Managing client attrition and acquisition in order to achieve sales growth requires more than just knowing which customers have left the organization, it also requires understanding why and where they go.  This understanding is important and required in order to target replacement customers at a lower cost of acquisition and/or at the same or higher margin.  However, let’s not forget that at this stage there is merely a replacement of a lost client, meaning that from the start the sales organization is spending more at a decreased profit margin (client attrition erodes profitably even if clients are replaced at a one to one or better ratio since it is always less expensive to maintain a current customer than to acquire a new one).

Nevertheless, without this understanding most sales organizations are akin to a hamster on a wheel. When obtaining new clients at the same or less rate as the number of customers that are lost, a causal effect is produced—a less efficient and more expensive sales process.  Conversely, sales organizations that have slower client acquisition and lower attrition may find it difficult to grow, unless of course they are able to further penetrate their current customers, thus increasing revenue at higher profit margins than that of the acquisition of a new customer.

So what’s the punch line… today we are seeing glimmers of an economic recovery, and thus client organizations are becoming better positioned to seek out competitor services and or products, notwithstanding that the competition for the same customer is higher than ever.  Therefore, we are faced with the art and science of calculating a formula that allows a sales organization to manage and/or prevent client attrition while at the same time increasing new customer acquisition.   As mundane as this post may feel, just know that most companies have little to no control of this practice and thus find themselves living the ups and downs of a turbulent revenue stream.

Does your organization have a method to address this issue?  If so I would be interested in hearing about it.

Over the last three weeks I have met with several CEOs and other senior managers within several sectors; Technology, Human Resources Outsourcing (HRO), Business Process Outsourcing (BPO), and Staffing and Recruiting, and most shocking is that most of them — not all — have little to no strategy in play to protect their current client base, but indeed have strategy and execution plans for new customer acquisition. In fact, their burn rate for new sales outpaces their customer retention programs by five times.

You might be asking yourself – so what? Well, for starters, 81% of America’s fastest-growing companies have initiated programs aimed at customer expansion, retention and profitability. They are acting on what we all know to be true: it is less expensive and always more profitable to retain, grow and expand a current relationship than to make a new one – but not all companies are engaging in this space. Further, the 81% of America’s fastest-growing companies that have a client relationship program in place have achieved 45% faster revenue growth than their peers over the last five years, and are projecting 35% higher growth over the next 12 months.

Am I missing something? The negative impact of customer dissatisfaction is all too familiar to us:

• 96% of clients who have had a bad experience will not complain.

• 90% of these customers will not return.

• On average, a client who has had a bad experience will tell 9 others.

• 13% of these customers will tell at least 20 other people.

• For every customer complaint, there are 26 other customers who had a similar experience.

• 6 of these had serious problems.

• 68% of customers who stop doing business with organizations leave because of company indifference.

If you’re not outraged, you’re not paying attention. It is costing solid organizations (perhaps yours) millions to show barely any growth in profitability, and yet the answer is so easy, it is almost ridiculously stupid. Organizations today must figure out a way to fuse together a solid relationship management program with their current new sales strategy – if not, they’re chasing their tails by creating a self-fulfilling prophecy within their own sales team.
Your thoughts and comments are always welcomed – I will try my best to respond personally to each of you.

It seems so long since we have seen each other, and truthfully I forget what you even look like anymore. I vaguely remember the day we tied the knot, signing that contract that, frankly, took too much time to read, never mind understand.

If your asking yourself if I am bitter, no I am not—I am just lonely, with new problems and challenges and trying to solve them all on my own. To cure my loneliness I went out, and can you believe it? I found an organization, one that is just perfect, and a great sight for sore eyes. Oh, and they have a solution that makes yours look…well, I won’t go there.

What I am trying to say is…the last problem we worked on was Y2K, which was a dud. But, you were shiny and new, full of excitement, firing off solutions one after the other. I was overwhelmed with anticipation, and now…well, you know. It’s time I call it quits— so if you want you can come by and get that “solution” of yours.

Is this what really plays out in our customers’ minds? Yes! Our client relationships are no different from our other win/win relationships. If you want to keep them, you’ve got to manage them, and if you want to grow them, you’d better nurture them.

With today’s economic situation, organizations need to better strategize their account management systems. Organizations need to optimize the way they sell and manage clients; fusing the sales and account management team can do this. I am not talking about joining the two teams together. It’s deeper. Organizations need to leverage the different sales skills and talent at different times to create an environment that is able to replicate success within new and existing accounts.

