SPEAKER_00 0:16

Okay, today me and I would like to talk about the unfortunate situation of losing customers, which is inevitable, it's part of business. But of course, you don't necessarily want to lose customers. I say necessarily because we'll get back to that in a second. But of course, we've been over the last 12 weeks talking about the value pillar in the Vert flywheel methodology. And just as a reminder, Vert stands for value engine reach and team. And of course, next week we'll start talking about the engine, which is, you know, the way that you deliver your product or service in a consistent way that doesn't destroy quality as you scale your business. So that's an important part. But the value part, to finish off the value pillar, we want to talk about losing customers. So when the customer actually sends you an email to cancel the service or speaks to you is just too late. By then the customer's probably already made the decision to leave and to turn that ship around, it's just too big a ship to turn around. So what we really want to really focus on is trying to build into our systems and processes and value proposition a way of getting that feedback sooner or getting client feedback sooner so that we can course correct. And that's what we're going to really talk about today. We're going to cover really five main parts in today's episode. Why getting customer feedback is so important, how to use that customer feedback to really improve your value proposition and reduce the amount of churn. How to work out which area of your business needs to be responsible for different types of feedback, because just blaming customer service or the customer service team isn't always, you know, the right approach there, of course. And then finally, and this is a really important one, particularly if you're in a service business, I think, but it's it's probably equally important in product businesses as well. But when losing a customer is actually a sign that your business is working as intended, because not every person that walks through the door and buys a product or service from you is going to be the best ongoing client. And so it's best that you both the customer and you recognize that as soon as possible so that you can focus on your core target market. So, Mina, let's start really at the beginning and customer retention or client retention really begins right at the beginning of the relationship.

SPEAKER_01 2:36

Thanks, Stuart. I think the saying first impressions are lasting impressions are hold true in this fact. And the problem with many attempts when it comes to retention is that they tend to start too late. Tends to start when the customer has really sort of already lost interest or they're disengaged or lost trust in your product or service and they've already started to look elsewhere and decided to leave. It's all almost like a disgruntled employee who's coming to you to resign, but you're just trying to throw anything at him, whether it be uh them, sorry, whether it be money or something else, to just keep him to stay. We call it the golden handcuffs. It's very similar in the sense of holding true for your clients or customers. So when you try to offer a discount, it sends the impression that you know we'd hate to lose you and we're trying to, you know, rectify it, but they've already lost trust, but they've already decided that they're moving on. The decision's already been made. So retention really starts at the beginning of the relationship, and you really need to do two things very well. And the first is make it easy for someone to become a customer, make sure that onboarding process is easy, seamless, it requires as minimal effort as possible from their end. If you think about Amazon, for example, and their checkout process, you know, you could be buying a product from just two clicks, you know, they really do it well. And the second one is help them experience value when they signed up as quickly as possible. So it's really important what we say in our business is that we need to make value visible. Sometimes the value is already there, but it's not illustrated to your customer or client. And that second part is critical. There's sometimes a gap between agreeing to buy something and actually experiencing the benefit. The longer that gap, the more time the customer has to question that their actual decision or consider a competitor or wonder if they've actually made a mistake in its entirety. You know, if you think about Canva as a good example, it's got three templates that make it easy for someone with no design experience to create something that really looks professional. And they can choose a template, make a few changes, and produce something that's really useful without actually paying for any subscriptions. Now the customer can experience the value before deciding whether to pay for more features. And they've already seen what the product can actually do and help them achieve. So the same principle really applies in any business if you think about it. Work out the first meaningful benefit you can deliver to a new customer, then design your onboarding process to deliver it as quickly as possible. So you've got that value right there at the forefront. You want them to feel confident early on in the relationship that choosing your business was actually a really good decision. Now, saying that, even with a good onboarding process, you're still going to lose some customers. So, Stuart, how do you work out what those departures are actually telling you?

