Identifying customers at risk of leaving

In a B2B environment it can be a relatively small number of customers who represent a significant proportion of a company’s revenue and profit. Therefore, while without doubt it is important to establish overall levels of corporate loyalty of the total customer base, it is just as important to understand them at an individual customer level. You will need to know this  if you want to identify customers at risk, how to retain customers, minimise customer disloyalty and reduce customer churn.

The cost of replacing that hard won, highly profitable customer can be significant and so therefore the investment needed to really understand how that customer feels about you as a supplier will easily be repaid several times over if you can retain that customer. Clearly, understanding is one aspect, but this needs to be followed up with a customer specific action plan to ensure any problems are removed, and any strengths are reinforced keeping the issues related to losing customers to a minimum.

Defining customer loyalty for your business

Ideally a business would like all of its customers to be loyal to it thereby providing a firm base on which to continue to grow the business because customer churn is minimal. But what does customer loyalty look like to you as a business? Is it a combination of the following, some of which are responses back from customers, and some of which are actual behaviours:

Customer feedback Customer behaviour
Overall level of satisfaction Renewal of contracts
Rating of the added value they are able to offer their customers through dealing with you as a supplier. Multiple service purchases
Rating of added value received from your competitors Extension of current contracts
Score you highly on likelihood to recommend Have recommended you / they act as reference customer / case study for you
Trend of your performance is improving Current and projected levels of usage / spend exceed the original contract / plan Increase their share of wallet spend with you
Provide high levels of margin

Customer segmentation by loyalty

Once you have established the definition of a loyal customer for your business you can then segment your customer base and identify areas for potential customer disloyalty and minimise the risk of losing customers. Taking the responses to customer feedback as one axis, and desired customer behaviours such as contractual and financial issues as the other axis the following matrix can be produced.

Customer segmentation by loyalty

The “Wannabees” group provide very positive feedback through surveys, but currently their economic profile doesn’t match these encouraging signs. You will need to establish the barriers to this relationship. Is it budget constraints, are they contractually tied into another supplier, are the right people being surveyed (if they are influencers rather than decision makers, how can you help them increase their influencing impact), are there purchasing constraints on how much they can commit to a single supplier? Once these barriers are understood you can work with the customer in partnership to remove these.

“Does what it says on the tin” customers are extremely loyal as they not only rate you highly within customer feedback surveys, but convert that feedback into positive business economics. Having established who these are, are you making the most of this extremely positive relationship?

“Hostage customers” may not have a long-term future with your business. When reviewing their spend levels and other desired customer behaviours they may in the short term appear to be complying with your loyal customer profile from an economics viewpoint. However, when looking at how they evaluate the relationship it suggests that this may just be a short-term relationship, and they are a hostage to your business. For example, is there currently a lack of effective competitors in your marketplace, and therefore there is a lack of choice of suppliers. There may be other barriers to them leaving you such as the cost of exiting the relationship may be too high, or contractual reasons. Either way the relationship needs to be fixed and customer dissatisfaction needs to be resolved if they are to be moved into being a long-term positive customer.

If you have “Terrorist” customers these may well be the ones that you need to develop an exit strategy for – when it comes to losing customers, these are the ones it’s OK to lose. They are in danger of not only taking resources that could be used more effectively elsewhere, but are also in danger of negatively impacting your corporate reputation across your current customer base, and potentially across the whole market such is the level of the customer disloyalty here.

There are tools that can both help you evaluate where your current customers sit within this segmentation and help you move individual customers into a more desired segment.

Tools to help position and reposition your customers

In order to correctly place your customers into the right segment you may need to review how you currently collect customer feedback. For example, within your current feedback programme are you gathering responses from both influencers as well as the key decision-makers? Customer Champions have found that in a B2B environment the use of face to face executive interviews has been essential in really understanding the key issues from the decision maker’s viewpoint. Within this type of feedback there is more of a relationship built with the customer and they see greater value in providing that feedback. They have the opportunity to clearly communicate what issues are of significance to them, rather than being “driven” through a more standard telephone / online interview. These types of interviews should be conducted by independent third parties to ensure that there is no bias in terms of interpretation or feedback from the customer. There is no substitute for well-briefed professional executive interviewers, skilled at teasing out potentially controversial, if not confidential, information for the benefit of the relationship.

Current surveys may also need to be reviewed to establish if data is being collected on what added value you are providing, how you are performing relative to the competition, and levels of recommendation etc.

A tool that will bring significant benefits in terms of the relationship with an individual customer is a Shared Expectations Workshop. The objective of a Shared Expectations Workshop is to provide both parties with a jointly agreed and owned meaningful action plan that improves service levels for both and is a foundation tool for partnership planning. It also provides very rich customer specific feedback, vital if you want to truly understand your customer and keep customer churn to a minimum.

Within the workshop each organisation is represented by all of the key contacts between them. These range from key decision-makers to operational day-to-day contacts. The supplier forms one group and the customer the other and the workshop is facilitated by an independent professional third party, such as Customer Champions. The first exercise is for each group to assess both their own performance and that of the other party. Both will then be required to develop recommended areas of focus before presenting to the other group. These presentations are then developed with the objective of identifying areas of overlap between the two parties and then developing jointly owned action plans. These action plans will often form the basis of a rejuvenated, targeted and, most importantly, mutual account plan.

Finally, a tool that may be particularly useful for those customers appearing in the “Does what it says on the tin” segment is the development of a Customer Advisory Council. This will help reinforce the special relationship that you have with this group of strategically important customers.

This would be a body of key decision-makers from carefully selected key customers who are seen as strategic partners to your business. The approach is to deal with these companies in a workshop environment and share with them your company’s future plans. These could either be of a strategic nature or a tactical one based upon customer feedback. The key element is to gain their feedback and support on your plans. By providing them with insight into how your business works and its future this approach fosters a close partnership with these companies.

As you are asking key decision makers from strategic customers to commit to usually a full day, there is a requirement that senior management within your own business not only match this commitment through attendance, but are also committed to the event planning and resulting actions.

Understanding risk is the key to success

Clearly there will always be forces at work within a market place that you cannot directly impact, whether that is M&A activity involving your customers, or new competitors entering the market. Knowing your customer base – which customers are loyal? which customers do you risk losing? – is a fundamental requirement of running a successful business.

Take the next step

Customer Champions specialises in understanding customer behaviours. To discuss how we could help your organisation develop, maintain and reinforce its customer relationships, please contact us.

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