In This Chapter

You can lose a customer in many different ways. The most common way is to view them as a single sale not as the aggregate of their purchases over time. In this chapter, I review why customers “quit,” what customers are worth, how to deal with a complaining customer, and when you should decide a customer is just not worth keeping.

Research tells us that 1 percent of the customers retailers lose die. Approximately 3 percent move away. They change jobs or have another reason to move; either way, you won’t see them again.

Just about 5 percent of customers that retailers lose are convinced by friends to try another store, and approximately 9 percent leave because they are enticed by the competition without any help from friends.

About 14 percent of the customers lost were nice customers who didn’t complain about a product they didn’t like or a service they didn’t receive and they simply left and did not come back. They’re like most of us when we go to a restaurant, and have a mediocre meal, and the waiter or waitress says how was your dinner? We answer, “Fine.” And in our head we are saying, “Ooh. It’s terrible and I’m never coming back here again.”

But the majority of customers, who don’t return—as much as 68 percent of customers that don’t come back—do so because of the “attitude” of the store. I’m not saying that stores are negative to them. But what I am saying is even worse: they’re apathetic to them. There was no real connection. So very often it’s the attitude of the store that keeps the customer from coming back. Reread Chapter 18 and go that extra mile with every customer to prevent this type of customer loss.

Have you ever tried to estimate what a loyal customer could be worth to you in sales over his lifetime? Take the time to think about it. One national pizza chain did, and it came up with $13,000 as the estimated average lifetime sales value of a loyal customer. That’s a lot of pizza. And it figured, why not give away a pizza or two to keep that customer happy and coming back?

A similar study done by a high-end hotel operator puts its lifetime loyal customer value at over $100,000. In that chain, a staff member can spend up to $2,000 on the spot to resolve a guest problem.

Think of your customers based on their long-term sales potential and what they will be worth if they come back again and again. Talk about this concept with your sales associates and encourage them to give ideas that will help you turn casual customers into loyal repeat business.

So how can you calculate a customer’s worth? Let’s take a look at a car dealership. Let’s assume you sell the first car to a customer at the age of 30 and expect that customer to buy a new car every three years until the age of 60. That’s 10 cars over a customer’s lifetime. We’ll assume an average car price of $30,000. Here’s the calculation …

While you probably aren’t going to sell cars, you will be able do this same calculation using your average transaction per customer. You will need to estimate how often your loyal customers come into your store each year and multiply that by your average transaction. Then multiply that by the number of years you believe you can serve a loyal customer. That will depend on the type of store you have and the age of your target customers. Remember, people are living longer today, and you might be surprised by how long you can keep them coming back.

Give your sales associates these numbers. Also remind them that a loyal customer will bring in other customers. So the value of that loyal customer will be far greater than just the sales you can make directly to that customer. Isn’t it worth it to go the extra mile to keep that customer loyal?

When a customer complains, don’t think of it as a problem, but instead as a blessing in disguise. For every person that complains, you can be sure there may be hundreds who did not bother to complain, but instead are just spreading negative comments about your store.

Deal with any complaint immediately and do your best to rectify the situation and keep the customer happy. Customers may not always be right, but you have to make them think they are.

You can solve the problem by giving the customer her money back, exchanging the item, or offering to pay for a repair. To be sure the customer is completely satisfied, you should also provide some special service to say you’re sorry, such as offering another product at a reduced price or possibly some service related to the product for free—something to get them to want to come back to your store again.

Sometimes you will face dishonest customers who make false claims to get a bonus. For example, suppose you are a fashion store and you suspect a customer is returning an expensive gown after using it once and then saying she wasn’t satisfied with it. You may see signs that the gown was worn. If it’s the first time, assume the customer is right and return her money, but if you see this happening more than once, you just say no. Losing that type of customer is better than keeping her.

There are some customers you would rather lose. These can be up to 20 percent of the population, depending on where your store is, who have what I call a “relaxed conscience.”

These are people who just try to take advantage of you and lie to you to get what they want without having to pay for it or by paying very little. It will be very difficult for you to build a future business with those customers.

As hard as it is for you as a retailer to turn a customer away, you are better off encouraging them not to shop with you anymore. You may lose less money.

The other 80 percent of the population can be great customers. Learn to recognize the customers you want to lose and be glad you got rid of them. But don’t lose the other 80 percent because they didn’t receive the right service and experience when they walked into your store. Make going that extra mile a habit, and you’ll build a strong base of loyal customers.