking up the phone. Bob Ottley, president of One Step Tree and Lawn Care, in North Chili, N.Y., hesitated for fear "the negative feedback would be impossible to deal with."

So he used an independent consulting firm to conduct One Step's first telephone survey, in 1988. The firm called current customers as well as those who'd canceled their service. The results were sobering: a full 32%, or 719 of 2,250 customers, had defected, and many wouldn't say why. That did it. Ottley shucked his administrative duties and devoted himself to employee training and customer relations.

Now One Step persistently keeps track of its customer list, and Ottley acts on the weekly "cancels" report. He's halved the attrition rate, and he knows why customers failed to renew. In the first half of 1994, for example, 19% of nonrenewers had moved, 16% decided to do their lawns themselves, 12% could no longer afford the service, and 8% opted for a cheaper rival. Among the rest, only 4% gave no explanation.

"Our leave-behind survey card helped a lot," says Ottley. "It puts the idea into the customer's head that we want to know if there's a problem." Customers who return the card with comments are eligible for a prize drawing.

Since 1988 One Step has conducted two more comprehensive surveys, its customer base has grown 26%, and its revenues have doubled, to $1.2 million.

For his part, Grench of HDIS responded to his price-conscious customers by introducing a line of private-label products, which now account for 15% of his business. He notes that a spoonful of sugar helps bitter medicine go down. By surveying many of his customers, he hears from a lot who are happy. That, he says, was "our ulterior motive."

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