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How Much Does Losing Just One Customer Cost My Business?
By Shawn T. Kiley
How much, indeed. Well, of course there are a number of variables that owners and operators can use to guage what losing a customer can cost their business, but there is a standard measurement theory that is based on cost per customer vs. sales per customer. Here it is in a nutshell: We begin by dividing your business expenses by your customer traffic. Lets run under the assumption that it costs your business an average of $1 million in operating expenses per year. Now lets assume that 100,000 customers patronize your business in that year. Based on this model, your cost per customer is $100. In other words, your sales associates, servers or whoever is responsible for making the sale must sell at least $100 to that customer just to break even. If this does not occur, your business is out $100.
Simply put, you absolutely cannot afford to lose even one customer, let alone not attract new ones. Retail trends demonstrate that in this quarter, due to the financial crisis, average retail business may be down by as much as 20%. Your staff must be able to use effective sales techniques to sell the customers that are coming into your establishment.
In addition, studies show that if one customer has a bad experience in your establishment, they will tell up to 11 other people about that poor experience. Statistics show that of those 11 another five people will pass on the bad experience to potential customers. If only a modest 25% of those customers decide not to do business with you, thats 17 customers and depending on the business you are in, that can lead to a potential lost revenue of up to $1 million over their lifetimes.
Keeping your customers and attracting new ones is serious business. Which is why a customized mystery shopping program from Aloha Solutions can help you in more ways than one. By having your fingers on the pulse of your frontline operations, you will be able to spot negative trends before they become a serious problem, as well as identify needed areas of sales training within your organization.
Mystery Shopping is a cost effective, proven way of helping your business keep your current customers as well as attract new customers through proper sales training and identifying gaps that may be costing you big dollars.
Until next time... Shawn
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