Short-Term Thinking & Customer Attrition

If business professionals would pause for a moment to analyze how their short-term actions can negatively affect long-term customer attrition rates, many would likely do things differently.[1]

I’m all about long-term thinking… which means the current business fascination with thinking quarter-to-quarter grates on me — just so you know. On that basis, the above quote caught my attention, since I agreed with it quite wholeheartedly when it popped up on Christopher Carfi’s Social Customer Manifesto blog.

The article from which it’s taken is a quick read, and yields two more tidbits. Firstly:

The most serious culprits behind retention and loyalty problems are tied, however, to many companies’ lack of awareness of the importance of the customer experience, their short-term focus, and cost cutting. …. There’s a conflict between short-term results and long-term results. Sometimes short-term results win out, and that can make companies do things that might result in short-term profits, but may not result in long-term loyalty or long-term sustainable value in their customer base.[2]

This is what I’m generally on about… sacrificing the long-term in favour of the short-term. I’m not saying there’s never a time when compromise is necessary, but an utter disregard for the long-term can lead to utter disaster. It may not be universal, but I tend to think that the general rule is that the short-term negatives of favoring the long-term are small, whereas the long-term negatives from favoring the short-term are huge.

A quick example that comes to mind is something we not-so-lovingly called “the rape-and-pillage rate.” This is the difference in fees for the telephone on your desk because it’s a business line and not a residential line. It’s the long-distance charge you once paid because there was only one provider able to sell it to you. And it’s probably the biggest single reason why many people want to give VOIP a try. Short -term thinking is setting rates “because we can.” Long-term thinking is setting rates because they’re fair and equitable. The difference between the two is the cost of customer loyalty. Customer loyalty is what funds your long-term dividends.

In context, the quote and the article is talking specifically about customer attrition, and about finding clarity in understanding what’s on customers’ minds, particularly the ones on the way out the door. This brings us to the second tidbit, wherein a new phrase is dropped into the mix: “enterprise feedback management (EFM) application.” I hit that one and thought, “Oh no, it’s got an acronym.” That was the cynic talking… the one that expects somebody’s found a new way to get medium and large clients to spend money on data-mining common sense. Oh, and this to take place after clients have left.

Let’s be realistic: small and medium-sized businesses don’t have the budget for this anyway… and most of them can’t afford to wait until enough customers have left that they can identify and analyze a trend. So let’s consider the common-sense angle. This one could be relatively easy, yet isn’t done by most small businesses.

Chances are you’re already doing something that would make your clients stop buying from you.

First, find some valued clients who can be honest with you, and poll them. Ask them more than once, and make sure you feel you’ve gotten the straight goods from them. In my business, I’ve had clients come and tell me which staff have served them well and which have not. These are my clients, the valued ones. They aren’t going to leave, they just want me to know what’s going on in my business if I’m not the one serving them directly, and once I know, I can deal. These are the repeat buyers, the ongoing clients. You really want to find out why they keep buying and what would make them stop. Chances are you’re already doing something that would make them stop. The reason they haven’t stopped probably has to do with an ongoing relationship, with history… but eventually the balance will shift if you don’t find out what’s going on and change it. What’s at stake is the fact that new clientelle don’t have the loyalty to make them overlook shortcomings, and those clients are simply lost. You may want to find out what these factors are.

Next, look at the package you’re offering the client. Top to bottom, looking at the pricing, and the feature set as well as the as-advertised versus as-delivered comparisons. This is a tougher one now… put yourself in the customer’s shoes, and ask yourself how good a deal it is. Why would you buy this product or service, and if you have an answer for that one, ask why you would buy it from this particular merchant or provider (meaning you, once you change your shoes back). If the answer is obvious, you probably aren’t digging deep enough, certainly not as deep as your customers will.

Lastly, talk to the prospect who don’t buy, and find out why. You’ll probably need to find the good-natured ones who are willing to talk a little more without buying, so you are imposing upon their good graces. You are likely to find a measure of honesty though… they aren’t buying, have no vested interest, and will normally tell you what’s wrong with your value proposition in their eyes. You may just confirm who is not your market, but on the other hand, you may also find out what you’re doing to drive away your market, or fail to penetrate it as well as you could.

Now, compare the results of each of these three exercises. I suspect you won’t need a very big data sample in order to come up with valuable insights, so don’t spend months on this, and probably don’t even spend weeks on this. In order to be helpful, turn it around quickly from start to finish. Draw some conclusions, adapt, change. Apply common sense. Give it some time, and repeat the process.

Best of all, it’s a lot less expensive than anything you ever bought that had an acronym associated with it.

Footnotes:

  1. David Myron, “Finding Customer Clarity” in DestinationCRM.com (Hat Tip: Christopher Carfi) [back]
  2. ibid., quoting Associate Editor Coreen Bailor. [back]