Question:  My customer count is down for the year. I have reduced my fees but my retention rate still leaves much to be desired. What am I missing?

 Answer: There are many reasons for customer attrition. Price is only one answer. People move or pass away. Businesses are sold and the new owners have their own relationships. Alas, some you lose to competition.

Of all the reasons mentioned above the only one you have any control over is the loss of customers to competition. If a competitor wants to cut profit margins to the bone, there is little you can do other than match their price.

However, if you do match their price the message you are sending is you are doing it only because you were forced to do so. This does not sit well with your customer and begs the question why would you do it if you can’t make any money?

While price is always going to be a major consideration, service (or the lack of service) is another reason customer’s leave. Allow me to share a personal experience.

I owned an insurance agency with many large commercial clients. At one point I noticed our annual customer attrition rate was eleven percent. In effect, I had to make up for this loss each year before we could grow the business.

Our clients had many needs that required almost instant responses which we did not always meet in a timely fashion. One reason for the delays were a lack of communication between the sales and service personnel.

We discussed this problem in staff meetings and came to the conclusion that we needed to condition the client to relay their requests to the in-house customer services representatives, as opposed to the salesperson. By taking one link out of the chain, turnaround times were dramatically improved.

We told our customers they could count on same day service. If same day service was not possible, we told them when they could expect their need to be resolved. We never promised anything we could not deliver.

As an to incentive to our customer service people, we devised a bonus plan that rewarded them a percentage of the savings reaped by the reduction in attrition. This did not cost the business anything as it was paid for from commissions we did not lose to competitors.

Because of this increased emphasis on customer service we found many of the former clients that left for a better price returned as their needs were not being met by the competition.


Gray Poehler is a volunteer with SCORE Naples. Business counseling on this and other business matters is available, without charge, from the Naples Chapter of SCORE. Call (239) 430-0081 or visit .The SCORE business office is located at 900 Goodlette Road North, in the Fifth Third branch bank building. Office hours are 9 a.m. to noon, Monday through Friday.