Nothing is more sacrosanct in Marketing than never giving up a customer. But is keeping all of your customers always the best way to build your brand? Here’s a possibly controversial view: in the future it will become even more important to gracefully remove dissatisfied customers from your franchise–and this will be key to maintaining a healthy and growing brand.
This is because “recommendations from known people” is the most powerful form of advertising, and your detractors are likely hurting your brand more than you think. And as my recent blog post “How the Future Social Web will Transform Marketing” pointed out, word of mouth from friends will become vastly more important in the future.
Are all Customers Equal in Value ?
Not all customers are equally satisfied. Whether you’re using standard satisfaction metrics or Net Promoter Score, a customer satisfaction metric popularized by Fred Reichold in his book ‘The Ultimate Question,” it’s important to not just look at overall satisfaction, but to understand differences in customer satisfaction across products, channels, customer groups, acquisition channels, etc. to identify potential problem areas.
Customers are also not equal in economic value. Some are more valuable and some are less. Measuring the profitability or life-time value (LTV) of a customer is a complex, but important marketing metric.
Not surprisingly, customer satisfaction and lifetime value are related. More satisfied customers are generally more loyal, more willing to pay a higher price, less likely to switch brands based on promotions and price deals, and are more likely to generate positive word of mouth that positively benefits your brand. Conversely, less satisfied customers are likely to generate negative word of mouth. This is critically important because “recommendations from people known” is the single most trusted form of advertising based on a recent Nielsen study.
Measuring your various customer groups on satisfaction and customer profitability is the starting point for understanding whether pruning customers will build your brand. Slice your data to identify groups of customers with low satisfaction and/or profitability, understand why, and then determine whether the problem is economically solvable. If not, you have to ask whether it makes sense to prune the customers.
“De-Recommending” Your Brand
Because if you don’t, dissatisfied customers will be “de-recommending” your brand and eroding your hard earned brand equity. Research has shown that only about 5% of customers will complain, but of the balance 95% that don’t, they’ll not only remain dissatisfied but also tell an average of 9-10 people each about their poor experience. They are, in Net Promoter terms, brand detractors that hurt your brand.
Examples Where Pruning Could Make Sense
- Channel Experience – Customer satisfaction by channel — web, phone, retail, etc. is often significantly different. Should you shut down a channel ?
- Product Variant – Product satisfaction frequently differs by product variant, with some variants having much lower satisfaction. Should you eliminate a product or product line ?
- Acquisition Channel– Some acquisition vehicles deliver lower satisfaction and lower profit customers than others. Should you de-emphasize an acquisition channel or tactic ?
Gracefully cutting business lines and exiting dissatisfied and vocal customers from your franchise in these and other similar situations is important to building your brand. Why? Because exiting dissatisfied, low value customers will reduce negative word of mouth, improve your average satisfaction, and improve profitability. And not doing so will become ever more risky as the future social web enables customers to bring the opinions of their friends with them as they traverse the web and interact with products and services like yours.
Are you bold enough to build your brand by pruning your business ?