It’s On My Heart: Bad News Does Travel Fast!

BadNews_JHinshawJim Hinshaw
Contributing Writer
Improvement Professional, President & Sales

A March 2011 study by Colloquy showed that 75% of people will let people know they are unhappy with a product or service, compared to 42% who share products and service that they are happy with.

The study goes on to say that even those who are happy consumers who recommend companies to others, will share bad news.  31% claimed they are more likely to share an unhappy experience than a positive one.

The article goes on to share that there are three distinct groups we need to be aware of:

• Advocates: will recommend favorites, but not a lot of followers.
• Connectors: they have lots of followers, but are not vocal about their experiences.
• Champions: they are vocal and well-connected, have followers they frequently contact, both family and friends.

So about 1/3 of the population falls into the Champion category, which is good to know.  What is not good is to realize that we have a sub-set of the Champion group who are far more likely to spread a bad experience than a good one, a group that can wreak havoc on your brand very quickly.

Here are some statistics to be aware of.

• It is 6-7 times more expensive to acquire a new customer than it is to keep one you already have.
• Increasing customer retention rates by 5%, increases profits by up to 95%.
• 83% of customers say that a loyalty program makes it more likely to continue doing business with a company.
• A company has a 60-70% probability of converting an existing customer to a sale, on a new prospect, only 5-20%.
• And finally, existing customers spend 67% more than new customers. They already know you, your products, your services, you have a relationship in place.  So it is easier for them to open their wallets for your products, rather than a new customer.

Here is some lessons from this information to apply to our businesses.  First, make sure you recognize the Champions, they have a voice in the marketplace, and will use it to share experiences.   Second, it is the bad experiences that impact our lives and maybe even survival as a human being.  We are mesmerized by accidents, floods, earthquakes, sometimes thinking we are glad it is not us, but we just can’t look away.  In fact, the brain detects negative information faster than positive.

In a business relationship, it typically takes 5 positive events to match up to 1 negative.  The old “Atta-boy” rule.  We want to share the bad, wait to share the good.  That is why websites like Yelp have such power; we go to them to see how our painter does in the real world.  Not just what he says, but what the customers say.

The harsh reality is that the customer has a lot of power today, the phrase is the customer is always right!  Actually, that is not true.  What is true is that they are always the customer, but they may be wrong!   In some cases, it may be best to fire a customer, one who is taking up too much time and causing strife in your team.  Gotta do that politely today, but you should have a plan on how to deal with mean or threatening customers.

So if a bad experience occurs, and they will from time to time, handle it fast.  Make sure your team has the tools and authority to make decisions necessary to make the customer happy.  You want to keep the customer in the family, customers who had a problem that was solved fast bought more and became more loyal than ones who had a problem that was not addressed.  Even more important, only 1 in 26 complain, the other 25 take their business somewhere else.

Finally, realize why customers leave:

1% die/3% move/5% buy from a friend in biz/9% buy at lower price/14% lost to unadjusted complaints…

But, 68% leave because of an attitude of indifference an apparent lack of interest by any one employee!

Lesson here: everyone is in sales!  Let each employee know how important they are to keeping customers and growing the business.

Thanks for listening, we’ll talk later.

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