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Ask SCORE: How to minimize attrition of customers in your business

Ask SCORE: How to minimize attrition of customers in your business

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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 are lost 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 the price.

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 11%. 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 was 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 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 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.

Gray Poehler is a volunteer with the Richmond Chapter of SCORE, Counselors to America’s Small Business. To ask a question or request free and confidential business counseling, go to Learn more about SCORE’s workshops on the website or by calling (804) 350-3569.

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