The True Cost of Losing a Customer
By Susan Preiss
One negative customer experience may seem like a drop in the ocean of all your customer interactions, but it’s never that simple. Consider these statistics from a recent survey from NewVoiceMedia:
After experiencing poor customer service:
• 37% of customers would change their supplier
• 28% would post a negative online review
• 26% would complain via social media
• 13% would tell friends/colleagues
• 10% would inform the media
It’s worth mentioning that many customer relationships can be saved even after a bad experience with the actual product or service, particularly if they choose to contact a customer service rep. But if that interaction also results in a negative experience, the customer support experience can become the straw that breaks the camel’s back.
The far-reaching impact of a damaged reputation, the lost lifetime customer spend, and the expense of winning back that customer and/or acquiring new ones add up to a significant loss – in terms of both revenue and reputation.
Calculating Lifetime Customer Value
Obviously, the cost of losing a customer isn’t as simple as the loss of one particular sale or the associated make-good. You have to assume that had that customer had a positive experience – both with your product/service and with your customer service team – they would have continued to buy from you and recommend your brand to others.
According to research, only 42% of companies are able to accurately measure lifetime customer value. This is a knowledge gap that prevents companies from comprehensively understanding the impact of a single customer on their revenue, and, in turn, how their customer experience impacts the company’s success.
If you’re ready to tackle the math, check out this post from Hubspot.
The LVT calculation can play an important role in determining the ROI of your customer care team, and specifically, the customer save team.
The Cost of Customer Retention vs Acquisition
It’s common knowledge that it can cost five times as much to acquire new customers versus retaining existing ones – and 70% of surveyed companies agree it’s cheaper to retain. Acquisition costs are seen in sales efforts, marketing, and advertising as well as customer onboarding, but it’s retention that appears to gain the most profit in return; a mere 5% increase in retention rates can garner 25-95% extra profit.
How do these statistics help us determine the cost of losing a customer? At its most basic, every lost customer creates the need to acquire a new one. And, as we can see, acquiring those “replacements” can get expensive.
A Real Life Example
A client of ours operates with entitlement contracts for their highest-value enterprise-level customers, requiring parts and labor onsite within either a two- or four-hour window (depending on contract terms) if that customer experiences an outage.
When one of our client’s customers experienced multiple cases of delays in part deliveries, the customer threatened to switch suppliers. In response, we at Blue Ocean created a 24/7 team of Subject Matter Experts dedicated to supporting this particular customer. We established separate KPIs for the team and empowered …read more
Read more here:: B2CMarketingInsider