Every business loses customers, regardless of whether it’s a big telecom company, a big bank, a popular retailer, or even a small local business. Sadly, it is one of those universal truths like death and taxes. And just looking at the average termination rates of industries is enough to give any CFO chills: retail has an average turnover rate of 37%, finance and banking have a turnover rate of around 25% and telecom customers have a turnover rate of 21%. While ideally customers would never be lost, it happens and Jose Duarte, an entrepreneur and eCommerce expert from Costa Rica, explains what can be done to bring them back.
Because turnover directly affects results, and the cost of retaining customers is five to 25 times less than that of acquiring new ones, you probably become obsessed with losing customers and spend a small fortune on Net Promoter Scores trying to figure out what your customers really think of you. To be sure, like many businesses, you know that the customer turnover rate is very high and you have regular discussions with your team about how to reduce turnover and increase retention (and maybe even a couple of recurring nightmares on the subject).
You can also win back customers who left your mark for negative reasons, such as concern about your prices, poor customer service, or even issues with the quality of your products or services, or your brand ethic. Of course, when you have a genuine problem, it’s not something that a press release or a new advertising slogan simply changes. “The first step is actually to fix the root of the problems,” explains Duarte. “Improve your products and services, fix customer service problems, make your offer competitive and pricing transparent, solve problems with your supply chain and so on.”
Customers today have more choices and more information than ever before. A deal with the competition is just a couple of clicks away and low switching costs make it easy to move from your brand to that of a competitor. While, as mentioned above, not all customer loss is due to negative reasons, the reasons for customer loss range from poor customer service and user experience to more esoteric reasons, such as a brand’s corporate social responsibility history.
Contrary to popular belief, price sensitivity is not the main culprit when it comes to losing customers in the retail and eCommerce space; that title goes to customer service. In fact, poor customer service is responsible for more than 66% of retail customers changing brands. And it doesn’t necessarily require a poor service pattern; it may just be a bad experience that leaves a bitter taste in a customer’s mouth and prompts them to leave. So, when retail brands have poor customer service, whether it’s through their frontline staff, call centers, support channels, or even just relentless return policies, customers won’t hesitate to take their business elsewhere (and they’re also not afraid to explain their reasons for leaving in online reviews or customer forums).
Another key factor is poor user experience, i.e., not creating a shopping experience that is streamlined, easy to navigate and satisfying to interact with. Asserts Duarte, “A good user experience provides a seamless, integrated experience across your website, mobile app, in-store, and anywhere a customer can interact and shop with you. Ultimately, retail and eCommerce customers want convenience and the more streamlined the shopping experience, the more likely they are to stay.”
So, if you’re suffering from high rates of decline in retail or eCommerce, the first steps are to look at how to improve your customer service and user experience, and consider whether you should implement a loyalty program. Of course, you’ll also want to monitor social media and customer forums, as well as get information from customers about their opinion of your product or service and, if there are quality issues, fix them.
Obviously, dissatisfaction with your products and services, such as high fees, high late fees, unfair contract terms, a shortage of branches and a limited product offering, is an important reason why your customers often start looking elsewhere. And, with the proliferation of fast-growing companies in the Fintech and Startup sector, often offering to do the search and match for their clients, the alternatives are effectively limitless, from no-charge checking accounts to high-yield investment portfolios that compete for your clients’ business.
So, while customer service and experience, like retail and eCommerce, are the ones that ultimately decide a customer’s decision to leave their favorite retailer, if there’s dissatisfaction with your products and services, that’s where you should start looking for ways to make things better.
But it’s not just poor customer service that causes customers to be forced to look for alternatives; excessive pricing also plays a key role, particularly in North America, where prices are among the most competitive in the world. No matter how valuable you may think your service is, there are plenty options for those price-sensitive customers, and they love to shop around.
Again, if you have a high turnover rate, the first thing you should do is improve your customer service, ensuring that your price is competitive and focusing on delivering a smooth and satisfying customer experience.