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Lost-Customer Recovery Represents Wise Company Investment

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 number.�

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.

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