SPEAKER_00 5:08

You know, I mean there's that saying that you only learn things when things go wrong, not when they go right. And I think a lot of people say that, you know, a lot of people in business say they learnt the most from their biggest failures rather than their biggest successes. And I think it's true with lost customers as well. So we should really look at it as almost a silver lining where we get to learn something about what might not be right in our business. And if we take that lens towards this situation, you know, we can turn perhaps a negative into a positive. Because if you can really drill down and understand why the customer left and then sort of plug that hole or fix that gap or improve the service proposition, then obviously that customer's helped you build a much stronger business. So there's really four categories that we can sort of look to to really understand what's gone wrong. The first one is value, of course, which is what we've been talking about over the last 12 weeks or so. And you know, it's really about asking, did we deliver the value that was expected? So, of course, there's two elements to that. There's the actual value and a value assessment. So that value assessment might be different for you than in the customer or client size. So you've got to make sure that your business is set up in a way and the way you deal with customers set up in a way that they're able or educates them to see the value that you see. And then there could be an expectation gap here as well. So, particularly when we're talking about value. So maybe the customer expected a different value outcome than what you expected to actually deliver. But value is the first point of call. The second one is trust. So we we've spoken about trust and we talked about the trust equation, how important trust is. And trust is a necessary precondition really for every business. But if a service business typically, or if you're a high value transaction, that the trust element is much more significant. But did the customer lose trust in your business or the person that they were dealing with? And what broke the trust? Was it a broken promise? Was it a broken system? You know, you've really got to identify where that trust broke down, or maybe you didn't engineer trust. Again, we we've spoken about that previously to, you know, build credibility, make small promises to over-deliver, which is the reliability element, deliver or make sure you present yourself as a low self-oriented business so you're not selfish. The third one is fit, and this is a really important one to ask because as Seth Godin says, as soon as you want everyone, you want no one. So of course you're building your business for your target customer audience, which again we've spoken about and will certainly speak about more when we talk about the reach pillar within the Vert flywheel methodology. But fit is important as well. There's no point trying to put a square peg in a round hole. So if the customer's looking for a solution that your service or product was never going to deliver, it's a fit problem. But why didn't your business identify that fit problem before you took on the transaction? That's still a consideration. And lastly, friction. Was the customer experience not ideal? You know, did things go wrong? Were there billing errors, slow response, delays, repeated mistakes, these sorts of things? Thinking about the customer experience is critical. I often find that people in business, you know, think about their internal processes. And I said in the next few weeks, over the next few weeks, I should say, we're gonna talk about engine. But I find a lot of business owners really think about well, I'm gonna engineer a business, a process inside my business. I'm gonna do it so that it's most efficient, you know, we can deliver quality at scale, all these sorts of things. But they forget to think about what's the customer experience and to make that as seamless as possible. And having that obsession around customer experience, a lot of brands like Zappos, and there's a lot of brands out there that have obsessed around customer experience and they've been really successful. So let me give you an Australian example of something like this that can fall into some of these different categories. So you might be aware that the online retailer BookTobia went into voluntary administration in mid-2024. At the first creditors meeting, it became obvious that Booktobia actually sold a lot of books, received the revenue, but actually never delivered the books. This is a pretty um brutal example because I think anyone that's going to, you know, run the ruler over this process is going to find that it's pretty obvious what went wrong here. Obviously, if you're selling a product and not delivering, of course, you your customers are going to be unhappy. But obviously, if you didn't deliver the books, that's a value problem. If you didn't, if there was no warning that they weren't going to get the books, that's a obviously a trust problem. And it was very difficult for people that actually bought the books to actually follow them up and get them delivered. That's obviously a friction problem. So it's a pretty extreme example, but it does give you an example of how you can find out what's gone wrong, and then you've got to compartmentalize it and find which category it falls in, because obviously different categories require different responses. Which is a great segue, Mina, because then you've got to work out who in your business will be responsible for the fix. And making sure you identify that rather than, as I said at the beginning, just lump it all into customer service is the important part.

