Old & Lost Customers

In this Hidden Profit module we will look at ways to make money from old and lost customers.

There are three types of business:

  • One off purchases – often big purchases like buying a new car can be considered to be separate and distinct events – and especially if you don’t keep in contact.
  • Infrequent purchases – customers buy on an occasional basis, when they are in the mood or when they need what you sell.
  • Regular purchases – customers buy every week or month

What is A Lost Customer?

It’s easy to spot a regular customer who has been lost. They broke their cycle for several loops.

Let’s look at this from the buyer’s perspective.

If you go to the same salon to have your hair cut and styled, regular as clockwork and then you miss a month because you’re ill, there’s no reason to think you won’t continue your routine when you’re better.

If a friend recommend their hairdresser and you feel like a change (and especially if there is a special deal), you can be tempted to stray. Depending on your experience three things can happen:

  • You love the new experience and you see that it’s much better than you’re old place. You decide to switch your loyalty and your old hairdresser won’t see you again.
  • You hate the experience and you long to go back to the comfortable relationship you had before. The trial has confirmed in your mind just how great your existing hairdresser is. Depending on how you feel about your new look, you may rush back to get your hair back to how you like it or you may hold off for a bit longer than normal, embarrassed that you’ve been somewhere else.
  • It was OK. The special deal was good value and you don’t regret giving the new place a try. The habit of old place has been broken but the new hairdresser hasn’t won you over. As a customer, you’re now in play for the old and new hairdressers plus anyone else who happens to be recommended or makes an attractive offer.

If you decided to look for a new hairdresser because you’ve got bored, wanted something better or you were rudely treated by a member of staff, you may have more commitment to finding a new place. You’ve made a positive decision to switch.

If the hairdresser keeps any kind of customer record, they can spot the customers who stop coming when the cycle is broken and try to bring the customer back.

For infrequent customers, it’s more difficult to spot who’s been lost and that’s why I tend to think of these as old customers. They’ve had the experience but, for one reason or another, they haven’t become regulars.

For one-off customers, the assumption may be that a customer is lost as soon as they buy – there is no lifetime value to fight for. I think that’s a mistake because of future purchases or even the referral potential of these customers.

Why Reactivate Customers

Finding new customers is tough and a rule of thumb from the direct response marketing industry is that the easiest buyers in order are:

  1. Current customers
  2. Referrals recommended by a customer
  3. Old customers

Only after you’ve got everything you can from those three categories, should you turn the full beam of or your attention on attracting enquiries from new prospective customers.

Reactivating Lost Regular Customers

First a quick recap from Module 6.4 on Customer Loyalty on the reasons research shows why customers stop buying.

  • 1% die
  • 3% move away
  • 5% switch on the advice of friends & relatives
  • 9% find a better deal
  • 14% switch because of product dissatisfaction
  • 68% switch because they don’t feel valued and are not happy at the way they are being treated.

The work you’ve done for Pillar 3 on your customer value and Pillar 6 on customer satisfaction will strengthen the bond between you and your customers and cover the middle three reasons.b This is the middle hairdressing example where the combination of a recommendation from a friend and an offer persuaded you to give someone else a try.

You can’t do anything about the first and the second is difficult although it could give you the chance to to make a referral.

It’s the last one that is devastating – 68% don’t feel valued and appreciated or have some kind of service problem which hasn’t been corrected. Sometimes customers can feel taken-for-granted when they see businesses spend so much time, energy and money chasing after new customers and especially if they get great deals. Other times they are neglected because the business doesn’t know what to say – there’s no new offers coming along to get anyone excited.

Jay Abraham summarises the decision to stop buying as one of three reasons:

  1. They no longer need your products and services (the move or die options)
  2. They had an unsatisfactory experience
  3. The buying habit was interrupted and they never started again – the intention may have been to go back, like my first hairdressing example where buying stopped because of illness but the longer the break in contact, the weaker the link. The buyer either felt under-appreciated.

I think that’s a more useful way to look at the problem and find solutions.

Step 1 – Identifying Your Lost Customers

The first problem is to identify your lost customers.

That means having some kind of record in a customer database of who’s buying and when they last bought. It’s even better to record all their purchases and how much so you’ve got more information to spot trends.

This does involve some extra record-keeping for cash-style businesses that don’t issue invoices that go into the accounting system. It doesn’t need to be any more complicated than a simple spreadsheet based database of name, date and value spent with a pivot table to analyse the data and pinpoint the gaps.

When you’ve got the raw data you need to decide on your definition of a lapsed customer.

In Pillar 6 we talked about steps to stop customers from lapsing by making offers. That’s fine to keep the problem small going forward but you’ve probably got a backlog of customers who have already lapsed.

Our aim is to get them back.

Step 2 – Make Contact With Your Lapsed Customers

You’ve basically got three options – in reverse order of effectiveness:

  1. Contacting the customer to come back to buy from your business
  2. Making a special “We missed you while you were away” offer to encourage them to buy again
  3. Contacting the customer to find out why they stopped buying and then taking the necessary actions.

The first is easy – a sales call, letter or email saying that you’ve spotted they haven’t bought from you recently and asking them to come back.  Point out your standard special offers.

In this world of grey indifference, the fact that you’ve noticed will stand out light a burning beacon and may be enough to get people back to buying or visiting your store or website.

Those who left because they felt you weren’t paying attention, may have exactly the same feeling about their new supplier and you’ve come along and shown that you are different.

The problem is that it doesn’t go the extra mile to get customers back and it doesn’t tackle any service problems at source.

The second option is to create a special “for lapsed customers only” offer.

You don’t want to make it so good, there is a temptation to lapse to get another chance at the goodies.

But you do want to make your old customers feel that bit more special and have a more tempting offer to consider.

