Creative Mess – Failing To Calculate The Cost of Losing A Customer

Written By

3rd September 2020

You may have heard about the amazing effect referrals can have on your business. This ‘positive word of mouth advertising’ is a truly awesome way of increasing your sales and profits – agreed?

So what happens if the opposite occurs? Instead of getting ‘good word of mouth’ you get ‘bad word of mouth.’ What effect can this have on your business? I think you’re going to be shocked…

One lost and unsatisfied client or customer has far reaching implications. You don’t just lose their business – you lose the business of many other potential clients or customers.

Let me explain this using a simple example…

My friend has been shopping at one of the Supermarket for about 10 years. She spends approximately £150 a week on her grocery shopping . That’s £600 every month. And a massive £7,200 a year. Over this ten year period she has spent over £70,000. She’s a good and very loyal customer.

When she got pregnant she decided to use Supermarket’s home delivery service. Everything started off okay, but after a few weeks the delivery would arrive and literally dozens of items were missing and several were replaced by similar items. What this meant was she had to physically go into the store each week to get the items she actually ordered.

After several conversations with the manager of the store (some were heated!) she finally came to the conclusion that Supermarket simply didn’t care. They were prepared to lose a loyal customer who had already spent over £70,000 with them, and would under normal circumstances spent tens of thousands of pounds more.

In the end she stopped using that Supermarket. But what was the cost to Supermarket?

Well on first inspection you’d say straight away they lost her custom which amounted to £600 a month. But here’s where is gets scary. She probably told this story (with all the juicy details) to every one of her friends. As a result a few of them have also stopped using that Supermarket out of principle. Heaven knows how many friends they’ve also told. In effect you have this mushrooming effect where more and more people get told about the ‘story.’ It amounts to a huge tide of bad publicity. And it’s exactly the same when you lose a client or customer.

So let’s take a closer look at how this bad word of mouth could impact on your business.

If one unhappy customer were to tell 10 other people about that experience (or not refer those 10 people to your business), and each of those 10 were to tell six others, the total number of people affected by your one bad experience would total 85. (6 x 10 = 60 + 10 = 70 + the original unhappy customer = 71).

Now, if only 25 percent of those people chose not to do business with you, that comes to 18 people.

If each of those 18 had similar buying habits as your original customer, your total lost revenues would be £27,000 (£1,500 x 18 people)!

£27,000… all from one bad experience!

But what if those figures are way off, and it’s only 20% of that amount? That still totals £5,400.

That’s a lot of money for letting one person leave your business unhappy. And here’s an unfortunate thing:

Sometimes people are unhappy and leave, and you don’t even know it.

They just get their feelings hurt, feel slighted, or have something completely unexplained happen, and take their business somewhere else. And you never know.

 

As you can see, losing customers really does impact your sales and profits – and ultimately the value of your business.

So what do you do about it?

Well, you can’t afford to do anything but treat each of your clients or customers the very best way possible. Give them all the love, care, attention and service you can. Go overboard. Make it nearly impossible for them to even consider doing business with anyone else but you, regardless of price, location, convenience, or any other reason.

Become not only the preferred place to do business with, but the only consideration your customers, clients and prospects have. In fact if you address this mistake explained in this article, you’ll be well on your way to doing that!

If you keep doing what you’re doing, you’ll keep getting what you’re getting..

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