Posted by: Troy White
December 4, 2007
Issue #298

How to Get Back Your Customers
That Left to Buy Elsewhere

In this issue:

• 8 common reasons your best customers will go to your competitors …

• How to tell if them leaving is the BEST thing to happen to your business …

• 2 tell-tale signs (one obvious, one not so obvious) they are about to bail on you and buy from someone else …

• Your new sales number to start tracking … and how it can easily add 50% to your bottom line …
• And Much More!

Fellow business builder,

We all love our clients … but what do you do when your clients leave you? It happens to all of us, but the way you deal with lost customers will have a direct and immediate impact on your sales and profitability.

Getting them back to buy from you again and again should be your primary motivation.

The big reason they will leave you

They found you, they came to trust you, they bought from you – then, chances are, never heard from you ever again.

And you wonder why they don’t buy more often from you?

Just think about all the different companies you have bought from in the past 12 months – how many of them did you EVER hear from again?

Why your customers will leave you:

• Unhappy with product or service
• Unhappy with price
• Complaints that go unaddressed
• Unhappy with new company policies
• Feel taken advantage of
• Better offer from competitors
• Changing life situations (making your product or service no longer necessary)
• Feel that you really could care less if you had their business or not

Base profits – The longer they stay in your active customer database, the more value they bring to your company. Your initial transactions will leave the least amount of profit on the table (factoring in acquisition costs). The more times they buy, the more higher value items they buy, the more valuable they are to your business and bottom line (not to mention the potential value of all your active clients to a potential buyer of your business).

Revenue growth – The longer your customers stay active, the more likely they will buy your higher end products and services, and the higher your revenues will go.

Cost savings – As they get more familiar with your offerings, your products, and your area of expertise, the less customer service time they will require. They won’t ask for things you don’t sell. They won’t have as many questions on how to use your products and services properly.

Word of mouth and referrals – Loyal customers talk to others and share their positive experiences with as many people as they can. In the day and age of very bad service almost everywhere you frequent, it is offering you the chance to stand out from the crowd in a big way.

Premium pricing – As they become more loyal to you, they will also become less concerned with the price they pay. They are more willing to buy your high-end offers. They will make quicker decisions. And they will become the majority of your revenues and profits.

Reasons why NOW is the time for you
to implement a customer loyalty program

1. The tools available. You have an immense collection of software tools at your disposal. The tools available now can automate a large majority of your customer communication and loyalty programs. I moved our company to Infusion CRM this year so that I could take advantage of more automation for my business. Moving from an online only shopping cart system to an offline focused CRM application has been the best thing I did in 2007.
2. They give you a definitive competitive advantage. Few (if any) of your direct competitors use loyalty programs … so if you are the one doing it … you will be the one that the majority of the market is naturally drawn to. There is a definite advantage to being the first in your industry to have a solid loyalty program in place.
3. 80/20. You undoubtedly have heard that 20% of your customers make up for 80% of your revenues (and profits) – and the numbers are no different in the entire universe of prospective buyers. Only 20% of the entire market should be considered your ideal client – the top 20%. You need to find them, win them over, and keep them as a loyal customer. Let your competitors deal with the other 80% of them that buy very little.

How do you know they have defected?

They may tell you they don’t like what you are offering them now. They may be unhappy with past purchases. This is the easiest one to fix as you know immediately that they are unhappy and are about to move on to another supplier.

They may just silently stop buying from you. If you have some form of continuity program, you will know immediately if they are about to defect. They will cancel their monthly billing, cancel their credit card, or write to tell you to stop the charges from going through. If you don’t have a continuity program in place, it is up to you to figure out the ideal buying cycle for your clients … and if they don’t buy every xx days or weeks … they should be flagged as potential for defection.

The plan to getting your lost clients back to buy more

First, decide on IF you want them back. Sounds counter-intuitive? It shouldn’t. The first thing you need to do is design your perfect customer demographic profile. Who is it that buys the most from you, is the easiest to deal with, uses the least amount of customer service, or refers the most business to you? Make sure you know exactly who it is you want buying from you. And only try and get those who fit the ideal customer profile back when they try and defect.

Next, calculate the lifetime value of your typical client right now (before any loyalty programs get put into action). The formula is simple: average transaction size X # of purchases in an average year X average # of years they stay an active buyer = the average lifetime value of your clients.

Once you know this number, we then need to start factoring in the additional value you can bring back to your company by recapturing your lost clients. Consider a tier 2 customer value or a second lifetime value.

Let’s use a hairdresser as an example:

Average purchase = $55
Average # times a year their clients visit = 9.5
Average # of years they stay loyal = 3
Old Initial Lifetime Customer Value = $1,567

After you put your new loyalty program in effect:

Average purchase = $55 (for now we will assume this stays the same – in reality it will rise as they are won back and sold higher-end products and services)
Average # times a year their clients visit = 11 (the more you communicate with them the more they will buy)
Average # of years they stay loyal = 5 (2 more years gained back from new loyalty program)
New Lifetime Customer Value = $3,025

Second lifetime value = $1,458 ($3,025 - $1,567)

In reality, the value will be much greater to the bottom line as you are not trying to win over a new customer, you are winning back an existing one … and the costs of getting an existing customer back to buy more are much lower than the cost you incur to get a new customer.