For an example, I have subscribed to the Harvard Business Review in the past but stopped because too many editions had articles outside of my interests. They could make me an offer like this:

“For Past Subscribers Only – start a new subscription to the Harvard Business Review for $69 saving $30 on the current subscription rate and receive online access to your choice of ten articles you missed while you were away.”

Since individual articles can sell for $6.50 each, it’s a good deal for an avid reader of business ideas like me.

The hairdresser in my first example could offer a welcome back discount of 25% off the first hair treatment plus a small basket of hair treatment goodies.

The best way is to swallow your pride and talk to your customer about why they stopped buying.

It may be something in their life – they were ill and couldn’t get out, they lost their job in the recession and had to cut back or a host of other reasons which gives you a chance to empathise and offer friendly support.

Or more seriously it may be that there was a problem with your business:

  • They made a complaint and didn’t feel they were properly treated – a very serious double whammy of an initial problem and a failure to correct it. The earlier you get to these and correct them, the faster you stop the negative word of mouth that can come from this type of problem.
  • They had a bad experience but didn’t complain… just took their money away to spend elsewhere. This is valuable information for you since other customers may be suffering the same problem in silence like a ticking time bomb. It gives you a chance to apologise, make amends and correct the problem in your staff and/or systems.
  • They didn’t feel appreciated and your service was nothing special. You’ve got some selling to do here to show that your business has changed for the better but with reassurance, an attractive offer and possibly a guarantee, you can get them back.
  • They got a better offer elsewhere. I’m not in favour of trying to win on price but you may find your customers fell into the “grass is greener on the other side” trap and what looked like a great deal, isn’t so good in practice and they need little persuading to come back.

Step 3 – Make Contact With Your Lapsed Customers

What step 2 and step 3 are the same?

Yes.

In just the same way as I recommend multi-step marketing to attract new customers, it works for bringing back the old.

Some need a little more convincing than others that you’ve changed.

If you revive 25% of customers after one contact, then you might get another 15% after a second contact and another 10% after the third.

You keep going while the marketing covers its costs, knowing that you’ll win on the lifetime value.

Step 4 – Give Great Customer Service

You’ve done well to tempt back lost customers but they may suspicious.

Yes they’ll give you the benefit of the doubt but you don’t want things going wrong… and especially not what caused them to go away in the first place.

Step 5 – Make Sure They Are In Your Normal Customer Programs

Once you’ve securely got these customers back, they need to go back into the process to get them to buy more and to buy more often.

It’s good for them and good for you.

Reactivating Old Infrequent Customers

Infrequent customers are harder to spot when you’ve lost them because there little or no pattern to their purchasing.

For me restaurants, theatres and even safari game reserves fit into this category.

I go somewhere, have a good experience and think “I must do that more often.”

Sometimes I do, many times I don’t.

Take the restaurant example.

It’s a special occasion and we go to a nice restaurant and have a great meal. two weeks later we’re chatting to friends and it’s suggested we have a meal out – the restaurant is an obvious place to suggest because it was the last good place I’ve been.

Or the theatre.

There’s a play or show that Margaret wants to see so we go. We have a good time and while there, we see the posters for the next three months of events – if there’s a must see event, we’re likely to book.

Regular contact is the key to getting these occasional customers to come back and especially with new exciting offers.

It’s about being top of mind AND interesting.

Some people, like my father with restaurants are occasional buyers because they like the variety and thrill of trying somewhere new. But a new or special limited availability menu can be just as exciting as finding a new place to eat.

Reactivating One Off Customers

One off customers are the most difficult to get back.

The nature of the product is that they won’t be in the market to make a similar purchase for some time and a lot can change between purchases, about your business and their position to buy what you sell.

Let’s take a look at a couple of famous car salesmen and how they created customer loyalty is what for most people is a purchase every three or four years.

The first is Joe Girard, recognised by the Guinness Book of Records as the world’s greatest salesman selling 13,001 cars at a Chevrolet  dealership between 1963 and 1978.

How did Joe Girard sell so many car?

he went out of his way to record the contact information of every person he met. Then every month he sent each one of them a card. He sent cards for the major holidays and sent birthday and anniversary cards. He sent Fourth of July, Groundhog Day, and Washington and Lincoln Birthday cards. Everyone Joe knew received a card each month and two in December because it was Christmas.

Each card had a simple handwritten note and his signature saying

“I like you – Joe Girard”

OK it does seem a little weird but it worked because when you bought a car from Joe Girard, you became a member of his family.

And would you buy your car from?

My second car salesman story is Bill Glazner with Sanderson Ford in Phoenix, Arizona.

I’ve heard about this through Dan Kennedy and when you go to his salesman’s cubicle you’re in for a shock.

The walls are covered top to bottom with photographs of his customers standing next to their new cars, each with a date.

They are clustered in little groups and you see the same person come back for model after model, and then with their wives or husbands, sons or daughters.

It makes a lasting impression and says this man can be trusted.

But it also honours his customers.

Cars are one thing and in some ways are a regular purchae but on a very long cycle.

What if you sell swimming pools?

First you should be looking at the servicing and supplies side to see if you can repeat business although i admit it will be small.

Second, your buyers need may have gone for what you sell but they can be an excellent source for referrals if you nurture your relationship. If you’re thinking about having a swimming pool installed in your house or garden, wouldn’t you ask someone who’d already got one?

Third, your buyers may move house. OK some may move out of the area but many upgrade or downgrade locally.

The new kitchen which should last ten years can become a more regular purchase if your customer moves house every four years.

What To Do

  1. Keep track of your customers and their purchases.
  2. Identify lost customers
  3. Make contact and try to win them back with an attractive offer
  4. Keep in contact. Once you’ve got them back, you don’t want to lose them.

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