4 Early Warning Signs You Might Lose a Customer

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It’s widely known that acquiring a new customer is significantly more expensive than retaining an existing one. This makes customer retention performance a critical metric in most board rooms. More recently, it's made the management of customer experience a top priority. Keeping your current customers happy while adding new ones is the key to commercial excellence and bottom-line growth.

But the second law of thermodynamics tells us that unless acted upon by outside energy, a system will either have the same or more disorder as time passes. Entropy wins in the end! But in the very long meantime, how will you know if your customer starts to slide into “disorder”? Rather than asking your sales team to scramble and save an account that's already closing the door on their relationship with you, there are early warning signs. Keying in on certain data points across the customer life cycle will give you  advance notice that the account could be at risk.   

Is It Easy to Tell If a Customer Is at Risk?

Historically, salespeople have relied on their relationship-building skills to gauge their customers’ satisfaction. While valuable, most salespeople have too many customers to make this approach reliable or scalable. That's why so often we hear our sales team say they didn't see the loss coming, and had they known, they could have done something.

New customer experience tools have emerged to both identify and monitor actions to improve satisfaction levels. Asking your customers what they want, how, and when is a tremendous boost to this effort. In addition to periodic check-ins with your customers by sales and customer success professionals, there are important metrics that will indicate potential trouble. It starts with a look at their buying behavior.

Watch for Early Warning Signs

Sometimes a dissatisfied customer can hide in plain sight—especially if you rely on simple averages. If you look close enough, their buying behavior can provide clues about how they feel doing business with you or whether they’re cozying up with a competitor. Using the example of a company that sells RFID products, here are a few at-risk scenarios.

1. Change in order frequency. If your customer has historically placed orders once every 10 weeks, and then this year their orders fall to once every 15 weeks, you may have a problem. If anything, a satisfied customer should buy more frequently over time, or at least with the same frequency as before. Contact your customer right away to find out what’s happening if you see order frequency decrease.

2. Shrinking order size. If order volume decreases, it’s important to find out why. If a golf ball manufacturer is a regular buyer of RFID tags for their premium trackable balls, and their average order volume goes from 250,000 units to 100,000 units, you need to start asking questions. There are legitimate reasons for this, of course—have they experienced lower demand and therefore decreased their volume accordingly? If not, you could have an account in trouble.

3. Certain geographies drop off or change. Another indicator of an account at risk is if your customer has packaging plants in different areas and orders continue to come in from Dallas but not Phoenix, for example. Or, orders for tags only rather than tags and readers come in from Phoenix. This could be a sign your customer is trying out a competitive product in one of their locations.

4. Bookings fall. The most straightforward sign of an at-risk account is a reduction in bookings. Historically, if bookings from a retail chain are $500K per quarter, it can be worrying if they book only $100K this quarter. Also, if the average revenue across all retail customers is $2 million, it probably implies that the salesperson hasn’t penetrated this account enough yet. It’s important to track absolute as well as relative revenue from an account.

Each of the points above are crucial to know at the rolled-up account reporting level, but the real value comes from understanding what is going on at each account touchpoint, whether that’s the plant, the distribution center, or some other place of usage. Intermediate aggregations such as regions, territories, districts, or even countries can also provide very useful insight.

Armed with real-time knowledge of these metrics across all customer accounts—with the ability to look at granular specifics within the account—you’ll quickly and easily know if any of your customers are at-risk. An early warning system of sales intelligence can protect you and your organization from potentially losing large and important accounts.

Mitch Lee is profit evangelist at Vendavo, a provider of intelligent commercial excellence solutions. He can be reached at mdlee@vendavo.com.

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