Losing and keeping customers Strategy Magazine April 10, 1994

Customer attrition is a lot like dandruff–by the time you realize you have the problem, it’s already too late to prevent it. Unless, in the case of lapsed customers, you’ve built a predictive model based on measurable characteristics of lapsed customers which can be identified among current customers.

The notion of value in keeping the customers you have versus constantly acquiring new ones is certainly not a new one, but you’d never know it to look around. Awhile ago I wrote a column about switching away from a hair salon I’d been faithful to for about ten years. Have I heard a boo, halloo of any kind? Not a whisper. Let’s see–ten years times fifty to sixty dollars a visit times twelve visits per year–that adds up to about six or seven thousand dollars they won’t be getting over the next ten years.

Meanwhile, the constant hunt is on for new customers…also known as the revolving door. In most companies, 30-50% of customers who appear to be new are actually lapsed customers who have re-surfaced incognito. Not because they’re coy and tryng to avoid being recognized, but because, as marketers, we’ve failed to keep them when we had the chance. And, to add insult to injury, we don’t even know they’re back.

The trick is to get in front of them. before they leave or, at least, to do something about it when they go. But, why does it seem so difficult? It must be difficult, otherwise wouldn’t there be a multitude of examples of well-focused reactivation activities I could tell you about. Here’s the closest I could get:

Recently, an acquaintance received the following missive from CITIBANK. The letter went like this: “It has recently come to our attention that you are leaving less funds on deposit with us. We are very concerned that this may be an indication of some dissatisfaction you have experienced with our service. Our goal is to provide our valued customers, like yourself with the best possible service and be bank of choice for all your financial needs. It appears that we may have fallen short of this goal with you and we very much what to know how we can correct the situation. I have enclosed my business card for your reference and I will be giving you a call to discuss any financial needs which we may have failed to satisfy for you.” Now, other than a little grammatical awkwardness, you might say that ain’t bad at all. Rather thoughtful with overtones of mea culpa. Refreshing coming from a bank.

But, now picture this. This letter was received by an elderly widow living alone who, for the first time in her life, has a significant investment account to worry about. Key words…to worry about. This letter made her worry. This letter upset her. The letter was from a bank. Banks are serious stuff. It sounded as though there was a problem. Whose problem was it? Hers or the bank’s? What should she do about it? Needless to say, it didn’t help that the Branch Manager never made good on the promise to call and follow up.

 Charles de Gruchy remembers how it was

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