Customer Defection Essay

524 words - 3 pages

I strongly agree that customer defection is one of the most illuminating measures in business. However corporations do not measure customer defections or make little effort to prevent them. Customer defection contains nearly all the information a company needs to compete and make profits. It is a clear possible sign that customers see a deteriorating stream of value from the company and diminishing flow of cash from customers to the company. By searching for the root causes and acting on them can help business win back the customers and reestablish the relationship on firmer ground.
Lessons
* Business doesn’t act on customer defections as many companies aren’t really alarmed by customer defections. Customer defection is often hard to define and is extremely hard to uncover the real root ...view middle of the document...

Executives focus heavily on customer satisfaction-surveys but these surveys have weakness and are imperfect. Instead they need to find how many satisfied and existing profitable customers they can keep.
* People in organizations need to focus on failure analysis. More can be gained by studying business failures rather than on business successes. Some customer defections can be easier to spot than others. Some defections can be partial. A customer can buy some equipment, some service from other suppliers, and these fractional defections have meaning. Corporations need to monitor if their share of wallet is going down from the customers.
* Companies need to find the core customers which are most profitable and loyal. The key is to identify and attract those core customers who will value the service and then to retain them as customers. This will ensure that companies win the largest possible share of their lifetime business. Companies need to spend their efforts on core customers instead of drawing unprofitable or marginal customers.
* Companies need to do the Root-Cause failure analysis. They can start by asking why something at least five times to get to the root of a failure. Failure analysis demands a thorough understanding of the business system and requires the guidance of senior managers. For example – executives need to listen in on customer-service calls for finding the real issues in the business flow. Rewards and bonuses should be tied with reducing the attrition. In addition it is necessary to remind employees how important it is continue improving retention rates.
* Companies need to make Failure-Analysis permanent by keeping senior managers permanently plugged into frontline customer feedback. Businesses need to develop a measurement system to monitor if solutions they’ve developed are reducing defection rates.

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