SPEAKER_01 10:07

I think the problem most small businesses face is that the problems generally come back to the owner and there's a bottleneck with the owner to fix the problem, whereas there's no responsible person that's actually fixing each one of those categories that Stuart mentioned earlier. And I think that's where the trend analysis often fails. You know, the business works out why customers are leaving, they put together or quickly sort of put the team together and they put a report and they discuss them at a meeting, but nothing really changes because there's no person to actually escalate and be responsible for that matter when it actually arises. So value problems might go to whoever manages the product or service, and trust problems get left with the person who took the complaint. And fit and friction can fall between departments altogether. So the next time the customer has exactly the same experience, nothing gets actually fixed. Now, each of these four categories needs a named person responsible for it, and it needs to be agreed on beforehand before you actually start the analysis so everyone knows who will act on their findings and what they can actually do about it. So the first category is value, and that belongs with whoever is responsible for what you offer and how you explain its benefits to customers. So this could be, for example, a sales representative who's originally had that initial interaction and discussed it with the customer or client and to ensure that whatever they've promised that you're actually delivering on. The next one is next category is friction, and that belongs with operations, which is part of what we'll cover in the engine. So this could cover things such as billing errors, slow responses, process failures, and it needs someone who can fix how the business actually operates. So someone in the team who is privy and knows the operations well so that they can actually fix it there and then. The next category is trust, and that needs a clear escalation process. Someone must have the authority to resolve the issue within an agreed time frame for taking action. And you know, if you're putting out sort of generic statements like management will look into it, it's just not enough. People will lose trust in the process, they'll feel neglected, they'll feel like they don't really have a good point of contact for the issue to actually be resolved. And finally, the next category is fit, and it belongs with whoever oversees sales or onboarding. They need to sort of take responsibility for whether you're accepting customers or can realistically help and be honest about that from the outset. They need to ensure that they're not over-promising and under delivering in the day. You know, if you think about the Ritz Kelsen as an example, they gave people or their staff authority to act. Its former president described a policy that allowed every employee in their hotel chains to allow them to spend up to $2,000 per guest per incident without getting a general manager's approval. Now, that authority resolved a lot of issues. If you think about how many times you've been to a hotel on a holiday, and for example, you've had a terrible check-in process because the cues were long, or and as a result, they gave you a free upgrade, or you got some bad food in room service or the buffet or whatever it is, and they didn't charge you for it. All of it, all the complaints fall away when there's actually a result that result to the issue there and then. You know, there was no simple just apologies or anything like that. You forget all about the long cues in the in the wait in the waiting room in the lobby or anything like that because you've got something out of it. They recognize the issue and gave you a solution there and then. So the useful lesson is really clarity. Staff know what they could do and how much discretion they had in the Ritz-Kalton. But simply telling people to take ownership with no clear direction achieves very little. They still need permission for every decision. You still have that bottleneck, as I mentioned before, in small businesses. So you really need to decide those boundaries there from the outset. And the person dealing with the customer can act immediately. Otherwise, the customer waits while the problem gets passed around the business. So, sure, we've been talking about customer departures as a problem to fix it, but all customer loss is actually bad for you.

SPEAKER_00 13:51

Not necessarily a meaner, but I think business owners kind of make one of two mistakes quite often. The first one is that they treat everyone the same. You know, if there wasn't a strong match, wasn't if the customer that you lost wasn't really a target customer, then maybe it's something that we shouldn't necessarily get upset about. The second mistake that business owners often make is they find excuses. You know, they they might have a perfectly aligned target customer, but because they weren't happy with some specific situation, they might actually fool themselves into believing they weren't a target customer or find some other reason other than their business for the customer to be unhappy and move on. And we've got to be careful of both those sort of situations. We don't want everyone. Remember what Seth says, as soon as you want everyone, you want no one. So we've got to distinguish between were they suited to us, were they right the right customer for us from the outset? Was it a customer selection mistake, or was it something that our business did? Now remember, not every customer is going to be perfect for you. Remember, you want to design your value strategy, your value proposition. You want to design your business engine, your REACH strategy, and your whole team to service your target customer. That means that not everyone's going to be suited to your business or product or service, whatever you're offering. And if you try and put that square peg in a round hole, what ends up happening is the system isn't built for them. So the product or service delivers little profit or maybe even a loss. They take a disproportionate amount of time to service because you know you're doing work outside of scope or you know the product isn't really suited for them. And it just doesn't reflect overall. So Nike has a good example here. What they did is they sacked a lot of wholesale retailers. And so what they want to do then is drive volume through online sales and through their own Nike stores. And they worked out that you know that that was going to deliver a better margin, you know, a better sort of gross margin and net margin as a result of doing that because the retailers, I think, were too price competitive. And so they switched it around. Now, it might not be a perfect story because actually Nike has kind of reinstalled its wholesale division and rebuilt it, but it's it's an important lesson to really think about the profitability of individual client segments and really understand that that is so important that depending on your margins, and most businesses aren't in a thankful situation where they have ridiculous margins like three, four hundred percent, where they they can afford almost to make mistakes. A lot of businesses are working on obviously much thinner margins than that 30%, 20%, 10%. So you've got to realize then that you can have nine profitable clients, but if you have one unprofitable client, you could end up in a situation where you've made no profit at all. You know, the ninth client, sorry, the tenth client that isn't aligned takes all the profit off the table. So I think it's being really honest with yourself. Are they a target client? If so, great, let's try and learn as much as we can learn and rebuild our business. But if they're not a target client, I think we've got to also learn from that. And Meaner, I guess that brings a practical question. If you've identified a client that you think may not be perfectly suited to your business or your product or service, how do you go in that relationship in a respectful manner that still preserves your business, uh your brand value?

