Imagine this … your quiet Sunday is broken up by the news that a monster tornado is heading straight for your business. You race to work and arrive with just moments to spare. Thankfully, the building is deserted but there's no way to save any of your equipment, tooling or inventory. You look around in a panic for something light and valuable for rescue … what do you grab? If your answer is an up-to-date master customer report with historic sales then you've proven you're a quick thinker who understands the power and value of those contacts. That green bar computer paper is your business.
After such a disaster, a properly insured business could accurately rebuild most of the bricks, mortar and "guts" that defined you, but without that customer data, you would be lost. Supreme knowledge, like an historic customer database, is literally invaluable and yet we don't always provide the right amount of safeguarding or corrective upkeep on these paper keys to the kingdom. Incredibly, there are times when we don't even fully use the knowledge stored in those customer reports. In today's sometimes sluggish sales environment, that is a luxury that we can no longer afford. Today we're going to concentrate on those inactive former customers who have left and not come back of their own accord. How can you get them heading in your direction?
Zero-In For A Powerful Sales Impact
We're taught that nothing beats a combination of high ground and powerful binoculars when searching for new sales. There is another way to grow by revisiting the partial successes of the past and coaxing them back into bloom. Targeting inactive, or "zero-sales customers," is a temporary initiative, not a permanent new way to look at your market. But, why change your outlook at all? Why go from a forward-looking perch where you scanned the horizon for new business to a different view that, admittedly, looks backward — even if just for a short while?
First, there are many competitive firms checking that horizon for business opportunities. That sales pie tends to produce many even-smaller slices. You have a far greater degree of possession when it comes to your former customers. They can be yours again. Your efforts are far more likely to produce a sale from an inactive zero sales customer than from a prospective customer. You already know that retaining and servicing an existing customer, or an ex-customer, is far less expensive than seeking out and landing a new, profitable customer.
When taken as a whole, this is normally a very promising opportunity. If you're unsure of the inherent value of a management initiative like this, I would urge you to test its potential. Begin by identifying the customers who haven't bought more than $100.00 since the beginning of 2006 through today. Analyze their individual purchases in 2004 and 2005 and then total them. Let's call that total dollar figure "missing sales." Generally, that's a sizeable number. If you took one-half of that amount and deposited into your business checking account, would it have a significant impact on your business and its needs now and for 2008? If the answer is yes, then an effort should get quickly underway.
Your Attrition Or Churn Rate
Every company has its own distinct customer attrition rate (sometimes called a churn rate) in which all businesses have both active and inactive customers. My experiences prove that churn rates aren't very often measured even though they are valid and valuable benchmarks for firms to track. The churn rate refers to the proportion of customers who leave a given supplier during a given time period. For instance, if "Traynor Surfaces" had 435 customers at the beginning of a given year and 96 of them became inactive in that year, the company would have a customer attrition or churn rate of approximately 22 percent.
This churn rate could possibly indicate general customer dissatisfaction, better offers from the competition, production or quality issues, staff turnover, more successful marketing and promotion by the competition or reasons having to do with the life cycles of "Traynor Surfaces" customer base.
To recap, there are multiple reasons you could end up with walk-away customers, including:
• The transaction caused your customer some unforeseen pain.
• Your pricing was either noncompetitive or inconsistent (fluctuation causes concern).
• The customer purchase was a "one-off" transaction, never meant to be repeated.
• Response to quotation request or lead time for job completion was unacceptable.
• The attitudes or behaviors demonstrated by your staff were disinterested, unprofessional or rude.
• The customer's core business or needs changed in some significant way.
• Your customer experienced a diverting life or cash event (illness, divorce, relocation, bankruptcy, etc.).