Every business loses customers, but not many do much about getting them back. And that is a big mistake. Studies show that the average business looses 20 percent of its customer base each year.

Heres what that means in practical terms: For example, lets say your business has 700 customers that buy repeatedly from you during the year and each customer spends an average of $300 a year. If you loose 20 percent of them ( one hundred and forty), youll loose $42,000 a year. Thats a lot of money to make up with new customers.

The longer you keep a customer the more he or she is worth to you. In part, because it takes a lot more money to acquire a new customer than it does to keep an existing one. In fact, businesses that are able to consistently keep the majority of their customer base are usually the ones that have increased profits year after year. Loyal customers spend more, they refer new customers, and it costs less to do business with them.

Before you can effectively put a plan in place to provide the highest in quality service and market to your existing customers, you first have to know the lifetime value of your customers. When you know the lifetime value of your customers it helps you budget more effectively. You know better how and where to best use your marketing dollars. This is valuable information that every business needs to know if it is going to be successful. And the only way to get this information is by knowing the lifetime value of your customer.

Once you know how much each customer contributes to your bottom line, you will begin to understand the value of hanging on to them. To do a better job of keeping your customers, you need a system to gather information about them and how they feel about your product and services. One of the best ways to do this is through using questionnaires on a regular basis. Ask questions such as: Why do you buy from us? How well do we meet your needs? How can we improve what were doing? What are we not doing that youd like us to do? What do you find valuable about us? Whats valuable about our competition?

You can ask these questions through a mailed questionnaire, e-mail, or by having one of your employees call them. Beside the obvious value in knowing the answers, you get a few bonuses as well. First, your customers will be happy the you bothered to find out what they want. Second, youll learn about specific problems that could cause you to loose them. Youll get ideas for your products or services, and youll find out some valuable information about your competition.

When you know youve lost a customer, try to bring them back through an interview. If you dont get them back, at least you can get valuable information that will help prevent you from losing additional customers. But, you first have to find out why they have stopped doing business with you. And the way you do this is by asking questions such as; Was it a question of price or quality? Was a better offer made by our competition? Was it inadequate responsiveness? Were promises not kept? Were complaints not resolved? Was it overall dissatisfaction?

Whether you are sending a questionnaire, using e-mail, or interviewing them by phone always use open ended questions that require an active response. Use questions that start with What? When? Where? Who? Which? How? Youll find that open ended questions help narrow down and specify their reasons for leaving.

Businesses loose customers due to poor service more than for any other reason. When you make a service mistake and a customer complains, you have an opportunity to win back that customer and gain long-term loyalty. Here is a five step plan you could implement when a customer complains.

Apologize and acknowledge the error.

Take urgent action. Quick effort shows you have the customers interest at heart.

Show empathy. Customers want to know you care about their feelings.

Compensate them in some way. (It doesnt have to be monetary)

Follow-up. Make sure youve satisfied the customer.

To transform your business into one that is committed to retaining as many customers as possible, you need support at every level. Provide customer service training for all your managers, frontline customer-service people, and everyone else in the organization. Teach your lower-level employees how important it is to keep customers, and show them how to be on the alert for unhappy customers. Give them a system for identifying unhappy customers, and reward them for using it.

Make it easy for customers to bring their problems to you so you can see where you need to improve. Make sure you have an 800 number that is designated solely for customers. Have a special section of your Web site designated for customer comments. You could even offer a modest gift of some kind for customers who alert you to a problem. And always offer some type of satisfaction guarantee on your product or service.

Most businesses can do a much better job keeping their customers. Write down your goals for keeping all your customers. Make sure everyone in your organization is aware of them and is working to achieve them. Identify the customers who have left you or are about to. Then, bring those customers back by working to solve their problems and satisfy their needs. And finally, use the feedback you get from both former and current customers to put customer-friendly policies and procedures in place.

Copyright(c)2004 by Joe Love and JLM & Associates, Inc. All rights reserved worldwide.