Lost customers represent a substantial profit drain for most firms.
Every year, the average company loses 20% to 40% of its customers.
When a longtime customer defects, the negative effect on profit is
substantial, because in most cases the profit contribution of a
mature customer is dramatically higher than a newer one.
And don�t make the mistake of thinking that a longtime, high-value
customer is easily replaced. Research shows that every market space
has a limited number of high-end customers.
In his book, All Customers Are Not Created Equal, Garth
Hallberg points out that for most categories of business, one-third
of the buyers account for at least two-thirds of the volume. �The
high profit segment (of buyers) generally delivers six to ten times
more profit than the low profit segment,� he explains. �Moreover,
they are critical (to your business); not only because of their
profit contribution, but also because of their relatively small
Although most companies consider lost customers as dead-end
opportunities, with no hope for revival, many of these lapsed
customers are simply dormant and awaiting resuscitation. A study by
Marketing Metrics found that the average company has a 60% to 70%
probability of selling again to active customers, a 20% to 40%
chance of selling to lapsed customers, and only a 5% to 20%
probability of a successful sale to a new prospect.
Get smart about reactivation, and estimate what your lapsed
customers are worth in future purchase potential. Identifying which
customers represent the most long-term value is important for wisely
prioritizing your win-back resources.