The correct answer is Price Too High.
According to a recent study by CRM Guru, almost half (49 percent) of all sales managers believe that price is the primary reason that customers leave, followed by "needs changed" (36 percent) and with "customer service" bringing up the rear at 22 percent.
That's what sales managers think. With that in mind, here's the second question.
The correct answer, by a long shot, is Customer Service!
In a similar CRMGuru survey of the respondents who stopped using a product or service, 74 percent (!!!!) blamed Customer Service as a major factor in their decision. The second-most frequently cited problem was Poor Quality (32 percent), while only 25 percent said they defected because of price issues. By far the least important factor was product functionality, which was cited as a major factor by only 14 percent of respondents.
You probably noticed that there's a pretty huge disconnect between what the sales managers believed and what was the actual reason for customer defections. Despite the constant emphasis on that everyone puts upon price, once you're in an account, it's CUSTOMER SERVICE that's going to keep the customers in the fold. EVERYTHING ELSE is comparatively unimportant.
OK, so now you know why you're losing customers. Do you know about how many you're losing? Here's the next question.
The answer is, on average, a little less than 25%. In other words, the average sales team works the first three months of each year simply trying to keep the number of customers level with the previous year. Needless to say, that puts a huge damper on sales productivity.
But do you know how big an impact that is? Here's your next question:
The correct answer is, on average, a probability of between 60 percent to 70 percent, according to study by Marketing Metrics. With that in mind, here's your last question:
The correct answer is Around 10%. That means that to replace a lost customer, you have to work six times as long as you would have spent to get the same sale from the customer who was lost. In other words, every time you lose a customer, you're not just losing revenue, you're throwing your close rate and your commissions down the toilet.
Incidentally, the average close rate on getting a lost customer back is a little better. You've got a 20 percent to 40 percent probability of accomplishing this, providing you address the problem that caused them to leave in the first place.
By the way, there's growing anecdotal evidence that acquiring new customers is getting harder every year because the traditional prospecting methods, like cold calling, are getting increasingly ineffective.
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What does this all mean for you? Here are some quick guidelines:
- RULE #1: Get out of denial. In all likelihood, either you or your manager (or both) think that your customers are leaving for the wrong reasons. Wake up.
- RULE #2: Improve your customer service. Insofar as YOU provide customer service, make sure it's superlative. Then work to ensure the rest of your firm is doing the same.
- RULE #3: Give existing customers the priority. While it's important to keep your pipeline primed with new prospects, it should NEVER be at the expense of your existing customer base.
- RULE #4: When customers leave, find out why. Until you know EXACTLY why your customers are leaving, you'll never know what you need to fix in order to keep them loyal.
- RULE #5: Selling to lost customers is easier than acquiring new ones. This is IMPORTANT! If you know why they left, and you fix it, most customers will give you another chance.