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Luring back former customers: Triumph of hope over intelligence?

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Apr 7 2009

It is axiomatic in marketing and customer management circles that it is much more difficult and expensive to acquire a new customer than it is to retain an existing customer.   Estimates range from five to fifteen times as expensive, depending on the industry and situation.   This is a reason why companies ought to pay more attention to nurturing current relationships and ensuring that customers feel valued, whether by providing a great experience or by other means.    Incidentally, happy customers can also be a great source of referrals and can help reduce the above mentioned high acquisition cost.

Not much is written about the relative difficulty and expense of regaining lost customers.    I suppose that also depends on the circumstances, but in some situations it may be not even be possible, because the customer has outgrown that need - think baby diapers.   Understanding your customer may help you realize that and help you avoid spending money on futile efforts. 

Allow me to illustrate these points with some personal anecdotes from the recent past. I recently sold the company I founded almost 10 years ago.   We were a medium size business with close to 100 employees.    We had a health insurance plan for all of that time.   The company also held a large value key man life insurance policy to protect our shareholders and employees in case something was to happen to me.    Shortly after the company was sold, we terminated both these policies as they were no longer needed.   The health insurance company, that had never bothered to communicate with me once during the many years we gave them business, was suddenly badgering me with customer satisfaction surveys, etc. to see what my experience had been like.  They were obviously trying to get at the reason for the termination under the guise of wanting to know my opinion of their service.    If they had any customer intelligence at all, they would have known that the policy was cancelled because our business circumstances had changed and had nothing to do with our satisfaction or otherwise with their services.  I ignored their requests, since there was no value to me in responding to them.  I would have gladly participated in any such survey while we were still a customer, but they never asked.

The life insurance company, which had also ignored me (nary a thank you over the years, mind you) for many years suddenly started calling me to tell me how concerned they were that my life was no longer insured.   Again they had no idea why the policy had been cancelled, even though I had explained the circumstances to their rep when I called to cancel the policy.   After repeated calls from the agent (my original agent had long since moved on), I finally spoke with him.   I asked him if he had any idea of my history with the company, that I had a high value policy for many years and had recently turned it in because I did not need that policy any more.  He was clueless.   He had just been given my name as a lapsed customer with no context as to my previous relationship.    Needless to say, I did not pursue the conversation.  Neither of these companies would be on my short list of companies to do business with in the future, if the need arises.    Nor would I recommend them to my peers.   I might even discourage my colleagues from doing business with them.

My last example has to do with what happened when the news of the sale of the company was announced.    Within minutes (no, that is not a typo or an exaggeration) of the announcement multiple private bankers from all over the country started calling me and bombarding me with letters offering to manage my money.     Not a single person called me from the local market where I live.    I found both the calls and the absence of local calls very interesting.    I did not respond to a single one of these approaches.  The only advisers I talked to were those recommended by people I trust.    The formal marketing outreach had zero impact.   Word of mouth was the only thing that worked, in this particular circumstance.  I do have to wonder how well cold calling works in these high involvement situations that are selling what is essentially a commodity service, but are very relationship based.  

What lessons do I draw as a professional marketer from all this?    Some marketing acquisition and win back efforts are futile.  IF you knew your customers, you would not waste your money chasing these opportunities.    So invest in knowing your customers and understanding why they do business with you.    Put that intelligence to use - treat those customers well - appropriately informed by that understanding.   At a minimum, take the time to thank them for their business.   Build your relationship while you still can. That courtesy may one of the best investments you can make.   You never know who they might be talking to.    It might be a prospect you cannot reach on your own.

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Apr 7 2009

Thane Schuning said:

If a company does something nice, the clients might tell one or two people. However, if the company does something poor, the clients will tell ten people each. Bad news travels much faster than good.

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