Innovation

The Case for Letting Customers Go

Customers hate dealing with the "retention" desk. Why it makes more sense to let them go and then win them back instead

Written by David Fielding

They say it’s easier to retain an existing customer than it is to get a new one. And certainly there are no shortage of examples out there of the effort service-based companies like Comcast and Time Warner expend to keep customers from jumping ship. But less has been reported on the value of trying bring customers you’ve already lost back to the fold.

A new study in the Journal of Marketing suggests that attempts to entice customers back are well worth the effort—in fact, a win-back offer that includes both a discount and a service upgrade can make customers even more loyal in future.

The study is based on data from one unnamed U.S. telecommunications company over a period of eight years, from 2006 to 2014. Researchers looked at the experiences that caused customers to leave their service provider, and what “win-back” offers were later made to them. From there they tracked the likelihood that a customer would give the company another try, how long the returned customer stayed for and, most importantly, whether the reclamation efforts eventually proved profitable for the company. And you know what? In almost all cases, customers who were drawn back to the service—either with a service upgrade, an ongoing discount, or both—tended to stay with the company longer than those who had been “retained” in the first place.

MORE LONG-TERM LOYALTY: You Have 100 Days to Turn New Clients Into Lifers »

“Our results show that lost customers, if won back, can be profitable to a company and that so-called win-back initiatives are worth the time and effort,” wrote study authors V. Kumar, Yashoda Bhagwat and Xi Zhang (all of Georgia State University). “In particular, customers who leave because they were unhappy with the service provided—as opposed to, say, the prices being charged—and who are won back with a service upgrade can be good for a company’s bottom line.”

In other words, given what some companies pay to acquire new customers in the first place, it may not seem financially sound to let customers walk away. But focusing more effort on winning back lost customers rather than merely keeping them in the first place, could be an effective loyalty tool. Certainly, there isn’t as much Internet demand for recordings of companies calling former customers up to offer them better service.

MORE LOYALTY-BUILDING STRATEGIES:

Would you consider a catch, release and re-catch strategy? How do you build customer loyalty? Share your strategies using the comments section below.

Originally appeared on PROFITguide.com