SPEAKER_01 17:07

Well, I think it comes down to just doing it carefully and respectfully, as you'll sort of do in any sort of relationship, whether it be personal or business. And most businesses put a lot of thought into how they welcome new customers, but I can tell you hand on heart that a lot of businesses don't really know how to do it when it comes to an end. So without a process, it tends to go one of two ways. Either the relationship drags on, it consumes a lot of time, energy, and profit, like Stuart mentioned earlier, or someone finally loses patience and it handles it badly. So it turns a manageable departure, sorry, into a complaint because things have escalated, people are heated up from you know previous complaints or discussions, and it never ends up on a good note. And we sort of we practice as we preach as well. And even in our business, our financial services business, we get a lot of inquiries per week, and this isn't to toot our own horn or anything. But if we can can't see enough value for us for the consumer to actually justify our fees, then we'll politely decline them and we'll either either give them a way or a recommendation to go somewhere else or a lightly recommendation on how they should proceed, but we wouldn't let them engage as clients just yet. And that protects us as the business and our reputation. And the same goes for you as well as a business. Keeping customers you can't serve profitably limits your capacity to look after those you actually can and it impedes your profitability. So how you treat someone when they leave can be just as memorable as how you welcome them. So and it's it's not uncommon for example, we've had many instances in our business where we might have declined a client at a certain point in time, but they've come back to us when their circumstances have changed. And they were only able to do that because we had we were upfront and honest with them. We told them why we couldn't help. And because of that clear and honest explanation, they came back and they said that their circumstances have changed and they were all keen to get the process started again. So it's really important to keep focused on what your customer needs and what your business can realistically provide to your customer. There's no need to criticize them personally or argue about every disagreement you've actually had. Then you can make the transition really straightforward. So what we typically recommend is you need to give your customers or clients a reasonable notice. You need to be clear about when the process or the when the process or service will end and what will happen between now and then and how you'll facilitate any sort of transitions or handing over of information. And then you need to also be honest about the mismatch. You can't just end services without an explanation, and you don't need to invent an excuse to avoid an uncomfortable conversation. Be honest, be up front. Clients might be upset about the about the truth up front, but they'll appreciate the honesty in the long term. And then you've got to help them move on where you can. And that might be suggesting another provider, a competitor, or even helping out with the handover as I mentioned before. And have the conversation while we can still do it constructively. Don't let the frustration build to a point where everything comes out in an abrupt email or they stop responding and in the hope that you know they eventually leave. You can be firm about the decision and still handle it professionally. Being upfront and honest in our view is the best way to go about it. And the aim is to end a relationship that isn't working while treating the customer with actual respect. Now I've been ranting on for a while, so Stuart, do you have anything out to add?

SPEAKER_00 20:16

Absolutely, Amina, because choosing the right customers has an impact on staff as well, which is something we really need to think about. I mean, that's one of the benefits that we talk about at Pro Solution. We want to deal with people that are respectful and that value our advice. And not every business sort of takes that approach and it can have a negative impact on staff. I mean, staff spend a lot of time at work 40, 50 hours a week. It's a big part of their life, and no one wants to come to work and work with really difficult people that don't appreciate the value that you're delivering. So by having you know high standards in terms of you want those customers to suit your target market, to be the enjoyable type of people that you deal with, not only has practical business positive implications, but also helps the team as well. Okay, so what can you do with the information that we've provided and particularly the last uh few weeks talking about value? Well, specifically with getting customer feedback, I think it's incredibly important and you should approach it with a really practical mindset. So have a think about you know your most recent customer departures and have a think about if you've got a way of collecting the information in terms of understanding why they've left. And then you've got to allocate it within those four categories that I sort of spoke about, um, which is uh value, trust, fit, and friction, and work out, you know, where in your business needs to be or what in your business needs to be improved to minimize the recurrence of that happening, but also leave the door ajar in terms of leaving room for the possibility that the client wasn't a target customer. And again, as was said there, you know, just be honest with yourself. If it's a target customer, you've you've messed it up, take ownership, take it on the chin, and at least learn from it so you don't repeat the same mistake. But if you find a lot of non-target customers, you know, being fed into the business and being serviced, then that's a client selection problem and or maybe even a reach problem, which of course we're going to talk about in a couple of months' time. So that's it. That sort of rounds out value. As I said, the value pillar in the Vert flywheel. In the next few weeks, we're going to start talking about engine, which is really the system and process that allows you to deliver what you've promised consistently at a consistent sort of profit margin without every decision coming back to you. And I think this engine area is that causes the most friction with business owners. Business owners that think they can establish or build a business that can run without them. Ultimately, a lot of business owners get sucked back into their business. They feel like they can't take holidays, they can't take time off. Every problem sits on their desk or ends up on their desk for them to solve. That's an engine problem. And so we'll start talking about engine next week, which will be our 200th episode. I can't believe Mina and I have been able to prattle on that long, but we look forward to joining you then. So until next week, bye for now.