Lost Customers Are Not A Lost Cause

Market researchers Jill Griffin and Michael Lowenstein, authors of the highly regarded business book Customer Winback, found that between 56% and 69% of companies had no strategy for identifying customers who were at risk of defecting. According to Griffin and Lowenstein, these businesses are making a costly mistake. Customer defections are not only a drain on your sales and profits, they're also a boon to your competitors, since most people who stop using your carwash end up getting their vehicles cleaned down the street.

Fortunately lost customers are not a lost cause. By reaching out to these former customers and addressing the issues that led to their defections in the first place, you can win them back. According to a study by Marketing Metrics, the average company has between a 20% and 40% chance of regaining an ex-customer -- that's more than twice the odds of convincing a new prospect to give it business for the first time.

Technology can serve as a valuable ally in the battle to curb defections at your carwash. Aside from warning you about "at risk" customers who are about to take their business to a competitor, it can also serve as a communications conduit between your wash and its ex-customers.

Research conducted by TARP Worldwide indicates that it costs five times more to win a new customer than it does to retain an existing one.

Why Customers Leave

If you track VIP club members and prepaid customers on your computer system, identifying defectors is relatively easy. Simply create a filter to separate customers in groups who haven't been to your wash within a specified period, such as six or nine months. Instead of just sending these endangered customers a "we miss you" discount mailer, include a brief survey that probes why they've stopped coming to your carwash. Click here to learn more about SiteWatch loyalty promotion.

Griffin and Lowenstein have found that customers abandon a business for the following reasons:

• They’re pushed away – either by poor service, an unfriendly attitude or a bad experience
  
  
• They’re pulled away – because a competitor offered better, friendlier or more convenient service
  
  
• They’re bought away – by a cheaper alternative that offers acceptable quality
  
  
• They’ve moved away – they no longer live close enough to continue using the same businesses

Learning why defectors have left should prove to be invaluable in helping you refine your marketing strategy. For example, you might not think the inexpensive service station wash in your neighborhood is hurting business, but if a survey of defectors shows that a large percentage of them left because of price, you might want to consider offering a cheaper option on your menu, or adding a self-pay exterior lane to your full-service.

Choose your questions carefully when surveying at risk customers. Griffin and Lowenstein recommend asking them to use a numerical scale to rate your performance rather than simply inquiring if they were satisfied or dissatisfied with your business. Out of politeness some people might not be eager to say that they think an entire carwash operation is poor, but they won't hesitate to give the wash they received a low numerical rating.

Whenever possible, a mail or Internet survey should be followed up by a phone call. Many customers who defect do so because they feel ignored, insulted or under-appreciated. Showing these defectors that you really care about their business often speaks louder than any incentive you can offer them. When BellSouth sent a letter to lost customers urging them back with a generous package of perks, it had a 3% re-connect rate. Not bad, but when it followed up this offer with a phone call, the re-connect rate jumped to an impressive 10%.

Actively soliciting customer feedback by posting a "comments" phone number on your receipts as well as in your direct mail pieces will also pay big dividends by reducing costly defections. A number of marketing studies have shown that most dissatisfied customers will simply stop patronizing a business rather than go through the trouble of complaining. By inviting complaints and providing these customers with an opportunity to communicate, defections can be headed off before they happen.

This was the thinking behind Maine Savings Bank's decision to offer customers one dollar for every letter they wrote suggesting ways to improve service. The bank averages more than 500 letters a year from customers, who might otherwise have kept their ideas and complaints to themselves. (Offering your customers one dollar off a carwash if they send in a suggestion letter or e-mail can be an effective way to build a mailing list and target discount offers, while enhancing customer relations.)

In some cases, you may find that customer dissatisfaction was not the result of how you cleaned their vehicles, but how you sold them on your services. Not all customers pull into a carwash with the same set of priorities and expectations. While some customers appreciate being informed about specials and extra service packages, others are liable to become impatient when a greeter recites all of the options that a carwash has to offer.

If you track license plate numbers, you'll be able to review customers histories when vehicles pull onto you lot. This allows you to determine whether or not a customer is likely to be interested in learning more about your extra service options. Customers who've visited your wash six times and never upgraded beyond your basic wash, your greeters can politely make the sale, but refrain from talking about other options. After all, the customer has already indicated that he or she is not likely to be moved by your greeters' "message". Click here for more about the SiteWatch Portable Touchscreen Terminal (PTT).

Aside from enhancing the experience of the "not interested" customer, this will also help keep your greeters in an upbeat mood, since they're less likely to be frustrated trying to sell extras to customers who aren't in the market for them. A study by George Day, a professor at the University of Pennsylvania's Wharton School of Business, found that companies that developed systematic and organized plans for identifying customers and tailoring relationships with them had defection rates that were 40% below average.

The Benefits of Regaining Lost Customers

In many cases, defectors who return to the fold will become even more loyal than other customers, since a company's willingness to handle their issues demonstrates how much it values their business. Consider the following:

• At National Car Rental, customers who experience a “great recovery” from a complaint are 5.9% more likely to return to the agency than customers who describe themselves as “satisfied” and have never experienced a complaint.
  
  
  
• Similar results were found in a Marriott study, in which people who had a complaint taken care of promptly were 5.6% more likely than other guests to say that they would stay at the hotel again.
  
  
  
• A study done for the federal government found that 70% of consumers who had problems with a low-priced basic purchase like a carwash would maintain loyalty if their issues were handled satisfactorily.

Getting back in the good graces of disgruntled customers also stems the flow of negative word-of-mouth advertising. According to the White House Office of Consumer Affairs, unhappy customers tell at least nine other people about their bad experience. Unfortunately, satisfied customers recount their positive experience to only half as many people. This means a carwash needs two new satisfied customers for every dissatisfied customer just to maintain a balance between good and bad word-of-mouth advertising. In light of this equation, no business can afford to take customer defections for granted.