Losing a Single Customer Hurts More Than You Know
Losing one customer is bad for business. In fact, it is catastrophic. The question is, how costly is it?
Let’s say that your customer’s name is Anne and Anne spends around $20 whenever she visits your establishment. Over the course of Anne’s lifetime, this could amount to thousands in revenue. While that on its own is already damaging to the business, this one customer is worth far more than the money she spends. If Anne is a loyal customer, she would have brought more people to your business and recommended you online. What is the cost of losing all those potential clients?
It is always a good idea to generate new business but it is just as important to retain and nurture your current customer base. It is costly not to. Losing Anne, in this case, will be detrimental. In fact, for most businesses, your current customer base can drive 80% of new revenue through the multiplier effect. That’s a lot of revenue tied to keeping your current clients happy! The multiplier effect occurs when Anne (and others like her) tell her friends about you.
If you are running a restaurant, statistics show that Anne will likely tell an average of 16 people about her dining experience. If Anne suddenly decides that you are not providing her with quality service, she will tell the same 16 people that she won’t go to your restaurant anymore.
Anne’s story gives us an insight on how much one customer is worth. To put this into perspective, let’s take a look at the average amount of money that Anne spends in your establishment per year. If she spends $20 every visit and visits at least twice a month, you’d be generating $480 a year from her alone. If she tells her 16 friends that she doesn’t want to return to your establishment anymore, you could lose $8,000 of multiplier revenue just from Anne’s direct contacts. This is assuming that they’d spend $20 per visit and visit twice per month. What is your average ticket price or AOV? What is the lifetime value of your customer? What is the lifetime value of their friends that become customers?
The Trouble with Social Media
If it were the good old days where most people only spend time and talk to close friends and family, Anne would only be telling an average of 16 people. Today, we have a million ways to share our experiences and this includes social media – a thing that is both a curse and a blessing to business owners.
The Internet has revolutionized the way we communicate and because of social media we can now broadcast ourselves through sites like Yelp, Google, Twitter, Facebook, and Instagram. Businesses can now engage with their customers on a more personal level through these sites too. And when we, as consumers, need to vent about a bad experience in some shop or restaurant, we’ve got Yelp to turn to. This leads us to one conclusion: social media can help us build our businesses but it also has the power to destroy these businesses.
If Anne decides to complain on Yelp, she will be able to reach hundreds of consumers and these consumers will know about her experience in your establishment. The business is urged to resolve the issue within 48 hours so as not to lose Anne and potential customers who will read her review.
The Impact of One Bad Review
While the impact of one bad review is hard to quantify, it is safe to say that you will lose potential customers because of it. If the average money spent in your establishment is $20 and 100 people read the review, you would potentially lose $20 x 100 or $2,000. Imagine if these 100 customers visit your establishment at least once a month for a year, you would have made $24,000.
What if you didn’t only get one negative review? If Anne is not alone and 10 more people wrote negative reviews about your business, the impact could be staggering when you add the multiplier effect and social media.This is a business owner’s worst nightmare.
If a customer wrote a complaint on Yelp, Google, TripAdvisor or Facebook or any site, you need to resolve the problem immediately. Not every problem can be solved but a lot of them can be addressed to reduce the impact of the review or to get the review removed. Every bad review that can get removed or mitigated translates to more revenue.
Resolving issues dampens the negative multiplier effect. It shows potential customers or guests that you care about them and their experience. It also shows that you want to improve your business.
How to Avoid Bad Reviews
No matter how great your business or how perfect your processes and procedures, your employees can make mistakes. One way to avoid having mishaps that will cost you customers or ones that result to negative publicity online is to implement a feedback program like Review Fire.
Review Fire prompts your customers to give you feedback about their experience and are sent directly to you or to your managers. This kind of capability gives you a chance to turn problems into customer service opportunities. It also gives your customers a vehicle to vent their frustrations without telling the whole world about it. This same procedure can be used to prompt happy clients to share their great experience at your business.
If you run a restaurant or another service-oriented business, Review Fire has a way to track feedback down to the staff level. You can see a report about how your customers view your staff and compare staff at a single location or across multiple locations.
Aggerate All Your Online Reviews into One Portal
Software platforms like Review Fire let you see all of your new online reviews on a single screen. No need to visit every review site on the planet to see what people are saying about your business. Review Fire will also notify you when you have an issue that needs to be dealt with.
If you are a full-service Review Fire customer, we will even respond to your reviews and try to get negative items removed.
For more information about Review Fire, you can contact us at firstname.lastname@example.org or give us a call at +1 972 355 2525.