A recent study by Gartner provided an eye-catching headline:
“By 2025, 75% of companies will ‘break-up’ with poor-fit customers as the cost of retaining them eclipses good-fit customer acquisition costs.”
Writing about their findings in a research paper titled Top Predictions for Customer Service Leaders in 2022 and Beyond, Gartner researchers note that when organizations proactively end relationships with poor-fitting customers, they will benefit in the following ways:
- Many customers won’t take offense to it, as they dislike it when organizations continue to push poor-fit products or services. This is especially true when an alternative solution from a competitor is offered or there is an opportunity to work with another organization that would offer a lower cost to serve.
- Companies are better at identifying when a break-up needs to happen as they have more insight into whether the current partnership is mutually beneficial or has the chance of becoming beneficial.
- By proactively breaking up with a customer, companies can plan for losing that customer — evaluating whether they can afford this loss and making contingency plans to ensure they can hit their financial targets after the break-up.
- Finally, companies can preserve goodwill and protect the chance for a future business relationship by ending things nicely.
Since the idea of proactive customer break-ups is counter to prevailing approaches (e.g., most leaders believe all customers should be retained), I hope you’ll consider three questions concerning this approach:
- What percentage of your customers are “poor-fits” (costing you more to retain them than find better-fitting customers)?
- Are you among the 75% of companies that are (or will) break up with those ill-fitting customers?
- What are the likely positive and negative outcomes you will receive from proactive customer break-ups?
Breaking up with customers evokes fear for many leaders but in the words of entrepreneur and author Tim Ferriss, “What we fear doing most is usually what we most need to do.”
Written by Joseph A. Michelli, Ph.D., C.S.P.
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