It is normal for a business to lose 10–25% of their customers every year. If you are losing more than that, it is a wake-up call for you to take action.
There are 5 main reasons why a customer will turn their back on your business:
- Your customers no longer need your product or service
- Your product or service does not satisfy their needs
- Your customers feel you are too expensive
- Your competitor is giving them better service
- Your customers don’t like your business
1. Your customers no longer need your product
Sometimes, your customer may move “up-market” or “down-market”.
For example, a mother with a baby will stop buying baby formula and diapers after her child reaches a certain age. She will move up-market to another market segment and start buying other products. The same thing may happen if your customer starts making more money and can afford to buy more expensive things.
If your customer’s ability to spend money has been negatively affected, he or she will move down-market to look for replacements or simply stop buying the product or service.
Finally, if a customer dies, they also leave your business.
Customers moving up- or down-market is a normal part of doing business.
You can try to hold on to your customers, for example, by offering a wide range of products from cheap to expensive. This may hold some of them but will not stop all of them from leaving.
You can also try to attract new customers to come to your business to replace those that may leave.
Try to calculate how many customers you have per year and how many of them do not return. This will give you an idea of how many new customers you need to attract each year to maintain your business.
2. Your product does not satisfy their needs
Do you truly understand who your customer is? Do you know what they want? Can you tell me what problems they face and how your business can solve their problems?
Customers are not looking to buy a product or service. They are looking for something that will solve their problems.
That problem may be a basic need like food to feed their family. Or it may be a desire to show that they are modern and successful, in which case they may be looking to buy the most expensive phone that they can afford.
Whatever solution they may be looking for, unless your business is able to satisfy their need, your customers will not come back. My advice is therefore to study the market. What are people looking for and how can your business provide the answer?
3. Your customers feel you are too expensive
Customers are looking for maximum value at minimum price.
If they can find the same product somewhere else at a cheaper price, that is where they will go to buy. It may not even be the exact same product, but if it is similar and solves their problem, you will lose them. This is particularly the case with fast-moving consumer goods.
But be careful before you drop your price! You should do some research first.
Maybe the other place is dropping their price to attract customers but making a loss. Do you have the financial reserves to also sustain such a loss?
You may also want to consider if you can position your business in a different way. If customers feel that your product or service is adding a value that other sellers do not offer, they will be more willing to pay a higher price.
- Can you offer free delivery if they buy a certain amount?
- Do you have a customer loyalty programme that will allow them to save for free products?
- Can you redesign the layout of your business so that it looks more exclusive?
- Can you add certain products or services that will make your business seem high-end?
Dropping prices can be a dangerous strategy because once you drop them, there is almost no way to raise them again. It is better to position your business at a higher level so that customers perceive it to have more value. This will make them more willing to pay a higher price.
4. Your competitor is giving them better service
If your customers think that your competitor can serve them better than you, that is where they will go.
It may be that the competitor’s product or service can solve more of their problems. For example, the phone that your competitor is selling gives customers a free 7-day internet package. Whereas the phone you are selling does not provide that.
It is also possible that the competitor can solve the customer’s problems better than you.
For example, you run a repairs shop but your customers have to come back after 1 week for additional repairs. Whereas if your competitor repairs something, it may take up to 3 months before the customer has to return for additional repairs.
This will also be the case if your product is old-fashioned or outdated compared to what the competitor is selling. If so, find a way to cut your losses. Can you sell the old inventory at a lower price and use the money to add more modern products?
Finally, there is the situation where there is no difference between you and your competitor. But your competitor has succeeded in making customers believe that their business is better. Meaning that your competitor has positioned their business better than you. This is mainly done through smart marketing.
Pay attention to what your competitor is doing. What products or services are they selling? How are they marketing those products? See if you can keep up or improve. You can also check out this post about how to market your business on Facebook for free.
5. Your customers don’t like your business
There can be many reasons for this.
Maybe your customer service is not good. This is one of the main reasons why a customer will leave a business! Maybe your employees do not immediately tend to your customer when the customer enters and show arrogant behaviour to the customer.
Maybe you promise things, but you do not deliver. For example, you claim to be selling a high-quality product or service. But when your customer buys it, they find out that the quality is lower than what you say.
Or maybe you do not approach negative feedback from customers with the right attitude. For example, when a customer complains about your product or employees, you do not take it seriously, you start arguing with the customer or you do not act to resolve the problem.
If this is an area where your business needs to improve, check out this post for some advice about how to retain customers.