By Andrew Sobel and Olivier Jacob
Playwright Oscar Wilde defined a gentleman as someone "who is never intentionally rude." Similarly, you never want to have a good relationship end unintentionally and without a good reason.
Unfortunately, relationships often end in avoidable ways. Customers simply vote with their feet as a matter of habit, and don't carefully explain why they no longer do business with you. This can lead to an after-the-fact rationalization, as if the relationship ended due to factors entirely outside your control.
Here are eight reasons why you might lose a customer, and the steps you can take to correct each situation. This month, in Part I, I'll cover the first four. Next month, I'll describe the remaining four.
- A reorganization or a change in leadership.
Does this sound familiar? One of my clients said, "I spent several years developing a relationship with a vice president, and then he was ousted in a reorganization. The new leader has a relationship with one of the key competitors, and we heard he might bring them in."
Leadership turnover is at an all-time high. It's a fact of life. Get used to it. Here's how to best handle these situations:
- Build plural relationships with all your key customers. If the relationship is dependent on only one manager, you are doubly exposed - the customer may leave, and your own relationship manager may leave!
- Be sure you are connected to a senior leader above your daily customer. The relationship will be worth its weight in gold when there is turmoil.
- Make sure you receive credit for your work and that the value you have added is widely appreciated in the company.
- Work hard to get the outgoing leader to vouch for you and introduce you to his or her replacement (of course, if you've built a good relationship with him or her in the beginning, this shouldn't be a problem!).
- A unique or temporary need for your services.
Sometimes clients only have a periodic need for what you do. A university may hire a fundraising consultant only every five or ten years, when it has a capital campaign. A corporation may need the services of a construction company only when it is building a new headquarters building.
The first and most important thing you need to do is develop additional products and services that satisfy recurring needs. Ask yourself, "What adjacent and ongoing needs can we help the customer with?" For example:
- A fundraising consultant can help a university run its annual campaign more efficiently.
- A construction company can help clients manage their premises and conduct sustainability audits.
- An executive search firm can do talent planning, executive assessments, and leadership coaching between periodic searches
Second, you must add value between major engagements. The client needs to perceive you as a trusted advisor in good times and bad - when you are collecting fees, and when you are not.
Do you call all of your past clients each year, and add value by sending them insightful thought leadership materials that address their most challenging issues?
Third, if your customers rarely use what you offer, be sure to get referrals and testimonials from every person you do business with. Your marketing strategy should be to deploy a wide network, and these referrals will help you tremendously.
- A financial crisis or profit crunch - and a lack of budget for you.
A friend of mine was providing coaching services to one of the Big Four financial audit firms. This client grew and grew, and eventually accounted for 75% of his business. In 2008, when the financial crisis hit, the client did not renew its contract. "We don't have the budget for your coaching services anymore," they told him. A familiar story?
It's a lie, however, that customers don't have the money to pay you. What they have decided is that using you is no longer a priority given their (invariably) limited financial resources.
The client has just told you that he can no longer afford to continue with you is paying for a whole bunch of things at that point - some of which may be a total waste or have little return on investment. They may spend money on unproductive initiatives, underperforming managers, too much office space, ineffective advertising, too many photocopiers, etc.
They may also be spending more with your competitors. How many times have you heard that there is a "freeze" on all management consultants, only to find that someone is still doing multi-million dollar work for the client? Note: this company usually has very strong relationships with key senior executives - relationships that support them in tough times.
Your challenge is to demonstrate why your services should attract the already scarce budget. You do this by:
- Showing how exactly you are a part of the customer's growth, profit and innovation - not just a cost, a necessary evil. You must draw an irrefutable line between what you do and the client's critical objectives.
- Relentlessly communicating the value and impact of your work.
- Spending enough time with leaders so that you have a good understanding of what is important to them.
Another client of mine was told that, due to spending cuts, every supplier in his market had been reduced by 20%. He analyzed the client's total spend, and came up with a plan that could save him 30% - if the client consolidated all his business with his company. He won the contract, and grew his business with the client, even though the size of the pie had shrunk!
4. The impact and benefits of your work are not indisputable.
This reason often leads to a feeling that you are not needed on a current basis (reason 2) or budget unavailability (reason 3). If you deliver good quality work, why would your client feel that what you do is not relevant or compelling? Here are some possibilities:
- You have not sufficiently communicated the value you add
- You are working too low in the organization and your product or service is basically hidden from view.
- You haven't shown the client how you help them achieve their most important goals or priorities.
- Your work is acceptable but not perceived as "superior". You do not impress the client in any way.
- The customer perceives your products or services as solving a relatively insignificant problem.
Your first step should be to diagnose why the customer doesn't see you as an important and compelling supplier. Then, take action. For example:
Can you better quantify the benefits of your work?
Can you get a few managers who know and like you to vouch for you with management?
Can you make yourself useful in ways that are more meaningful to the customer, either by evolving your service offering, or by raising your customer service levels to "knockout" levels?
Can you tie what you do - even if it impacts a small part of the client's business - to something bigger and more important? For example: one of my clients offers moving solutions to professionals. Traditionally, this is a relatively small expense for corporations, and the job is given to a junior manager who is expected to do it in the least expensive way possible.
My client redefined himself as a creator of a mobile workforce, not just a "mover. He began to show clients how he could be an important talent development vehicle among client companies. This created a unique differentiation within its industry, and increased its relevance with clients.
In Part II of this article, you'll find four more reasons why clients leave.
- Quality or delivery problems.
- Low personal compatibility.
- A decline in confidence.
- Complacency on your part.