This week, I selected a new CRM system. Four hours into my onboarding, I closed my account. Poor experience caused early customer attrition.
There is an often-unrecognized vulnerability when clients sign contracts or when customers are new: early attrition.
The initial experience shows customers what they can expect going forward. When those first interactions go well, the company enjoys the returns from their customer acquisition investment. Companies can then grow those customers and ideally convert them into evangelists.
Everybody Loses from Poor Early Experience
In contrast, there is an outsized negative impact when customers’ first impressions is poor.
Customers invest in choosing new products and services. In my case, I set my objectives (including no point solutions). I conducted research: created a short list, assessed features, looked at founders’ profiles, read reviews, and considered value and pricing. I signed up for a free trial which, let’s be honest, is not free.
No Commitment Bias +
A List of Alternatives =
Easy Exit
I was excited for the promised benefits. They simply weren’t in evidence. Given the poor experience, I concluded that I was trading one problem for another that was far more frustrating. And I would be paying for it.
When customers are neglected, burdened, and/or disrespected, the decision to cut their losses can be easy. New customers don’t have commitment bias: long relationships, assumedly with great experiences, to balance the negative. Switching costs are low. Dissatisfied new customers also likely have a fresh list of alternatives.
Early Customer Attrition Drives Down Revenue, Drives Up Costs
The loss for companies is significant. Acquisition is the most expensive customer lifecycle phase. Pick a multiple, because there’s research to confirm that it costs 5-25x to acquire customers than it does to sell to your existing base.
When customers attrite quickly, companies lose their investment in generating interest, nurturing prospects, writing proposals, creating presentations, reviewing contracts, and onboarding. Perhaps there’s a loss to reputation.
Companies also forego revenue. That increases sales pressure to compensate. And even if they achieve those new goals, they are realizing thinner margins.
If companies do not quickly address early customer attrition, they can find themselves in a spiral of lower revenue and higher costs.
The Better Investment: Solving Early Customer Attrition
As an example, I had a client that lost ~20% of new customers within the first month. As a B2B company, their cost to acquire was high. The revenue lost from that 20% was significant also.
As the client did not recognize the impact of the routine early defection, they did not make the appropriate adjustments. They did not, for example, increase sales’ pressure and adjust their goals upward to compensate for losing ~1/5 new customers. They did not increase marketing’s pressure and raise lead pipeline numbers.
Worse, they did not recognize that early customer attrition put them in a downward revenue spiral while unproductive costs were escalating.
Through my proprietary assessment, I uncovered the early customer attrition drivers. The recommended solutions required minimal investment and time to correctly set expectations and smooth early customer experience.
The results were highly valuable: they increased the new customer retention rate, secured new customer revenue, and relieved the sales and marketing team from making up for the losses. The solution also saved the client from hiring another employee to support the overwhelmed resource who managed the onboarding process.
The client realized greater revenue at a lower cost.
And the client was freed to focus on growing new, loyal customer relationships.
* * *
Customers are vulnerable when new. Their decisions can be undone easily if their early experience is poor.
Companies lose both revenue and invested costs when customers defect quickly.
It is far more cost-effective to address the drivers of early customer attrition to increase revenue and reduce unproductive costs. Then, customers get what they need, and companies gain greater revenue at lower cost.
About Marina Erulkar
I create comprehensive growth strategies for mid-sized companies. My clients gain greater revenue and lower costs. I frequently uncover unseen revenue sources.
I begin with a proprietary assessment that combines quantitative, qualitative, and process.
The resulting recommendations are quantified and prioritized so you will gain the greatest revenue sooner and with the least, if any, investment. Clear plans ensure that teams can quickly execute.
Engagements are typically completed in under three months.
The result for my clients is greater, reliable top- and bottom-line revenue. And a growing business.
To see if I can help you grow revenue and reduce costs, click here!
Photo Credit: Elliott Stallion