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How to Recover from a Major Customer Loss

Everyone likes to talk about winning new customers, not losing them. The harsh reality is that companies lose major customers all the time. A key differentiator is how they handle the loss. Here are five key steps for recovering from a major customer loss:

  1. Do NOT under any circumstance, rationalize away the loss. Look in the mirror first. You chose to acquire the customer, therefore you should never, ever make excuses for the customer’s defection.

  2. Make sure that you affect a smooth transition to the new supplier. Take the high road. You lost and the best thing you can do now is lose with class. Put your best effort into a solid transition meeting. If handled properly, this keeps the door open for the client to return.

  3. Make sure you understand the “wrongs” you need to “right.” There is only ONE good thing about losing: you learn where you are weak so that you may become strong. There is a real learning opportunity here if you choose to take it. At a minimum, you should meet or engage a third party to meet with the customer to understand where the gaps in the relationship occurred. Unfortunately, most customers are more comfortable speaking with a third party and investing in a third party to do a Post Mortem shows the customer you are serious about learning from the experience.

  • Review Operational Performance. Analyze gaps in operational performance v. Service Level Agreement (“SLA”). Were you consistently conducting Quarterly Business Reviews with the customer and clearly illustrating that you were meeting the SLAs? Did you over-commit, or did you under-deliver? Were there areas in the feedback where the client praised certain aspects of your business processes?

  • Review governance and relationship map challenges. Was there a key decision-maker change or key decision influencer change? Did you experience turnover at the sales or client relationship manager level? When people change, the entire relationship can change. According to the latest Butler Street research Changing of the Guard® accounts for 38% of customer defections.

  • Review Innovation Quotient (IQ). Innovation Quotient is an objective measure of the value of ideas that you have put forth over the course of the relationship to help solve your customer’s problems. Remember, that is most likely the reason why they contracted with you in the first place.

  1. Establish the root-cause reason for the loss. What were the root-cause reasons for the defection? Break down each execution or relationship error to its root cause and develop strategies to deal with them in future.

  2. Lessons learned and Knowledge Sharing. As discussed earlier, a loss is an opportunity to learn the “wrongs” you need to “right.” What did the business as whole learn from losing this customer? This needs to be formulated into a case study and shared with the organization as part of key account management training.

“Good judgment comes from experience…and experience comes from bad judgment.”

Losing a key client can be devastating for any business. This devastation is not limited to just a financial loss or tarnished company brand. There is the declining employee morale associated with the loss and how senior management handles this loss. It is absolutely essential for leadership to provide their employees moral support by “fixing the problem, not the blame” to help them through these trying times AND learn from the experience.

At Butler Street, we specialize in key account management and client risk. Our proprietary, web-based Key Account Plan and Client Risk Analysis will help you to advance the relationship with your customers resulting in higher retention and greater cross-sell opportunities. Click on CONTACT and let’s talk about how we can help your company and your people grow!

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