03/ 30/ 2005
by Judy Artunian
It is an axiom of business that no customer is guaranteed to stay with you forever. Regardless of how loyal your customer may be, there are any number of factors that could prompt them to take their business elsewhere. It may be no reflection on the quality of your product or service; a customer might be merging with another firm that uses software or hardware that isn't compatible with your product. On the other hand, a long-time customer who praises your company to you might be quietly keeping track of your late deliveries or product quality inconsistencies.
When a departing customer represents less than 15 percent of your revenues, you can probably make up for the lost business with a few months of expense trimming and aggressive marketing.
But what if 50 percent of your revenues walk out the door in one afternoon?
Feelings of shock and betrayal are normal, but don't let them overwhelm you. One of your first steps to recovery should be to consult with your lawyer or accountant to determine your risk of bankruptcy and to get objective advice on your worst-case and best-case scenarios.
Among your top priorities should be slashing expenses. Consider small changes like giving up your company car. If more serious downsizing is in order, see if you can sublet part of your facility. Depending on the type of business, you may be able to give up your office altogether by asking your employees to work out of their homes. If you have to lay off employees, you can help ease the pain by offering a severance package and writing a letter of recommendation for them. Also see if you can refer those you lay off to other employers. But before you start letting people go, talk to your key employees about becoming independent contractors who will work for you on a project basis. After all, you are likely to need them as you bring in new customers.
While you implement your cutbacks, get your marketing machine going so that you can replace that bread-and-butter customer, preferably with several smaller customers. Start by identifying your target market. Who are your existing customers? What benefits do you provide to those customers? How did you attract that big customer you just lost?
Go beyond your sales and marketing department by enlisting your all of your employees in the effort to attract new customers. Offer them a commission on every new account they bring in. Don't forget to ask your current customers for referrals. You don't need to reveal that you lost your largest customer. If pressed, you can say that you have recently completed a long-term project and now have the capacity to expand your customer base.
At some point, ask the customer who just left if there is anything you could have done differently in order to keep the business. You could get critical insights into the quality of your customer support or your pricing policies.
If you do learn that changes are in order, waste no time in implementing them. If your sales staff isn't already authorized to offer price breaks or payment plans to customers who are wavering, consider allowing them to do so now. Encourage your sales staff to spend more time talking to customers about their needs. Pay a visit yourself. Nothing inspires customer confidence like a sincere show of concern by the company president.
Upgrading your level of customer service is just one way to ensure that you aren't caught off guard by a customer defection in the future. Other strategies to consider:- If a single customer represents more than one-third of your revenues, it is time to add new customers.
- Commit at least 15 percent of your annual gross revenues to maintaining a strong marketing program.
- Give your sales staff incentives to bring in new customers rather than simply focus on current customers who routinely place new orders.
