Thinking About Customer Defection Is Mis-direction

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The recent newsletter from customer management magazine indicates that the of rate customer churn is up in a number of industries.
This particular study cite the following three key reasons for customer defection that are consistent across industries :

  • Not being recognized as a valuable customer.
  • Unhelpful staff.
  • Ineffective call centers

One of the main conclusions is that companies retention strategies need to improve to deal with the phenomenon.
I’ve got another suggestion—give customers a reason to return. If you want to be customer-centric, start thinking about problems from the customers’ perspective. We are all customers and I doubt that one of us wants to be retained.
Certainly the key reasons mentioned above are important to customers but there are some other considerations at work. A big one is the way companies fight over market share. In many industries it is tantamount to bidding for customers business.
As customers we see a world of abundance and overwhelming choice. Under these circumstances when a business routinely drops its price or offers incentives, it signals that their offering is functionally indistinguishable from the competition. This encourages customers to shop and shop around for the best trade-off between price and convenience—and, to do so every time. If it weren’t for convenience, the hold a business has on a customer would be even more tenuous.
I suggest a realignment in thinking about customer defections or churn and trying to patch together a strategy to retain customers. The above scenario describes a self-inflicted wound.
Don’t think about acquiring customers. Think about attracting them to your offering. What attracts customers? The hope of a better customer experience. Don’t focus on retention. Work at shifting the focus of the buyer-seller relationship from things to the inherent value of the relationship. Think, how you can get customers to see value in coming back time and time again. Think about building customer equity so they put up with snafus, so they are less focused on price and value the relationship.
Companies who put their energies into this approach dramatically increase the number of repeat customers. They also create advocates. It’s about shifting the focus from things the company wants (acquire and retain customers) to what the customer wants (a valued experience and a valuable relationship).

4 COMMENTS

  1. In Strategy Maps, Kaplan and Norton identify four customer management processes – Selection, Acquisition, Retention and Growth.

    Don’t think about acquiring customers? Don’t focus on retention?

    So what should firms do with the the Strategy Maps?

    Acquisition and retention are still every firm’s core tasks. Winners are those who acquire and retain customers more effectively. They acquire customers by attracting them to their offering. They retain customers by building customer equity.

    The hope of a better customer experience?

    Experience always matters. The problem with experience is that it lies in the eyes of beholder. It is unique in different situation to different person.

    Is there simply a way to deliver positive experience to different people at the same touchpoint?

    Daryl Choy, the founder of Touchpoint eXperience Management, helps firms make a difference at every touchpoint. Choy can be reached at wisdomboom.blogspot.com.

  2. Daryl,

    Let’s get past the semantics. I am not saying that a company’s core strategy should not include a plan to win over new customers or to have a plan to turn them into long-term customers. I am saying that the tactics that are very often associated with acquiring and retaining are inside-out thinking and in a marketplace where customers have choice they are producing diminishing returns.

    Since customers have alternatives, it behooves companies to consider the value proposition from their perspective. Sure, companies can erect barriers to switching but customers resent them and many will pay to escape. Moreover, they bad-mouth the company once they have left.

    John I. Todor, Ph.D.
    Author of Addicted Customers: How to Get Them Hooked on Your Company.

  3. John

    Thank you for helping me understand your message.

    Winning firms connect the opportunities that come outside-in with the capabilities that work inside-out.

    It’s always about balancing the focus.

    Daryl Choy
    Make Little Things Count
    wisdomboom.blogspot.com

  4. John,

    I couldn’t agree more that customers need to see value to return to do business again. One form of value, I believe, is simply a feeling of appreciation.

    It’s amazing to me how rarely I feel, as a customer, that someone that has me has a customer, genuinely values my business.

    A heartfelt “thank you” would go a long way towards motivating me to come back again, even when other forms of value are not all that distinctive.

    I think that retention can often mean not creating a reason for the customer to look elsewhere. I know that when I don’t feel appreciated, it motivates me to seek other options.

    Bob Thompson, CustomerThink Corp.
    Blog: Unconventional Wisdom

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