The Cost of One Lost Customer

by Rich Kizer & Georganne Bender

As part of our research we host customer focus groups, hold one-on-one customer interviews, and personally mystery shop stores posing as every kind of customer we can pull off. We also spend countless hours in all types of stores, trying to blend into the woodwork, just watching how customers shop.

And sometimes we are actually just real live average customers who need to make a purchase. Georganne’s experience in a fine furniture store is a good example.

Georganne had been cruising furniture stores looking for new furniture for her family room. It’s time. Two teenagers and their scores of friends had made this replacement necessary. The problem was that although Georganne knew exactly what she wanted, she hadn’t been able to find it. So when a friend recommended an independently owned fine furniture store not too far from her house, Georganne decided to check it out.

Jackpot! Walking from her car to the store, Georganne saw several groupings she thought would work in her family room. She was ready to buy.

Just inside the front door stood five elegantly dressed women behind a counter. Each one barely gave Georganne a second glance when she walked in, so she continued to browse the store on her own. Approximately 15 feet past the first counter, Georganne encountered another. Standing behind this one were four more elegantly dressed sales associates. Not one of them looked at her either. Still, she kept on shopping.

Georganne was in that store a total of 25 minutes, and not one of those professional salespeople bothered to approach her. No one looked at her on her way out, either. So, like any other ignored customer with lots of shopping choices, Georganne left the store. Then unlike any other ignored customer with lots of shopping choices, she returned to the store and asked the women at the first counter if she could speak with the owner. The conversation went something like this:

Georganne: “I’d like to speak with the owner please.”
Store owner: “I’m the owner.”
Georganne: “Did you happen to notice that I was looking at your product?”
Store owner: “Yes.”
Georganne: “Did it occur to you or any of your staff that I might need help?”
Store owner: “We prefer to let customers just look.”
Georganne: “I was in your store 25 minutes.”
Store owner: “I know.”
Georganne: “Did it occur to any of you to maybe acknowledge that I was here?”
Store owner: “We knew you were here.”
Georganne: “No kidding? Did you know that I came in here today prepared to buy a couch, a love seat, chairs and accessories for my family room?”
Store owner: Silence.
Georganne: Well, you’ll be happy to know that I will not be purchasing a thing from your store. Ever.”

If you’re a retailer, we’re willing to bet that your skin is crawling right about now. You would never treat a customer the way Georganne was treated. We also bet that if you saw an angry customer leaving your store, you would chase them to their car to see how you could fix the situation. Unfortunately all retailers are not like you. Apparently, this retailer has all the business she needs. Losing just one customer won’t make a difference…or will it?

Take this test using figures from your own store:

1. What is your average customer sale? _______________
2. How many times a month does this average customer come into buy? _______________
3. Therefore, an average customer will spend this much in one month: _______________
4. Now, multiply the number in # 3 times 12 to find what an average customer spends in one year in your store: _______________
5. How many years is that customer potentially your customer? _______________
6. Multiply the number in # 4 by the number in # 5 to calculate the lost lifetime sales of this average customer: _______________
7. If this angry customer is like most angry customers, and tells 10 other people about her bad experience, and they believe her and also decide to no longer shop with you, what’s the cost of just one unhappy customer? To get this answer, multiply the amount in # 6 times 10 (that’s the 10 other customers), then add the original customer’s lifetime sales (# 6) to get the total answer: _______________

You will be surprised how much damage one customer can do to your business.

If we use just $20 as the average sale, and follow the above exercise through all of the steps, that one angry customer would cost the retailer $3,360 in lifetime sales. But that’s not all.

Add in the 10 people that customer is likely to tell, and that single, unhappy customer would cost the store $33,600. Now add in the angry customer’s lifetime sales and the number grows to a whopping $36,960. That’s a pretty steep number to make up. It pains us to think about how high this figure could be in a fine furniture store.

Here’s the scary news: only one in 10 customers will take the time, or make an effort, to tell you when something is wrong. That means that the other nine leave angry and may not ever come back. They may even tell their friends. So, when customers leave your store empty-handed make it your mission to find out why. When you -- or anyone else on your team -- see an angry or unhappy customer, approach them and try to fix whatever is wrong.

There’s good news, too because the statistics are on your side! When customers give you the opportunity to merely attempt to fix the problem, studies show that over 80 percent will give you another chance.

Sometimes the misunderstanding is so small you can fix it in an instant. Sometimes you’re going to have to swallow your pride and work hard to woo the customer back. Either way, it will be worth your effort.

About the Authors …

Rich Kizer and Georganne Bender are nationally recognized experts on customer diversity, “messing with the media,” marketing and everything retail. They are widely referred to as retail anthropologists because they stalk and study that most elusive of mammals: today’s consumer.

KIZER & BENDER have presented their “Retail Adventures in the REAL World™” keynotes and seminars to diverse audiences since 1989. In 2004, KIZER & BENDER were named “Two of Retailing’s Most Influential People.”

KIZER & BENDER’s retail observations are widely featured in the Medias, including the ABC News special report “How Stores Hook You.” Their book Champagne Strategies on a Beer Budget! has helped thousands of retailers improve their bottom line; their client list reads like a Who’s Who in American business; and their column, “Georganne & Rich on the Road” which appears in Craftrends Magazine, was honored with The American Society of Business Publications Award of Excellence (ASBPE) in 2004 and again in 2006.

Contact Rich & Georganne at 1-888-215-1839 or via their Web site www.KIZERandBENDER.com Visit their “Retail Adventures™” blog for daily updates www.kizerandbender.blogspot.com .

Reprinted from Floor Care Professional, December 2008