The Real Danger of Customer Defection

The Real Danger of Customer Defection
The Real Danger of Customer Defection

Companies spend a lot of time and money figuring out how to attract new customers to their product or service. But less thought is given to customers who stop buying and simply leave.

Customers leave for a variety of reasons. And understanding these reasons is an important first step to reducing customer defection.

Statistics, depicted in Figure 1 below, tell us the major reasons customers defect.

why customers leave3

Figure 1

Quite simply and clearly, the bar graph above shows that 68% of customers leave because they believe that the company does not care about them. 14% leave because they are dissatisfied with product or service while 9% leave because they are lured by a competitor.

Expectedly, there are a few factors that are not within the company’s control, like when a customer dies or moves away but those constitute only a small percentage of the reasons customers leave.

So, all together, 91% (68+14+9) of the reasons customers leave are potentially within the company’s control.

Now these are not hard issues to address – but as will be seen in Figure 2 below, most companies do not recognize them as the issues that make customers to leave.

company view 2021

Figure 2

Figure 2 above shows that a staggering 73% of customers leave because they are dissatisfied with customer service, but the company losing the customers thinks only 21% leave because of customer service – look at the purple bar underneath.

Again, the company losing the customers thinks only 17% leave because of quality of product or service, when in fact 31% do so. Also, look at the wide difference in views in needs change and price.

What this clearly demonstrates is that companies tend to place the reasons for defection firmly at the feet of the customers (i.e. something outside the company’s control). It’s easier to rationalize a customer’s decision to leave by blaming it on price, needs change, etc. but, as statistics have shown, often times it’s primarily because company representatives did not provide excellent customer service.

And doing so is an art that requires the right blend of knowledge, customer service skills, and great attitude. Without these, employees find it difficult to provide the level of service that can significantly reduce defection.

But the real danger of customer defection lies in its subtlety. Customers don’t usually leave in one fell swoop. Rather they depart in hard-to-spot dribs and drabs.

Hence it’s important to, at all times, keep an eye on your customer defection rate and treat it as a top priority. Analyze how and when customers leave in their lifetime with your company, and use that information to put into place preemptive measures.

This is very helpful in reducing customer defection. And there’s a strong correlation between customer defection and profitability. Depending on the industry, reducing your customer defection rate by 5% can increase your profitability by at least 25%.