Rapid Churning Makes for Great Butter, But Lousy Businesses
In the last post, I pointed out that it was more important to deepen your connection to your existing customers than to spend a lot of time and money trying to figure out why certain customers left. After all, while you might learn some things from the process, you can’t really water yesterday’s crops and, in any case, it feels a little too much to me like crying over spilt milk. Extract the necessary lessons, fix what can be fixed, and move forward.
But that’s not to say that you shouldn’t care about losing customers. Nothing is more important to your bottom line than preventing customer attrition and avoiding churn. I’m just saying that, once they’re gone, they’re pretty much gone so the real key is to hang on to them by “closing the back door”. If you can’t do this, and you’re spending a fortune on the front end to pull in new customers while you’re losing them out the back, your company’s going nowhere fast. It’s like kissing your sister or as Yogi Berra used to say about his road trips: “We’re lost, but we’re making good time.” The truth is that, if you’re losing customers as quickly as you adding them, you’re not making or building anything – you’re just treading water – and once you run out of money, they make you go home.
The name of the long and winning game is to “own” your customers for life and to anticipate, meet and, in fact, try to exceed their needs and their expectations throughout your relationship with them. The key word is “anticipate” and the biggest change in all businesses today is that we now have the tools and the data concerning virtually all of our customers that should permit us to totally manage our relationships with them if we invest the time and money to look at the available information and – most importantly – if we know what we are looking for. Everything in life happens on a continuum (or a series of cycles) and your job is to monitor your customers’ timelines and jump in at the appropriate junctures (long before the competition is even in the game) to make the next connection and the next sales.
This approach is equally true whether you think you are selling a product or a service. The smartest operators know that every business is really a service business today because the real nature of every business is that it’s always about making the next sale, managing the next interaction or event, delivering an uninterrupted stream of service, etc. You never want the customer “to come up for air” because if he or she does re-enter the marketplace and starts shopping around, your job becomes a million times harder.
So the real task and the critical questions are always the same – how do I know when to act and how do I pre-empt/intercept the customer at exactly the right times in our relationship? The answer is actually easier than you would think because - even though the start and stop points on the cycle may vary by customer - at some definable and determinable point, every customer will move through the same cycle. You just have to understand and learn how to measure and manage the cycles.
Here’s the most valuable chart you will ever see. Keep in mind that it not only applies to the customers in your business; it also applies to your current relationship or marriage and to every other significant connection you will ever have with other human beings. So use it early and often because it describes the critical cycle of consumption that governs our interaction with everything we love and value.
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The “trick” as you might imagine is to consistently get your next “offer” in front of the customer somewhere right before DISENHANCEMENT so that you glide into RECEPTIVE as the only horse in town.
The chart below illustrates a more practical view of a consumption cycle that relates to the point in time (the “CROSSOVER POINT”) when the remaining value of a consumer’s car exceeds the amount of the loan balance which the consumer still owes on that car. From the standpoint of an automobile dealer, this is the ideal time to make a new offer to the consumer which basically amounts to a proposal to turn in his or her old car; get a brand-new car; and get a brand-new 48-60 month loan repayment book to go along with it.
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Why is this a compelling offer for the customer? Because in virtually every case, the customer can be told that his monthly payments will remain the same EVEN THOUGH he or she will be driving a brand-new car. In addition, there’s no car salesman to deal with; no time wasted negotiating; no anxiety about getting a fair deal or a fair trade-in; and, of course, from the dealer’s standpoint, there’s no competition.
Now the cycles are going to vary dramatically depending on a variety of important considerations and they will vary from industry to industry as well. Some of the variables which will impact the types and durations of the cycles (but not the fundamental stages or phase within the cycle) include: (1) how large and financially/emotionally important is the transaction; (2) how often is a transaction likely to occur and what other connections/interactions with the customer will take place between transactions: and (3) how easy is it for the customer to change vendors, services or products and how readily available are competitive offerings?
But, regardless of a given cycle’s duration, there are similar cycles to be identified, tracked and managed in every business and properly managed, these cycles are the keys to closing the back door and keeping your customers for life.
PP: “You Get What You Work for, Not What You Wish for”
