Why Customers Leave, and How you can Persuade them to stay
We are in #business to make money right, but how can we make money when our customers leave to go to one of our competitors. In desperation, we may reduce our prices because we believe our customers are highly price sensitive. After all, don’t we sell more when we have a sale compared to when we sell at normal prices?
Price vs Relationship Buyers
There is a lot more to it than simply reducing your prices in an effort to keep your customers happy. Grabbing a bargain is one thing, but building a long-term relationship built on trust is another. There are generally two types of customer that we deal with – the bargain buyer and the relationship buyer. A bargain buyer is genuinely interested in price, and no matter how nice you are to them, they won’t stay to buy again if they can get the same product somewhere cheaper the next time they are ready to buy. They generally have no loyalty, and you can waste a lot of time and effort trying to build any sort of lasting relationship with them, and in the end it will all be for naught.
Your second type of customer is the relationship buyer. Now these types are the sort of people who probably have very busy lives, and don’t have a lot of time to spend trawling the internet for all your competitors prices. These buyers are looking for someone they can trust, and they want a company that can deliver a reliable and trustworthy service. They will grow to trust you, and will be happy to return to buy from you time and again. Many will be aware they could save a bit of money by shopping around, but that would take up too much of their time that would be better spent on more important jobs, so they will look to you to deliver a consistent service.
Many retailers still believe that having regular deep discounts and rock-bottom sales will encourage more people to buy, and eventually they will be converted into regular customers that will consistently buy from them. This is actually a commonly believed myth, and when you look more closely at the figures will show just how fickle price-oriented customers really are. The majority of bargain hunting customers will defect to one of your competitors within a year of their first purchase from you.
When you have a physical bricks and mortar business, your location can count for a lot of your customer base. Research shows that only 15-30% of customers of a physical store are price-oriented, where 70-85% of customers will be loyal customers from the near locality that provide most of the regular profits. This is mostly the case for businesses like petrol stations, supermarkets, high-street shops and businesses.
Once you have established your business you will have built up a good base of relationship customers, with a small extra addition of some bargain hunters around the edges who will drop in to take advantage of your latest sale or discounts. Once your products or services return to normal prices, your price-oriented customers will defect to one of your competitors when they run a sale or promotion. Then they will move on once again to someone else that has a sale, and so on it goes.
When you think about it, these price-oriented customers don’t actually make you a lot of profit because they will only buy from you at a discounted rate. So why bother putting so much effort into pursuing these customers in the first place? We should be looking at price-oriented customers as an added bonus to our flash sales and discount led #marketing strategies rather than our regular year-round sales and #marketing efforts that build relationship and brand recognition.
Why Do Customers Leave?
So apart from those fickle price-oriented customers who move on to grab a bargain, what other reasons are there for customers to leave you? There are a few possible reasons why this happens:
- They die (sad but true), or are no longer buying from your business niche
- They are unhappy with your prices
- They are unhappy with your product or service
- They are unhappy with the way they have been treated
While management may overly focus on issue No. 2 because it is probably the price of your product or service that is the easiest one to fix, this doesn’t always stop your customers leaving. Research conducted into #customer retention have often found that issue No. 4 is the most common reason why people leave.
What really builds a good relationship between a buyer and a company is not simply price alone, but the combination of elements that add up to how you make your customer feel. Their overall customer experience will be made up of the following elements, and all of them are important building blocks of a relationship:
- Customer recognition
- Customer service
- Useful information
- Staff helpfulness
- Friendly employees
- Brand identity
- Product quality and price
Basically, relationship customers stop buying from you when you stop valuing them. If you can continue to provide them with a good service and quality products or services, they will be happy to stay.
Get To Know Your Customers If You Want Them To Stay
Relationship customers are worth keeping for the long-term success of your business, so getting to know your regular customers is important if you want to keep them happy. You should be keeping track of them on a database, and you should be singling out your absolute best customers to treat like gold star members of your club.
Regular communications with your loyal customers should be encouraged, and remember to say thank you for your custom – gratitude goes a long way to help customer retention. You only have to look at the banking sector to see how they segment their customers by their value. Those who provide the most consistent profit and long-established loyalty get preferential treatment by their best customer service agents, and will have their personal phone calls and email messages routed to their priority customer service team.
If you use CRM software, it can be easy to track the most consistent and loyal customers on your list. So you can create a special segment for your relationship customers, and make an extra effort with them, such as sending birthday or Christmas cards each year.
Do you need help with your customer retention? Are you struggling to hang on to your regular customers? Why not book a consultation with us at Lobster and let us see how we can help you to build your loyal customer base. Contact us today.