The Service Side of Loss Leader


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Loss leaders are those marked-down-below-wholesale-cost items designed to lead you into the store. For example, if milk is normally $4 a half-gallon and you see it advertised for two dollars, you are more apt to go to that store if you need milk. The store counts on you buying more stuff since you are there anyway. Las Vegas hotels sometimes give you a few free chips when you check in just to tempt you to the blackjack table.

The service side of loss leader is also about attracting customers. However, the attraction strategy is grounded in learning and not marketing. There are major insights to be mined from customers you lose you did not want to lose. However, most organizations take a passive role in gaining customer information, not a leadership stance intent on gaining insight translated into process or practice improvements. Some simply ask departing customers to complete a form stating why they are closing their accounts and assume the customers’ answers are the real story.

A financial services company asked all their commercial customers at account closing, “What is your primary reason for closing your account?” The overwhelming majority cited, “Price” or “My Needs Changed” as their reason. When we conducted a customer forensics study on a statistically significant sample of their recently lost customers, “customer experience” was the overwhelming choice for leaving. Customers knew giving answers like “price” or “needs changed” would less likely trigger a win back conversation they were not interested in having. When we asked the sample group a few experience assessment questions, their answers centered around “communications”. Again, “price” and “needs changed” were camouflage answers, not fundamental reasons.

The goal of customer feedback is not the pursuit of customer information (like “price”) or even customer intelligence (like “communication”). The objective is customer insight that triggers change. Using proprietary data analytics borrowed from the fields of social coding and cultural anthropology, the lost customer data revealed that, “Timely call-back/resolution after an issue” was the leading driver of customer exodus. When the organization installed virtual hold technology in their call center and a practice of “call back in two-hours or less,” their customer churn for the at-risk segment dropped 28%.

But the improvements did not stop there. When senior leaders listened to two hours of taped customer calls per week and added a Voice of the Customer item to the agenda of their weekly meetings, additional process and procedure changes lead customer turnover to drop an additional 11%. Since the customer segment with the greatest churn also had the greatest impact on revenue, the savings could be easily calculated. The retention of otherwise lost earnings easily funded in just the first year the cost of the resulting systems improvements.

Forensics does not seek to only determine the cause of death of a murder victim; the goal is to gain insight into why the person was killed. The lessons of customer forensics are similar. Consider if our financial services company had simply launched a price change based on what they believed caused the loss of their customers. Customer forensics involves learning the details about the series of events that lead customers to enter a zone of indifference (that point when there were open to a competitor). It also encompasses getting customers to accurately articulate the tipping point in their experience when they were frustrated or anger enough to pull up stakes and migrate to a competitor. Smart organizations lead by making changes grounded in deep insights derived from customer turnover.

Chip Bell
Chip R. Bell is the founder of the Chip Bell Group ( and a renowned keynote speaker and customer loyalty consultant. Dr. Bell has authored several best-selling books including The 9 1/2 Principles of Innovative Service and, with John Patterson, Take Their Breath Away. His newest book, Sprinkles: Creating Awesome Experiences Through Innovative Service, will be released in February.


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