The Curse of Churn … time to put the plug in!

When businesses want to grow, their first instinct is often to advertise. But there’s an easier, equally effective and longer lasting way of increasing sales.

Most owners of small to medium sized enterprises/businesses (SMEs) have an underlying desire to grow their businesses. It’s born of a material wish to make more profit, but possibly reinforced by an emotional wish to nurture something they can be proud of.

If you were to ask them how they’re going to achieve that, the answer invariably will be to sell more of what they do. Ask them how they expect to sell more, and the answer will usually be by advertising. Ask them what else they will do to help them sell more, and the answer will be to advertise even more (hence the abundance of people offering to help you grow your business by marketing and/or advertising through Google Ads, or Facebook, or Twitter, or LinkedIn, or some other social media platform these days).

This is all well and good, and may indeed bring your business a temporary boost in sales. But there is a part of your business that could also bring you more sales, and not just for the length of the advertising campaign(s), but for months and years to come. And, even better, there won’t be a need to hand over your hard-earned cash to advertising agencies or whichever platform you choose to use, because it’s within your own business.

And what is this often-overlooked source of sales, you ask? It’s good, old-fashioned customer service, or rather, customer focus.

A Hidden Source Of Sales

You see, a successful advertising campaign (and let’s not forget not all campaigns are ridiculously successful), could bring a flood of enquiries into your business, but then it has served its purpose. You then have to convert them into actual customers, during which a fair portion will fall by the wayside.

Having a customer focus will not bring in the volume of enquiries that an advertising campaign possibly will, but it will play a role in bringing more sales to the business. You see, when a new customer deals with a business for the first time what they have done, at its simplest, is they have given the business an opportunity to show what it can do.

The business can then: a) disappoint the customer by falling short of the customer’s expectations; b) satisfy the customer, by simply meeting their expectations; or c) delight them, by exceeding their expectations.

Needless to say, the failure to adopt a customer focussed approach will leave the business struggling in type “a” or at best type “b”, while adopting a genuine customer focussed approach will lift the business into type “c”. In fact, a customer focussed business is one that will, by definition, delight their customers.

A type “a” business, having disappointed its customer, is unlikely to get a second chance, meaning that customer is lost, possibly forever depending on the availability of alternatives, and the benefit from advertising ceases there and then. To bring in another new customer the business must rely on more advertising, with its associated cost.

A type “b” business, having satisfied its customer, may get a second chance, but could just as easily lose the customer who is open to trying an alternative supplier to see if they can do better.

This constant flow of bringing in new customers only to lose them and then have to replace them with more new ones is often referred to as “churn”.

In contrast, a type “c” business, having delighted its customer, will likely keep the customer should there be a need for a subsequent, similar purchase. We all know how difficult it is to find good, reliable suppliers and once one is found, there’s often a reluctance to try someone else, even if they are cheaper. Even if they are significantly cheaper the customer is still more likely to give a type “c” business the opportunity to improve their offer rather than risk using an unknown party.

Once the customer makes a repeat purchase, customer focus has played its role in keeping the customer and bringing in additional sales, and there should be no reason (as long as the customer focussed approach is maintained) for that customer to look elsewhere in the future. So not only is your customer focussed approach now bringing in repeat business, it is (based on common estimates of the costs involved) doing so at something like a sixth to a twelfth the cost of running advertising campaigns.

But even if you are providing goods or services that rarely give rise to a second purchase, or only a handful in a lifetime, customer focus can still play its part in bringing in sales through a different channel.

A Growing Reputation

In marketing one of the most compelling tools in convincing someone to make a purchase is that of a recommendation from a trusted source. If a customer has dealt with a business and been ‘delighted’ they are likely to tell three of their friends or acquaintances of their experience (as opposed to ten friends or acquaintances when they’ve been disappointed).

These three will then tell three more each and so it continues, causing word to spread quite quickly. Before too long you have the equivalent of a minor advertising campaign in terms of ‘contacts’ made, but one that is backed by personal recommendations (i.e. more likely to turn into sales) and has cost little more than caring for your customers.

However, while this illustrates how powerful a force a good reputation can be there unfortunately isn’t an equal and opposite impact when disappointing customers; it’s actually far worse than that!

When customers are disappointed, they tell more of their friends and acquaintances (around ten) of their experiences, which means that word of a poor level of service spreads considerably faster and more widely than word of a good level of service.

The outcome of this is that there’s a good chance a type “a” business will lose most of the new clients their advertising campaigns bring in, and consequently they have to run a new advertising campaign to bring in the next period’s sales; and this is just to stand still, let alone grow! So now they’re on the treadmill of continual advertising with its recurring cost(s), constantly having to advertise to bring in new customers to replace those lost. I think I can best describe this situation as equivalent to trying to fill a bath without putting the plug in.

Plugging The Hole

So, how do we put the plug in the hole? This is the role customer service plays. When done properly it helps you keep most of the new customers you bring in for repeat business and/or bring new customers in through very effective word of mouth recommendations. While there is no harm continuing to advertise occasionally to boost your sales and growth, it does mean you’ll be getting the best ‘bang for your buck’ each time you do so. And it does translate into securing a ratchet-type growth, where the movement in sales is always one way, i.e. steadily increasing.

The challenge, of course, is in the phrase “when done properly”. As I’ve mentioned in other articles, many businesses profess to be customer focussed, but when it comes to actually delivering against that implied promise, most of them fall sadly short. In most cases it appears while they are quite happily using the term ‘customer focussed’, they rarely give the impression of understanding what exactly it truly means.

But that, I feel, warrants a separate article of its own ….