By Jessica Heald on Thu 24 March 2022 in Wholesale & Distribution
A leaky bucket in your business is likely draining the profit out of your business faster you can bring customers in. But how do you know who's at risk of being lost to competitors? And how can you analyse this information quickly, so you don't lose them for good?
Many businesses claim to have loyal, repeat customers who will buy from them time and time again. But often, the stats will say differently. A leaky bucket is not always noticeable, but is likely draining the profit out of your business at a quicker rate than you can bring customers in!
And, it’s actually more common than you think – especially for businesses that sell lots and lots of different products, and have hundreds, possibly even thousands of customers. But how do you know who’s at risk of being lost to competitors? And once you have the data, how can you analyse and action this information quickly, so you don’t lose them for good?
A bit about transactional vs. relational customers…
For a service-based business, one-off sales might be perfectly normal. But if you’re selling physical products, getting your customers to regularly come back and repurchase again is absolutely essential for ongoing, profitable success. So, in some businesses, a “transactional” buyer is ideal, but for B2B product sellers, you need to turn these into “relational” customers who keep coming back.
Whether you’re selling medical products, packaging, beer or leisurewear, (or any other type of products for that matter!), analysis shows that the 4th order is the tipping point (more on this here if you’re interested or just sceptical). Once the 4th order has been placed, a customer switches away from being a transactional buyer to a relational one (just one of our top metrics for B2B Wholesalers and Distributors). In other words, for B2B product sellers, securing that 4th order is gold.
Identifying a “lost customer”
Of course, there’ll be edge case scenarios where a customer doesn’t buy from you for a while, but overall, there will be patterns for each and every customer across 2 key metrics; order frequency (on average, how regularly they place orders from you) and order value (the approx. monetary value of each order placed).
Truth is, it’s really hard (and inefficient!) to calculate this independently and manually across your entire customer base. In fact, if you’re a B2B product seller offering lots of products, it’s basically impossible without the proper automation. So, it’s vital you make use of tools or techniques that are designed to do so. RFM, for example, (or Recency, Frequency and Monetary Value) is a well-known and well-loved technique for segmenting customers by their spending pattern. Segments like “Needs Attention”, “At Risk”, “Hibernating” and “Don’t Lose Them” are the red flags you should look out for when identifying “lost” or potential churn risks.
Start with the easy, low investment stuff
Once you’ve identified who you need to target, go after the quick wins first. Here are just a few:
- Speak to lost customers – pick up the phone and speak to your lost and closed customers to identify reasons for churn, so you don’t keep making the same mistakes
- Chase missing orders – try and get your hands on a list of customers who should have placed an order with you by now, but haven’t (it should literally be a list of customers to dial now and get orders from!)
- Optimise your quote-to-order workflow – move from quote to order faster so you can take more orders in less time, whilst making it easier for customers to buy from you
Then, move onto the strategic stuff
This might sound like a lot of effort, but with the right tools and systems in place, it’s actually super easy! Once you’ve identified which customers are at-risk, start developing some content around the following topics to target them with:
• Make limited time offers
• Recommend products to them based on past purchases
• Share valuable resources
• Recommend popular products at a discount
• Send emails from Account Managers to appear like personal 1-1 emails
• Recreate brand value
If you’re to take away anything from this article, know that:
- You’re probably losing more customers than you think – no matter how good your product and service are, and...
- It can be fixed, you just need the right tools and systems to drive change!
Searching for the perfect CRM for your B2B product business that will help you retain customers for longer? Prospect CRM offers built-in RFM Analysis, enabling you to identify your Lost and Closed customers instantly. Try it for free here or request a demo to chat with our team and see it in action.