The Value of a Single Lost Customer

 “…We were visiting with a multi-unit retailer recently and figured out with them on the white board that simply saving one customer per store per year would pay for their entire Customerville implementation.”

We’ve met a lot of new companies over the summer, both in the US and in Europe.  And, as you’d expect from these types of first-time meetings, one of the early questions we get asked is “What’s the ROI on measuring the customer experience?”  There are really two ways to calculate this – the hard way, and the easy way.

Here’s the easy way. Look at ROI by understanding the value of lost customers – those who report a very bad experience which has them headed for the exits.  To do this, simply calculate your average annual customer value, and then multiply by the number of customers per year you think each location loses due to the kind of service failures that result in a compliant.

Don’t know how many you lose each year?  Just make a guess.  Fact is, even your lowest guess will likely amount to less money than it costs to start measuring and sharing your customer grades, whether you do it with us or through another means.

One Lost Customer. We were visiting with a multi-unit retailer recently and figured out with them on their white board that simply saving one customer per store per year would pay for their entire annual Customerville license.  Now that’s ROI.

Why is this method such a quick way to establish an extremely powerful ROI on measuring customer experience?  Because, as we’ve found in virtually every implementation we’ve ever done, sharing live feedback about bad customer experiences with the right people and in the right way provides a dramatic reduction in the number of reported poor experiences.  Simply put, you’ve closed a vital feedback loop between customer and employee.

Take a look at this chart. It’s a 10-store district in their first year of measuring and sharing their customer grades.  In their first month they had 14 red flags.  Remember, these are customers you’d usually expect to defect.  (Because we have their contact information, our client was able to call and save many of these customers before they defected.)

But look at how the number of red flags per month just drops line a stone!  By July and August, these guys are at zero red flags for the entire district!  Now they rumble along at one or two per month for the whole district.

There’s no magic at work here – just the simple power of sharing candid feedback about when things go wrong directly with employees.