Optimized account management systems:

• Provide a collaborative culture that crosses your organization, driving a customer-centric mentality
• Prevent client and brand erosion
• Clearly articulate opportunities for account growth and expansion
• Dictate and executes against a clear strategy, linked to goals which have measurable metrics
• Decreases client revenue cost; it’s less expensive to grow revenue with a current customer than it is to acquire a new one

Finally, the number one goal of a good account management organization is truly deliver value by understanding that “the only value that is of any importance is that perceived by the client.”

Most interesting about these listings is that the companies advertising are spending money on hiring new salespeople to find new customers. Further, none of the same companies were hiring (or at least advertising for) any account managers, relationship managers, or business development people—the “farmers.” The statement is loud and clear—“We want new sales”—which is clearly appropriate; new revenue and new clients are a must for any organization.  I do see the approaching “duh” factor – nonetheless, what follows might seem stupidly simple – however, few organizations have their attention drawn in this direction.

Ask yourself how many times you have looked at your client list and noticed that your clients were only using a fraction of your service—or that your solution is not being used enterprise-wide, or worse, your client is using a competitor in other areas?

The punch line is simple:  Companies that employ evangelists to sell into their current relationships will win. This is because these organizations are investing in the customer through the use of farmers to cultivate and nurture their current relationships— securing these partnerships all while the hunters are obtaining new sales. These organizations have their products and services penetrating their client’s organization at all levels and their client plays a key role in the solution offering. Therefore, by the economic turnaround, your competitors will be so deep it will take an army to root them out of your target customers. Why?

Your competitors have clients that are now “raving fans”—clients who are part of the sales and solution process, and clients that have enabled your competitors to test and implement solutions enterprise-wide (or at least in multiple units). These competitors understand the customers buying process in good and bad times and have had a continue stream of revenue funding their relationships. Best of all, their clients are now referring them to other potential clients directing hunters to new sales. Believe it or not – but this was all happening while other organizations were busy cold calling, and spinning their wheels. Farming current customers costs a fraction of acquiring new clients, but the return is astronomical.  As I said above, there is a “duh” factor however, how many organizations today are actually growing their revenue by double-digits?

The point of this entry is not to do away with new sales or hunters—it’s to call to your attention the opportunity of blending the hunter and farmer.  Thus, harnessing the internal organizational power you already have in order to secure your relationships, revenue, and expand your product offering so that your organization is winning now!

If you’re not seeing double-digit growth try these four simple rules – they’re sure to increase revenue from your current client base:

• Understand the expectations and challenges of your customers
• Build and foster collaborative communication at all levels of your client’s organization
• Set service and delivery benchmarks that embeds a “wow” factor
• Conduct solution-based conversations that drive client productivity and clearly articulates the return on their investment

Want to learn more? Drop me a line at jcsaintjohn@gmail.com or leave a comment.  Also check out Joseph Jaffe’s new book, Flip the Funnel: How to Use Existing Customers to Gain New Ones, very interesting insight.

However, for the customer centric organization, there is a simple answer, engage technology to assist and manage your customer service process. Process and content-focused technologies, such as BPM (Business Process Management) and ECM (Enterprise Content Management) or WCM (Web Content Management) provide a means to protect the customer relationship process, streamline your interactions, and allow for enterprise wide collaboration and to identify, fix and redirect broken processes in a flash.

I am not selling these technologies – I just pray that companies I do business with will implement the technology and save me the frustration of their technological laziness. Nevertheless, why are so many companies not using this proven technology to retain their customers? Well I guess they are either living in 1960, or perhaps they have not figured out that the installation of BPM or ECM is painless, priced right and in fact in some cases its FREE – yes my favorite “F” word – free through Open Source, which provides very sophisticated and robust packages. However, if you’re concerned with implementation cost, license cost, training, etc., … just remember the cost to acquire new customers alone far exceeds any retention cost of current customers, and the cost to win customers back, — well your guess is as good as mine, but I am sure its not pretty. Do us all a favor check out the application of automated and dynamic processes, and content-focused technologies such as ECM or WCM and save a customer or two – what else do you have to lose…?

(click, click, click, boom!)

In my opinion 2010, will be the year of the come back, I think companies will start to look at their current client base and try to secure those relationships. There is automatic revenue potential if the relationship is intact.

