Editor’s note: Terry Vavra and Douglas Pruden are senior partners at research firm Customer Experience Partners. Vavra is based in Terry Richmond, Va. He can be reached at vavra@customerexperiencepartners.com. Pruden is based in Darien, Conn. He can be reached at pruden@customerexperiencepartners.com.
Suppose 8% of your current customers were to abandon your brand in favor of a competitor this year. What would be the impact? How much revenue would you lose? In reality, your defection rate may be even larger. An annual loss of 10% or even 20% of customers is not at all uncommon in many categories. It’s hard not to imagine customer defection as being high on management’s priority list. And yet, customer loss and churn appear to merit far less attention than they should. Management, in many corporations, dislikes talking about loss and churn and seem loath to admit or even publicly discuss that the problem exists.
The truth is, customer loss reaches an epidemic level in many companies. Part of the fault may lie with the marketing research community.
Customer loss
While virtually all brands lose customers every year, most are unlikely to know exactly how many. Some brands may have guestimates of the magnitude of their customer loss – especially if they conduct business through digital portals or have customers under contract or subscription. But most, especially those who deal with customers through intermediaries, have scant information. Regardless of the exact percentages, customer loss costs all business enterprises, large and small, significant revenue.
Why is customer defection infrequently discussed? Customers who’ve been lost remind organizations of failure. So, in many cases lost customers are allowed to simply fade into the company’s history, never to be thought of again. We’ve even witnessed cases in which their identities are scrubbed from the corporate database to save storage space, removing any evidence of their loss and thereby preventing any future win-back initiatives.
Second, lost customers represent a typical approach-avoidance scenario. It's reasonable to assume they are familiar with the marketer's brand or service (liking it enough to have purchased it at one time), yet through some set of circumstances they have subsequently rejected the brand in favor of another. Rejection by customers frequently spawns, on the marketer's part, the human reaction of avoidance. The marketer rejects further communication with the lost customer by supposing the customer wouldn’t want to hear from them, nor would they offer any useful information if asked.
Many give warning before heading out the door
The perplexing truth is that marketing research has the tools to make fairly solid predictions of how many customers will be lost in any time period. We can even provide management with a pretty good idea of exactly which customers are at risk. Further, MR can identify some of the most common reasons customers desert a brand. Unfortunately, this information is seldom requested or, when it is presented, it isn’t properly studied by management.
Most customer experience research today asks the Net Promoter question (“How likely would you be to recommend this brand to a friend or colleague?”). And, some CX research includes the question, “If you have a choice, how likely are you to continue buying this brand in the future?” So, there’s some great information available. Better research programs also ask questions like:
- Why do you give that rating?
- Where do we need to improve?
- What do we need to fix?
Yet, all too often that information falls to the footnotes in an MR overview or management isn’t asking the tough questions.
Gathering insights after losing a customer
Despite the inherit discomfort of dealing with failures, lost customers can be a very productive source of remedial information. Yet, from a pragmatic point of view, interviewing lost or departing customers may be considered a waste of time, while spending resources studying current customers is well accepted. We strongly believe lost customers should be pursued.
If you think about it, surveying lost customers is analogous to the "zero defect" philosophy of manufacturing. A manufacturer doesn't look to its acceptable products as a way to improve a manufacturing process; it studies the defective products. Further, conventional customer satisfaction studies can be thought of as being conducted among a biased population – current customers. Whether they’re totally satisfied or not, current customers are nevertheless biased toward a brand or service by virtue of their resolve to remain as customers. Lost customers, on the other hand, are the marketer's defects. These customers have abandoned the brand and can provide perspective that is more comparatively realistic in the marketplace.
Suggestions for a lost customer survey
Considering what can possibly be learned from lost customers, much more marketing research attention should be directed at them. Conducting a lost customer survey is relatively easy.
- Build a database or a source of names of lost customers (without an existing source of lost customers' names, the process will be protracted). If you don't have access to the names of your defected customers, you can substitute those customers scoring in the bottom three boxes of your latest NPS research or those who’ve responded with a low probability of repurchase.
- Create a questionnaire or interview, including a number of open-end questions to allow opportunity for the reporting of information or issues not currently identified by management as problem areas. Provide ample opportunity for lost customers to specify the key points of pain and their suggestions for improvement. Don’t bias your survey by using only closed-end questions that probe issues you already perceive to be a problem. You may be 180 degrees off target!
- Contact lost customers via internet, mail or telephone to administer your questionnaire.
- Tally a sufficient number of responses – to be statistically projectible – to be used as input to strategic planning, to improve manufacturing issues and to make the customer journey with your organization easier and more satisfying.
Interestingly, we've found many respondents to a lost customer survey indicate they'd previously contacted the company/brand asking for help or offering constructive suggestions only to have been completely ignored. (This revelation begs the question, why don’t we establish better quality complaint response systems for both questions and problems directed to a company and those floated on social media?)
Lost customers are accessible
A knee-jerk reaction to the idea of a lost customer survey may be, “They left our brand, why would they want to waste time talking to us?” Our experience, which includes numerous studies among lost customers, refutes this:
- a surprisingly high proportion of lost customers will participate in a marketer's survey (between 20% and 35%);
- their responses are generally constructive, thoughtful and rarely disrespectful; and
- a portion indicate they'd repurchase the marketer's brand and they'll describe exactly what the marketer needs to do to bring them back.
Adopting an active role
Customer loss is an epidemic that somehow fails to attract its fair attention from marketing research and corporate management. We believe the marketing research community should adopt a more active role in dealing with this problem. We have the tools. Lost customers are available and willing to answer our questions. And, lost customers’ insights and issues may offer a more realistic view of the problems and opportunities our brand faces than the opinions of sometimes obsequious current users.