Existing business is more profitable than new business
It's well established that customer acquisition cost (CAC) is as much as 5 to 8 times higher than retaining existing clients. Long-term clients are often more profitable too. Research by Frederick Reichheld of Bain & Company (the inventor of the net promoter score) shows increasing customer retention rates by 5% increases profits by a whopping 25% to 95%.
So what do those numbers mean?
Don't let your clients go without a fight.
- When a client is leaving it can feel like a betrayal but don't let your emotion influence your professional response.
- Acknowledge their feedback and ask for a follow-up/debrief/exit interview over the coming days.
- Now it's time to prepare. Take a good long look at the partnership and examine what went wrong and what you can do to fix it.
- Brainstorm your ideas and decide on a strategy. Explain what you're going to do and make the solution compelling. It doesn't have to mean dropping your prices. Beware of this strategy. A super-sweet deal may offend your client - they'll think you've been ripping them off.
- If they accept - great - make sure you deliver on the promises you've made.
- If they don't - wish them well and stay in touch. Leave the door open to doing business again in future.
- Make sure stakeholders at your company know what went wrong and ask how you contributed to losing clients how you can better manage relationships in future.
- Go through your portfolio with a fine-tooth comb. Don't make the same mistakes twice.
- Celebrate retention.
Don't panic
You'll typically find out your client has decided to leave by one of 3 ways:
- The call and tell you
- They write and let you know
- They stop trading and you realise months later they've gone.
Why? It could be any of 1,000 reasons you're losing clients - often nothing to do with you as an Account Manager.
Still, it can really feel like a betrayal. I've had some clients leave where I've poured my heart and soul into making things work. So their decision to move on has hurt big time and it's been difficult to separate my emotional response from my professional one.
Regardless of how you learn your client wants to leave, do not jump into panic-mode and start offering solutions before you've thought them through.
If you've had the courtesy of a notification the first thing you should send to the client who is leaving is an acknowledgement in writing. Your response should confirm the situation, express your disappointment and ask if you might have a further conversation about why they want to leave.
If they've just stopped trading, then the approach is similar. Get in touch with the key contact. Let them know you've noticed they're no longer trading and would like to arrange a follow up to discuss their motivations for leaving.
Figure out why
It's time to take a good, long, hard look at why your client has decided to leave.
- Did your client drift away or was there an event that triggered their departure?
- Are your client's expectations realistic? i.e. champagne tastes on a beer budget!
- Was your client getting the attention they needed?
- Were you meeting your commitments (e.g. service level agreements, key performance indicators)
- Was your client at risk? Were the underlying issues you failed to address?
- Are you competitive? Does your client's pricing no longer reflect the market?
- Are you innovating? Are you keeping up with your competitors?
- Is your USP (Unique Selling Point) not so unique any more?
- Have you made promises for things to get better that hasn't delivered results?
- Did you suspect there were problems but took the "no news is good news" approach? What were they?
- Have you met or failed expectations?
- Do you have enough resources? Were you or others overworked and the cracks have been showing?
- Have the people working with your client been the right fit? Could another team make a difference?
- Is their configuration the right one?
- Have things changed in your business where an alternative product or service could generate greater value?
- What could you have done differently?
Once you've answered all of these questions, you will have a few solid ideas about what you can offer your client to stay.
You may need to recalibrate your offer but do not drop your pants. Not only does it destroy your integrity but there's nothing more insulting to a client than to be offered a super-sweet deal on the back of terminating their relationship. The first thing your client will think is you've ripped off all these years and they'll run for the door.
Give them a reason to stay
Ultimately "please stay" is what to say to any client who is leaving, just don't ask them until you've done your homework and can give them a good reason not to leave.
This may sound obvious, but in a survey by Accenture on customer service
- 81% of respondents felt the company they abandoned could have done more to keep their business.
- 51% of respondents would have reconsidered their decision if they'd been offered advice or suggestions how to get more value from the partnership.
By now you've got a good idea of what went wrong and how you can fix it. Before putting your offer on the table, you'll need to make sure you're on the right track by getting some honest feedback from your client. It will guide you on which tactics to use to persuade your client to stay. In the follow-up meeting (a.k.a. exit interview) ask the same question you asked yourself:
- Why are you leaving?
- Were your expectations met?
- Are we competitive?
- Could we have done more?
- What could we have done differently?
- Do we have the right team in place?
- What can we do to get you to stay?
Steer the conversation to the ideas you've come up with. It's not a hard-sell. You're bouncing some ideas around and asking your client what they think.
- Is this enough?
- Would they be open to an updated proposal or further dialogue based on your suggestions?
The goal is not to secure a 100% commitment from them to stay. Essentially the purpose of the meeting is an exit interview, so you'll piss them off if you go in all guns blazing.
What you're doing is seeding enough doubt to make them wonder if it's really going to be better somewhere else? Maybe they should stay and work things out. Better the devil you know:
- If they show interest, there's more follow up needed.
- If they're firm in their decision to leave make it clear you lose clients gracefully.
- If they obviously hate your guts, then don't humiliate yourself by making a counter-offer. It's a relationship that is likely beyond salvaging.
Whether your client stays or goes, a thorough debrief is great learning opportunity to help you fix what's wrong.
Don't burn bridges
Sometimes it doesn't go your way.
Despite all the evidence that staying is better than leaving, your client decides it's time to part ways. Better to lose a client but keep a friend and leave the door open for future business opportunities.
Put together a transition plan - even if they've already left - and share it with your client. It's a good way to set expectations and make sure nothing is overlooked. It may even help keep them once they realise the hassle (not the cost) involved in changing suppliers.
You'll want to cover off things like:
- What happens with any accounts payable due?
- What happens with their data after they close their account and how they can access it?
- How long will you support them once they have terminated? (e.g. maybe they have existing orders that still need to be fulfilled)
- What costs if any are associated with closing their account.
- What to do should they wish to reactivate
Finally, create an engagement plan to nurture your relationship after they've left.
You've got nothing to lose by staying in touch. Don't be a stalker, but an email every few months keeping them up-to-date with what's going on in your business and industry trends will ensure you stay relevant and front of mind.
I've had many clients leave only to find the grass wasn't so green, so who knows, you might even get back together one day.
Remember: it's not the end of the world
Life goes on. Churn happens.
That's not to say you shouldn't care when a client leaves, but also don't go throwing yourself off the closest bridge.
Losing clients is an inevitable part of doing business.
Have a full debrief with every stakeholder in the business. If your client is leaving because of product, pricing, service or anything else, make those who have influence over those factors aware of the feedback.
Don't go on a witch-hunt.
Use hindsight and the insights from your client as an opportunity to change things for the better. Laying blame serves no-one and will only have you dwelling in the past, not focusing on the future.
Keep asking yourself:
- How are we contributing to client turnover
- How can we better manage our client relationships in future
Most businesses measure churn. Give your boss some context by reminding them of your retention success.
Finally, go through the rest of your portfolio with a fine tooth comb. Are there warning signs you might be losing clients that you need to address?
Don't make the same mistakes twice.
