Monday, October 24, 2011

8 Easy Ways to Lose Customers

imageThis article was written by Jeff Haden | September 26, 2011, reprinted by permission

Jeff Haden learned much of what he knows about management as he worked his way up the printing business from forklift driver to manager of a 250-employee book plant. Everything else he knows, he has picked up from ghostwriting books for some of the smartest CEOs he knows in business. He has written more than 30 non-fiction books, including four Business and Investing titles that reached #1 on Amazon's bestseller list. He'd tell you which ones, but then he'd have to kill you.

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Since often your most profitable customers are long-term customers, don’t lose them by

making these mistakes:

  1. Accept high employee turnover. High turnover is a fact of life in a few industries, but in most cases employees leave because they aren’t treated well. So do customers. Unless systems truly drive your business, you cannot expect to have long-term customers unless you first have long-term employees. If turnover is high, find ways to fix it. Otherwise customer turnover will always be high as well.
  2. Treat new and existing customers too differently. Offering discounts or incentives to land new customers is often necessary, but existing customers can quickly resent the fact their loyalty is not rewarded. Think hard about the carrots you offer new customers and make sure you “reward” existing customers as much if not more. And never forget that while new customers make an immediate top-line impact, sales to existing customers typically create a bigger impact on the bottom line.
  3. Introduce too many new faces. It’s easy to assume long-term customers love your brand, but more often than not they love your employees. (Customers buy from people, not companies.) Relationships are the lifeblood of most small businesses so don’t rotate salespeople, customer service reps, or key contacts unless absolutely necessary. When employees build relationships with customers, do everything possible to protect and foster those relationships. Employees are rarely interchangeable where strong business relationships are concerned.
  4. Focus too heavily on price. Being the low-cost provider is a competitive advantage, but good luck maintaining that advantage. Somewhere, someone is planning to steal your customers by cutting prices. You goal is to provide the best value, not necessarily the lowest cost, because value is an advantage you have a much better chance of maintaining through a combination of price, schedule, service, and relationships. If your marketing focuses mostly on price you’ll train customers to constantly look for a lower price — either from you or from your competition. Spend at least as much time finding ways to increase value as you do finding ways to lower costs and prices.
  5. Push too hard to grow customer revenue. Trying to sell more to existing customers is great, but don’t do so blindly. Know what each customer needs first and only then try to meet those needs. Never suggest a product or service a customer doesn’t need. And never say, “Is there anything else we could do for you?” unless you already know the answer and are ready to describe and provide a great solution. Otherwise you’re just pushing — and customers hate being pushed.
  6. Take your principals for granted. Every business has principal products or services that “keep the lights on.” Every business also has key customers that keep the lights on. Those are your “principals” (the association with “principle” is intended) but over time they can be taken for granted while newer, sexier, higher profile initiatives get all the attention. Make a list of the customers you can’t afford to lose. Then list what those customers buy. That’s the foundation of your business. Make it a principle to focus on your principals.
  7. Encourage the wrong focus. This happens most often in sales, when commission rates are much higher for new customers than existing customers. If that’s the case and I’m a salesman, why should I work to maintain existing accounts when I get paid a lot more to find new ones? That approach only works if someone else systemically takes over the responsibility for keeping an existing customer in the fold. Think about the incentives you provide and goals you set and make sure you encourage the outcomes you really want.
  8. Make it difficult to resolve problems. Policies and guidelines are great for ensuring employee compliance, but a customer with a problem doesn’t care about policies; she just wants her problem fixed. Let employees see complaint-resolution policies as guidelines rather than rules and allow freedom to make judgment calls. Resolving a customer problem or complaint can actually be the moment when your business establishes an even stronger customer relationship — if your employees are free to make that happen.