Now that you know these numbers you need to get busy
implementing your new loyalty program.

At the first sign of defection, assuming they fit your ideal customer profile, you need to get in touch with them.

Ideally, this involves a phone call from one of your team. Find out how they are, if they have in fact moved to another supplier, why they moved, and what you could do to get them back. This should also include interviews with your sales team as well to find out what reasons they are hearing for customer defection. They may know things that you don’t or that your customers don’t typically share.

Many times your sales team won’t know why the customer left, nor will your ex-customers tell you.

In those cases, you need to follow up with them again, a month or two after they leave.

If there was a big reason at the time that drove them away, they may have been so irritated at the time they didn’t care to speak to you – but 2 months later they have cooled down and shared their concerns with you.

When you are armed with this information on your customers … how much they are worth to your business, approximately what to be looking for when they defect, and which of your customers you want back (vs. those you would prefer buy elsewhere) … you then have the foundation for a customer loyalty and defection plan to be put in place.

Lost Customers -> segmented into 2 classes (ones you want back, ones you don’t) -> contact those you do want back (find out why they left, what you can do to win them back, uncover new needs they have that you haven’t helped meet, and if you can stay in contact with them even if they do not return) -> then put into action a win-back-your-trust campaign

In order to win back their trust, you must show your genuine interest in them.

Do not send the 45 generic e-mails
asking for their business back!

E-mail is as impersonal as it gets.

Send them a personal letter from you … have it handwritten if possible. Talk about the length of time you did business together, mention some of their past purchases, and express your sincere apologies that you lost their business.

And make it worth their while to come back!

They left for a reason – and they may or may not have told you what it is.

If you do not make it well worth their time and effort to come back, they will continue on with their new supplier and will never come back.

Show them you care and know the details of your relationship together.

Show them you have made changes and improvements to your business and products.

Show them the easy process you have set up to gain back their business.

Provide a financial incentive to come back.

And make it as personal as you can.

Put together a consistent plan to get them back …

• Write them immediately when they are flagged as a potentially lost client. You can automate this within your CRM software to flag them if they haven’t bought from you in XX amount of time.
• Use multiple media in your messages to them. From actual phone calls, to personalized letters, to gift packages in the mail. Carefully script and test each message that is going out to your lost customers. Find out which approaches work the best – then make those a standard system in your follow up.
• After a certain amount of time (and recapture messages going out to them) – try re-entering them in your sales funnel. Consider them a new prospect again and send them through the exact same system and funnel that you put all your prospects in.
• Stay in front of them. Whatever their reason for defection is – it is almost guaranteed that somewhere along the line, the company they moved to will make a mistake and that lost customer may again be thinking of making a move. If you are the only one staying in constant contact with them – they will come back to you.
• Figure out the point when you call it quits. You may find that after constant communication for a year they still do not come back. Or in your industry, it may take 2 or 3 years to reach this point. Ultimately you need to find the point when you move on and put your time and money into finding more of your perfect clients.
• Constantly measure, analyze and refine your lost customer campaigns to see how they are working. You may find certain pieces of your campaign don’t recapture any clients – while others get exceptional response rates.

Your lost customer campaigns should be considered as important, if not more important, than your new customer lead generation and conversion campaigns.

Your profits will go up.

Your marketing efforts will see much greater results (due to your new focus on the ideal customer profile- ones who buy more, more often, and at higher price points). And your customers and employees will be much happier with the new focus on ensuring complete satisfaction across the board.

Please let me know your thoughts, and if you have any furthr topics on this you would like to see discussed.

To your success,

Troy White
Editor, Small Business Mastery
Supplement to THE TOTAL PACKAGE™

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A Final Note:

If you have specific subjects you would like addressed, or have any comments on what you have seen here, please submit a comment below and I will see how I can help.

"Don’t wait. The time will never be just right.”

–Napoleon Hill

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1 Comment »

1. Comment by Douglas Kelly — December 4, 2007 @ 12:25 pm

   Give us a break. We who need information don\’t what on earth this means. \”I moved our company to Infusion CRM this year so that I could take advantage of more automation for my business.\”

   What is this and why did it address your needs and what do you mean \”you moved your company\” ?

   I\’m seriously interested in customer loyalty programs that I can afford. Please explain the afore mentioned so someone as dumb as I am can understand it.

   If possible I\’d like a personal email response. Just the URL if nothing else.

   thanks.
   Doug

2. Comment by Lauri — December 26, 2007 @ 5:48 am

   Thank you for the formula and the encouragement. I think sometimes we get intimidated by losing a customer and take it personally. This helps to keep it in perspective and realize it\’s important to stay on your toes.