Losing just one can be costly

By Rich Lindblom, AVB Marketing

If you’ve been reading my columns from the past three-and-a-half years or sat in on one of my SYNC point-of-sale system discussions, the odds are pretty darned good you’ve heard me say that it’s OK to fire a customer.

I still stand by that position 100%, although it should really be reserved for the, ahem, truly deserving, who have earned that consequence by virtue of their misdeeds, attitude and/or behavior. It should not be broadly applied to any customer who simply annoys you.

Case in point: There’s a dealer I am well acquainted with who told me, quite proudly in fact, of the time he refused to “give in” to a longtime customer’s demands. This was a loyal customer who had done business with the dealer for many years, but when they asked for a better deal than was offered, the owner took offense and told them to take their business elsewhere.

Blown Away

When I questioned the logic behind his decision to, for all intents and purposes, kick a loyal customer to the curb, he responded matter of factly, “What? It’s only one customer.”

Needless to say, I was blown away by his remark on so many levels.

For starters, I would never dismiss a long-term customer unless the reasons were quite egregious.  in this instance, it was simply because the customer asked for a better deal. Is it so wrong for a good customer to ask for a little extra consideration?  I think not.  And even if you can’t do any better on the price, explain to the customer why you can’t and odds are no one’s feelings will be hurt.

Second, you have to wonder just how many friends, neighbors and relatives your now former good customer will share his experience with. How many additional customers will that store lose because of the dealer’s willingness to dismiss that one person?  Actually, there’s been plenty of research on that topic. On average, an unhappy customer will tell nine to 15 people about their bad experience, while a happy customer will typically share their positive experience with an average of six others.

Finally, you must consider what it costs to replace that customer. Once again, studies show that it costs five times more to attract a new customer than it does to retain a current one.

By the Numbers

So, let’s do some customer math:

Let’s start with that one past customer, add in six more people who will never be referred to your business, and finally toss in 15 others who were advised to not do business with your company.  

In reality, the loss of “only one customer,” as he described it, ends up costing his business as many as 22 customers.  

And let’s not forget the stat about the cost of capturing new customers. The cost to capture 22 new customers is equal to the cost of retaining 110 current ones.  Let that sink in for a minute.

The bottom line is that every customer matters. You need to do whatever you can to preserve the relationships you have with your good and loyal shoppers, because when you get right down to it, that “It’s only one customer” mentality could end up putting you out of business.

Rich Lindblom is a past principal of Advanced Maytag Home Appliance Center, a family business founded 64-years ago in Schaumburg, Il. Lindblom is now sharing his 40-plus years of hard-won retail experience with fellow BrandSource members as a YSN columnist and product manager of AVB’s SYNC point-of-sale system. You can reach Rich at rich.lindblom@avb.net.

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