Marketing Mistake #12 | Failing to Calculate the Cost of Losing a Customer

Business Management

The “Ripple Effect” is one of the most powerful forces in business. And it can affect you both in a positive manner, as well as, negatively.

In our last example, we discussed how valuable each of your customers can be to you over time.

We called it the Lifetime Profit Value of your customers. Now, let’s take a look at what the cost could be to you if you lose a customer, instead of gain one.

Let’s suppose for a minute, that you or one of your employees got upset with a customer, and they stopped doing business with you.

No big deal, right? I mean, they were just one customer. And it’s not too difficult to get another one to replace them. How much would you lose if they never returned?

In our previous example, $2,000.

But now, let’s take a closer look at how the Ripple Effect could impact that one bad experience between you and your customer.

If that unhappy customer were to tell 12 other people about that experience (or not refer those 12 people to your business), and each of those 12 were to tell six others, the total number of people affected by your one bad experience would total 85. (6 x 12 = 72 + 12 = 84 + the original unhappy customer = 85).

Now, if only 25 percent of those people chose not to do business with you, that comes to 21 people.

If each of those 21 had similar buying habits as your original customer, your total lost revenues would be $42,000! (That’s $2,000 x 21 people.)

$42,000... all from one bad experience!

But what if those figures are way off, and it’s only 10 percent of that amount? That still totals $4,200.

That’s a lot of money for letting one person leave your business unhappy. And here’s an unfortunate thing:

Sometimes people are unhappy and leave, and you don’t even know it

Marketing Mistake #12 | Failing to Calculate the Cost of Losing a Customer

 

They just get their feelings hurt, feel slighted, or have something completely unexplained happen, and take their business somewhere else. And you never know. However, mostly its because of perceived indifference.

So what do you do about it?

Well, you can’t afford to do anything, but treat each of your customers the very best way possible. Give them all the love, care, attention and service you can. Kill them with service. Go overboard. Make it nearly impossible for them to even consider doing business with anyone else but you, regardless of price, location, convenience, or any other reason. Become not only the preferred place to do business with, but the only consideration your customers, clients and prospects have.


Lisa Ormenyessy

Business Coach and Marketing Specialist at

I help SME's gain leads easily without breaking the bank. Talk with me and discover how to spend your marketing dollar and achieve sales using simple, proven, low cost strategies. | SavvySME Members Only Offer - Request your Free Marketing Review Session (valued at $397) & identify the hidden opportunities in your business & put a stop to the expensive leaks in your marketing


Comments (2)
User
Loading...
Leo Eliades

Leo Eliades at

Hi Lisa, thank - your numbers say it perfectly. I was surprised with the % that leave due to them feeling indifference, a kind reminder to always strive for the best possible service. wow 68%, this must inspire all of us thank you again Lisa

Ling Lee

Ling Lee at Digital Marketing and Personal Branding

Thank you always for the great articles Lisa! Yes, there are a number of these hidden costs out there, and most important of them all is the 'losing customer' cost. Especially for someone with an online ebay store, a negative feedback is always hurtful.