October 25, 2014  
 
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Repeat Business is Key: Find Out Why Customers Don't Come Back

Written by Andrew Goldman for Gaebler Ventures

While we tend to gather data from our customers, we often neglect to gather data on lost sales or non-repeat customers. In many cases, we can learn more from a lost sale than we can from a landed sale. By capturing this crucial data you can greatly improve your company and increase your chances of landing the next sale.

Most small business managers understand the importance of collecting customer data.
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We try and find out how our customers heard about us, why they chose us and what they like about our product or service. This information is helpful in determining marketing plans and impacts new product development. While this type of information is crucial and should be gathered and organized, it is an incomplete picture. The problem with this type of data mining is that it ignores customers who tell us no and fails to capture the reasons first time customers don't repeat their business.

There is a lot that can be learned from potential customers who turned us down. In many ways, finding out what's wrong with our product is more helpful than finding out why customers like our products. The tricky part is finding a way to obtain the information from a customer who has not purchased our product or service.

To accomplish this, you need to have a method for obtaining this information. If you have a sales department or customer service representative who answers phone calls from potential consumers, this is a great start.

When a potential customer calls with questions and then fails to order, make sure you follow up and ask 'why'. To achieve this, make sure your staff is trained to get the potential caller's contact information and follow up after a certain period of time. If the potential customer informs your representatives that they are not purchasing from your company, ask them a series of questions including 'what could we have done better?' You will find this information extremely informative and in many cases, the correction can be made quickly.

Your sales staff should always have these follow up conversations after losing out on a sale. Many sales personnel are hesitant to do so because of the ill feelings associated with losing a sale. In addition, the sales person may not want to "bother" the lost customer. While these reasons are understandable, they do not justify losing the valuable information that a lost sale can generate. In addition, many of these lost customers will be glad to offer feedback, especially if your company does something they do not like.

Learning from customers who buy once and do not repeat their business is more difficult. In order to complete this goal your company needs to have a solid customer information database in place. There are many software packages that manage customer information, but I have seen simple spreadsheets be effective.

The key is to have a list of customers and their purchasing history. When there are first time customers, these need to be highlighted and follow-ups should be made in addition to the traditional sales process. If your sales team does not receive an order from the customer after a certain period of time, it's time to find out why.

This is a slippery slope because you do not want to have this conversation with someone who is going to place an order in the future. Once time has passed and your sales team is sure there will not be another order then you can ask the difficult question, 'what made you choose someone else?'

Once you have trained your staff to ask questions to find out why you lost out on a customer or why a customer did not repeat their business, you need to have a place for this information to be stored and analyzed. Make sure the answers to these important questions aren't lost and go into a file or spreadsheet. This information should be reviewed and analyzed by both management and the sales and customer service representatives.

By knowing, understanding and correcting the reasons why you lose out on sales, you will have a much better chance of increasing your sales in the future.

Andrew Goldman is an Isenberg School of Management MBA student at the University of Massachusetts Amherst. He has extensive experience working with small businesses on a consulting basis.

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