Both selling organizations and clients recognize that it is more cost effective to expand relationships, than it is to acquire new ones. The complexities lay in understanding the strength and challenges faced by both organizations and how to exploit them for combined relationship advancement.

However, over the last year most selling organizations have had their eyes on new client acquisition, which, is indeed a necessity, but has overlooked current customers, and thus the overlooked customer has been acquired by another organization.

So there lays the rub – new or existing business, I say both. Get new business first from your existing clients then from new client acquisitions, creating a self-fulfilling cycle of revenue. Nevertheless, the selling organization must, bear in mind that the current client relationship is indeed the golden goose, and squeezing it will only kill it; so tread easy to reap the rewards of loyal, expanding, revenue generating clients.

Yesterday, I had the experience of bearing witness to two extremes in customer service, and ironically it was with AT&T, which just got voted the worst in customer service.

It all started when AT&T told me I could change a rate plan. So, I called the customer service center and told the representative what I wanted to achieve. She was very nice and said “No problem”; I could hear her typing away, as I thought to myself Wow, she is actually documenting my call.

I was told all was done, so I went on my way to a client meeting. All of a sudden, I noticed I had not received any e-mails since 10:00 am, which was 4 hours ago. During my commute I called AT&T back to explain what I believed had happened, which was that the customer service representative must have made a MISTAKE yes, an error. That is, she had switched off my plan versus downgrading the pricing. Long story short as this still makes me twitch; I spent a total of 70 minutes on the phone trying to get my problem resolved with no such luck.

Later, I spent another hour on the phone with two other customer service representatives trying to fix my dead Blackberry. My experience with these two customer service reps was like rubbing bleach into an open wound. During these calls it was no longer a MISTAKE—it was my phone’s fault—it must have broken down and thus I needed to call technical support. Fat chance I was dialing another AT&T call center to go through triage again for the fourth time—seems that the first customer service representative must have been IM-ing instead of documenting my call. Lucky for AT&T and my blood pressure, I hit one of the white areas on their blue map and lost the call.

That afternoon, I thought I would call again, and got James from their Little Rock, Arkansas call center. After I explained the entire fiasco to him and demanded to speak to a manager, he said “Absolutely” and then kindly put me on hold. I think during the hold time we both must have counted to 100; he then told me that he was awaiting a manager to pick up the call and appreciated my patience. He then said, “Since we both are on hold, tell me again what happened,” in a friendly voice—you know, the kind that says, “I am on your side.” I took a deep breath and off we went down memory lane. He said, “Hold on, let me look at this, OK let me check this and that…” and all of a sudden my lifeline to the technology highway was working. He did what so many customer service professionals, never mind organizations, do not do, and that is care. James took pride in the job he was doing and made me feel that I was the only customer he had today.

James, if you’re reading this, I want to say thank you! Thank you for doing what most organizations don’t or can’t do in the best of times, that is having the ability to pull off a graceful recovery, and save the relationship. I have been an AT&T customer for at least 8 or 9 years, and you and your recovery methods will keep me coming back.

Today, more than ever we must protect our current customer resources. Sure, we will drop the ball now and then and yes customers will be angry, but they will be the happiest when we can recover from our mistakes with grace, and remind them that they are the reason we are in business.

In downturns, customer sometimes feel stuck with a vendor and will tolerate much more than in an up economy—but do not be fooled, they will leave you as soon as economic storm clouds have drifted away.

Companies today have lost sight of their current customers, and this is directly related to the people they hire. Organizations are hiring cheaply, not taking in to consideration the customer impact when hiring employees. Companies use one section of the company for hiring which must meet the needs of another section, and in some cases the two different parts don’t ever meet. Further, a majority of companies today use software to screen would be applicants, however the relationship between your organization and your customers is human and therefore, should be selected by humans. Your associates are not calculating rates of return, or processing batches of transactions, whereby their hard skills need to be validated through experience screening. I don’t know of any software on the market today that can better determine the soft skills of an applicant better than a human.

The answer in my opinion is be innovative and think holistically when hiring, use social media to paint a picture of the applicant, have actual sales/service departments screen via social media as well as resumes, try to find an applicant that matches your sales/service guru, better yet have your guru screen and chat with the applicant, they know what works. It’s a cut-cut world out there, but the companies that take the risks now will reap the rewards later.