Test Your Winback IQ

True or False…

1. Most firms stay well informed about their company’s percentage of annual customer loss. T or F

2. Conducting defection interviews is not a wide spread practice among corporations. T or F

3. Generally speaking, your chances are greater on winning back a lost customer than converting a new prospect into a first time buyer. T or F

4. Generally speaking, web customers are proving to be loyal customers. T or F

5. A customer’s lifetime value after the customer is recovered and buying again from you (referred to as the second life cycle) is likely to be the same as the customer’s pre-defection value. T or F

6. Newly departed customers are likely to give the same reason for leaving as the one they report several months later. T or F

7. Timing is everything in building a successful win-back plan. T or F

Answers

1. False. Our nationwide study found that close to 50% of marketing managers and 30% of sales managers could not identify their company’s percentage of annual customer loss. Those who did know their firm’s defection rates said it averaged 7 to 8% when in fact, the average company loses 20% or more of its customers every year.

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2. True. Our national study showed that forty three percent of sales managers and 47% of marketing managers said they did not conduct defection interviews thus depriving their companies of insight about root causes of defection.

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3. True. A study by Paramus, New Jersey-based Marketing Metrics found firms have a much better chance of winning business from lost customers than from new prospects. The research found the average firm has a 60-70 percent probability of successfully selling again to ‘active’ customers, 20-40 percent probability of successfully selling to lost customers, and only a 5-20 percent probability of making a successful sale to prospects.

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4. False. A recent study of web shoppers by Cognitiative Inc. found only 55% of e-shoppers polled declared allegiance to their chosen web sites with no interest in switching to another site to perform the same activity. That means a whopping 45% of e-shoppers reported a likelihood for switching. Poor technical performance – such as frequent downtime and slow turnaround speed, outdated content and poor customer service are the leading reasons given when Web shoppers defect to other sites. In addition, Cognitiative research found 30% of respondents expect the same selection and 50% expect a better range and selection of products when they shop online as compared to when they shop in the analog world. With web site capability in its infancy and more and more dot coms and traditional retailers scrambling to get online, customer loss and win-back on the web will be important dynamics requiring careful management.

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5. False. There are at least four reasons why the ‘second life cycle’ can differ greatly from the ‘first life cycle’ of the same customer: (1) the departed customer is already familiar with the services offered, (2) the service provider has a lot of more data about the likes and dislikes of this particular customer than about any first-time customer and can offer a more targeted service, (3) the personal recognition of the customer in the course of the successful win-back could lead to a different sales performance than that generated by any more anonymously recruited first-time customers, and (4) the length of the ‘prospect phase’ and the ‘new customer phase’ would arguably be shorter in the second life cycle than in the first one.

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6. False. Studies show that newly departed customers are often reluctant to share the real reason they left. They may be embarrassed to say they’re leaving and will compensate by giving easy reasons for defection. It’s often better to wait a month or two later when they are settled elsewhere to get the real facts.

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7. True. You must understand your customer’s restrictions in returning as a customer. It’s critical that you time your program to coincide with the lost customer’s ability to switch.

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