The Cost of Losing a Customer

We all have the customers that we feel like running from when they walk through the door or we see
their name and number come up on the caller ID screen. These are the ones who always seem to
complain or are so demanding you question whether you would be better off if they did go over to the
competition. Let them deal with the headaches, right?

Well, it might be worthwhile to see just what kind of value these difficult customers represent to you
and your business. This is important because the true value of a customer may help you determine how
you view each and every customer.

Every customer has three things to consider when it comes to value they represent. That is the value of
their past purchase, their current purchases, and likely future purchases. In addition to those three
factors, we also have an unknown factor. More on that later.

The value of past purchases is important because that helps us decide just how much a customer is likely
to spend with our business in the future. For example, if a customer has a history of purchasing $100 a
month for the last 3 years, then we know that we will likely see those purchases continue as long as the
customer remains pleased with our products and services.

Current purchases let us know how much business the customer is presently doing with us and also help
us identify any trends in their business. For example, if past history shows their purchases decreasing
gradually over the last few years and purchases now are down considerably, it might mean the
relationship might be reaching the end. For example, you might be selling baby products and customer’s
children might be reaching the age where they are using less and less of your product and soon may not
be using any at all. This is important to understand.

The value of future purchases is also important because it helps you forecast the value of keeping that
customer happy with your business so that he continues to purchase from you and not your
competition. For example, if a customer has steadily purchased $100 a month from you over the last 3
years, it might be reasonable to expect that he will continue to do so for the next year or two. All this
boils down to understanding the value of a customer. When you understanding true value, you can
make informed decisions pertaining to what you are willing to do in order to satisfy that customer.
Let’s say customer A walks in the store and creates a situation where his demands are quite high. This
customer is a “high maintenance customer” and you are not sure whether or not you should attempt to
reach an agreement with the customer. His current purchase, of which he has a complaint, was for $50.

Right now, many of us might be tempted to tell the customer to take his business elsewhere because of
the high amount of effort and resources required to address his continuous demands. After all, a $50
sale is not going to make or break you. More important, is that the value of the current sale is not going
to appear important to your brain, either. If we don’t attach much importance to something, we often
do not make the effort to hold on to it.

But what if the value of that customer were more important? What if you were to realize that this
customer has spent $250 a month in your store for the last 3 three years? That amounts to $3,000 a
year! So, if you look at this customer as a customer who purchased $3,000 from you instead of just $50
do you think you would treat them differently or at least have a different mindset towards him?

Of course you would. By understanding that you are at risk of losing $3,000 instead of just $50 you can
make a more informed decision as to what you should do to keep that customer happy. If it costs your
$75 to keep that customer happy, it might be worth it to salvage $3,000 a year but not for salvaging a
$50 sale! In order to make informed decisions, you need to understand the real value of a customer and
not just the value of the current purchase.

Now, about that “unknown factor”. Every customer has an unknown value that must be taken into
consideration. That unknown value is the amount of business that customer might bring to you, or take
from you, because of their comments or actions regarding their experience. Since dissatisfied customers
can be as much as 10 times more likely to spread the word about their experience, this can be quite
important for you to consider.

It has been said that a great reputation can take years to build and minutes to destroy. That is because
people often take multiple good experiences in order to feel good about a business but only one to drive
them away for good. Because of this, and because we do not wish to have negative comments spread
about our business, we must decide whether it is in our best interest to let any customer walk away
dissatisfied unless their demands are truly off the charts.
So, the next time the “customer from the dark side” walks through your doors, understand the value
they really represent and make your decisions based on more than what they are currently complaining
about. Look at the big picture and do what is right for you and your business.

The Customer Service Training Institute

http://www.infowhse.com