Handle a Problem Customer Your goal is to prevent customers from ever becoming dissatisfied in the first place. In the event that a customer does become dissatisfied, try to solve the problems quickly so they don’t escalate into major issues. But when a dissatisfied customer gets to a certain point, it may be time to let that problem customer go. It may be more expensive for you to try and retain a very unhappy customer than to move on and focus on preventing the dissatisfaction in other customers. What are some reasons for moving on from a problem customer? The customer may not represent enough revenue to warrant the investment The customer may use your customer service department excessively The customer may not treat your employees well even as they try to rectify the situation The customer may not differentiate your product from the competition and will never become loyal How can you identify a potential problem? CUSTOMER BEHAVIORS (check any that apply) Threatens to pull the account
Makes late payments repeatedly
Complains about your prices
POTENTIAL ACTIONS Customers who threaten are very unhappy. Before you invest time and energy into re-‐winning a dissatisfied customer, make sure the effort is worth it. Review the customer’s lifetime value. [Customer Lifetime Value can help] If you decide to try and re-‐win the account, make the effort substantial and swift. The longer you take, the lower your chance for success. Create an action plan to gauge the status of the relationship moving forward to help prevent the problem from happening again. Ask your primary contact about the situation. It may just be an issue with their accounts payable department, but there could be a larger problem. For example, your contact may be taking longer than normal to approve the invoice, or your contact may have instructed to hold off on payment until an issue is resolved. Try to understand the concern in as much detail as possible. The complaints may be tied to their own financial crunch, or a competitor may be wooing them with a better offer.
Customer Retention Handle a Problem Customer
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Complains about your product or service
Asks about your competitors
Decreases spending or purchase frequency
You may be able to provide a different product or solution that better fits their budget rather than lose them to a competitor. You may also need to re-‐sell them on the value you provide; they may not be convinced. Your prices might not be as competitive as you think; consider doing a pricing analysis if multiple customers are expressing the concern. If your value proposition is price, you can try to lower their price by locking them into a longer-‐term deal with more favorable terms. Gather as much detail about the problem as possible. Ask what they need the product/service to deliver and how critical that feature is to them. You may just need to train them on your product or modify the way you’re handling their account. You may also discover that your product isn’t truly meeting their needs; can you offer an alternative that’s better for them? Be sure to thank the customer for the honest feedback and let the customer know what you’re going to do about it. Follow up regularly to keep the customer updated on your progress and its impact. Your competitors may be trying to win over your customer. Ask them if they’re considering your competitor and what the competitor offers that you’re not currently delivering. If your product isn’t truly meeting their needs, offer an alternative that’s better. Resell the customer on the value you deliver. Offer a longer-‐term contract or other incentive to stay with you. Your customer may be turning to other suppliers, or their needs may be changing. Ask your contact about the drop in spending or frequency. You want to make sure you’re delivering the best product or service to meet their needs; is the drop tied to any concerns?
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If your product isn’t truly meeting their needs, offer an alternative that’s better. Resell the customer on the value you deliver. Offer a longer-‐term contract or other incentive to stay with you. Outline your action plan in more detail below: NEXT STEP
PERSON RESPONSIBLE
DUE DATE
MATHEMATICAL ANALYSIS Determine whether a problem customer is likely to deliver enough revenue to warrant the investment you’ll make when trying to win them back. Use 396-‐D to help you measure whether you should pursue a customer or let the customer go. Customer in question What’s the lifetime value of an average customer in this segment? How much value has this particular customer delivered to date? How much value remains? What will it cost to retain this customer? What is your ROI with this customer? If you’ve established a “hurdle rate” for marketing investments, what is it? Does the ROI for this retention activity exceed the threshold
Yes
No
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Before making a final decision, give some thought to the following additional issues.
QUALITATIVE ANALYSIS Has this customer been a challenging, dissatisfied customer beyond the immediate situation? Can this customer be converted into a happy, loyal customer? Does this customer mistreat your employees? Comments:
Yes
No
Yes
No
Yes
No
RECOMMENDATION Based on your mathematical and qualitative analysis, what do you recommend doing? Next steps: ACTION STEP
PERSON RESPONSIBLE
DUE DATE
Customer Retention Handle a Problem Customer
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