One of the great truisms of selling is that it’s cheaper to keep a customer than it is to find a new one. Here’s another sales truism: most customer defections are a surprise to the salesperson!
It’s not about neglect or poor service. Your customer base is, no doubt, your most treasured asset and one that you toiled to acquire. So you probably want to protect it like you mean it (except, of course, for that small handful of “customers from hell” that we want to jettison. But that’s another column).
Why do customers defect? In my experience with clients, 90 percent of all defections can be placed in one large bucket: change. This bucket spills into four smaller ones. And here they are.
Change #1: The organizational landscape
Though there are other examples, here’s the example of organizational change that is most familiar to most salespeople: Phil is one of your sales guys. Phil’s contact at Customer X is Sally. Sally leaves the company. Sally’s replacement wants to put his own spin on things so he promptly brings in his own pet peddler to replace your company. Phil’s commissions – and your revenue from X – are history!
The best way to prevent this type of defection is to make sure your salespeople don’t make the number one account management mistake: overly identifying with a single contact. They will, of course, unless you intervene and encourage – coerce if you must – them to spread themselves around in the organization.
The longer they’ve been calling on a single contact the harder it is for them to move beyond that contact. And they will go to great lengths to convince you that there’s absolutely no reason to do so – oftentimes, because they actually believe it.
Change #2:
Supply chain philosophy
One client, an HR and employee benefits consulting firm, lost a big customer when that customer took the work it had been outsourcing to our client and brought it back inside. The client never saw it coming.
Turns out there was a shift in this customer’s supplier relationship philosophy at the top of the organization triggered by a new CEO that had joined the company more than a year earlier. Could it have been prevented? Maybe not entirely. But a reasonable business case presented to the right executive months earlier could very well have saved some of the business – if not all of it.
Change #3:
Strategic direction
Another client, a Fortune 100 chemical company, narrowly averted what would have been a painful defection of its biggest customer. The customer, the largest printing company in Canada, had made a strategic decision to exit the commodity-oriented type of printing that consumed 80 percent of my client’s products sold to the printer. It had decided to invest more heavily into what’s called flexo printing, historically a tiny part of that printing company’s revenue.
My client approached its customer’s management with a business presentation that demonstrated its commitment to flexo technology, including its sizeable investment in soon-to-be-released flexo-related products.
Sure, there was a little luck involved in this win. But, as I like to say, the better you understand the customer’s business the luckier you seem to get!
Change #4:
Business conditions
Curt, a salesperson for a client software company, approached a customer that was paying a $300,000 annual license fee for Curt’s software and suggested they move to a hosted solution at $100,000 per year.
Was Curt feeling the pressure from a competitor? Nope. Curt knew his customer’s business. This customer, he determined, was in the very early stages (that is, senior management was still in denial) of an impending and substantial decline in business. Rather than take the chance of losing all of his business with this account when the customer woke up and panicked, he opted for this approach.
Face it, too many salespeople in this situation would have crossed their fingers and hoped for the best, if they had even known at all about the decline in the customer’s business.
Check in with the salespeople managing your company’s most important accounts. Do they have the pulse of the customer’s business and politics, or is their knowledge limited to current and anticipated needs for your product? Are they connected throughout the company or do they over-identify with “their” contact? The wrong answer to either of these questions could be costly to your business.
