I love racquetball. I played racquetball for over 18 years, very aggressively and very competitively. It’s great exercise and a perfect way to let out your aggressions and stress. That’s why I was so upset when my health club decided to forgo customer retention and worry about their own singular requirement – Getting new customers! Yes, I’m actually going to teach a customer retention lesson by discussing my racquetball experience.
I’ve been a member of this club for about 15 years. I was part of a league that played two times per week for 2-hours each night. There were roughly thirty members on this league and we were all friends and competed in a sociable and pleasant environment. The average tenure of the members of this league was about 10 years of racquetball experience at this club. Not all league members showed up each night. But typically anywhere between twenty and twenty-four would show up at any one time, which means we would fill up most of the courts with continuous singles games (one-on-one).
Then one day they closed down two of the 12 courts so they could expand their workout room. They added state of the art weight lifting equipment and hoped their existing body building clients would tell their friends and increase business. We weren’t pleased, but at least we had 10 other courts to play on; enough to keep us all playing the full two hours without having to wait turns. Judging by the additional grunts and groans we heard coming from that new area, it seemed their plan worked. But I must admit that over time it seemed like the noise was ceasing and their increased business had waned. In the meantime, we loyal racquetball members continued to show up twice a week, every week, every year, paying our dues and buying supplies, soft drinks, and other miscellaneous purchases.
Then the owners decided to take over 2 more courts to build an aerobics gym with a climbing wall, dance area, and a few other amenities to attract new customers, at the expense of their existing racquetball members. Within a year, this new facility was as vacant as an atomic bomb testing ground. It was hardly ever used. And yes, we loyal racquetball members continued to spend our money at their club, which by the way, was the only club in town. Unfortunately, there were only 8 courts left and it started affecting our playing time since we now had to compete for court time and even started playing doubles (two-on-two) in order to get a chance to play at all.
A couple years after that they closed down another court to convert it into a Spinning room. Spinning is some sort of specialized stationary bike where you peddle your way to better health and fitness. Again, this was to bring in new health club members, at the expense of their existing loyal racquetball members, and again it flopped. Within 6 months the room remained dark and spun it’s way into oblivion. But we loyal racquetball members kept coming week after week, without fail, spending our money in the only club in town, which now had only seven courts. They obviously hadn’t re-converted any of these stolen courts so we could use them once again for racquetball. So they remained fallow.
As time went on, two more courts were closed due to damage. The owners said they didn’t have funds to repair them. So we were forced to play in the 5 remaining courts. Needless to say, we were very unhappy. We could only play doubles and we frequently had to take turns since there weren’t enough courts for us all to play at one time.
In year 15 of my playing at that club, we all arrived one night to the news that the owners were building a brand new health club less than a mile down the road and will be closing this older club once the new one opens. It would be three times the size with state-of-the-art equipment and facilities, including an Olympic-sized pool. Well this indeed sounded like good news, at last. What sounded even better was the offer for existing members to get free membership into this new club for the first year it was open. They’d transfer our membership and we’d get to use all the facilities for a year at no extra charge. Now, I must say that we ONLY played racquetball at the original club. None of us used any of the other facilities there. And this was unlikely to change, new club or not. So naturally, guess what our single question was to the owners when they told us all this good news? How many racquetball courts will the new club have? Answer – Zero!
We were devastated. Naturally, we complained but to no avail. Our only recourse was to join another club with racquetball courts. Unfortunately, that was all the way in the next town. My 8-minute ride twice per week turned into a 40-minute ride to a club that was older, dirtier, and more expensive. But at least we could continue playing our preferred sport. Ultimately, I moved out of state and it didn’t matter any more, except that I am now a little heavier and have strained breathing when I go up a flight of stairs.
So what’s the moral of this story? These business owners tried desperately for years to increase their business with fads and gimmicks to draw in new customers. However, they forgot their bread and butter customers – us loyal racquetball fans. We spent a lot of money at their club over the years and were a consistent revenue stream for them. Even when they continued to do things that harmed their relationship with us, we remained loyal. Of course that goes to show you that this sort of loyalty wasn’t good. It’s called “your the only show in town so I have to be loyal to you” loyalty. And perhaps that’s what they thought – that since they were the only show in town, they could afford to take us for granted. So they eventually lost 30 good customers, instantly.
Are you taking your customers for granted? Are you ignoring your loyal clients? Are you making changes to your business and it’s future direction without considering what affects it might have on your existing customers? You obviously need to acquire new customers. That’s understandable. But I hope you aren’t doing what too many other businesses do – acquire new customers while negatively affecting the retention of your existing ones. It costs up to seven to 10 times more to acquire a new customer than to sell to an existing one. With the increasing costs of marketing and selling, this shouldn’t be a surprise. So why don’t more businesses curtail some of these expensive acquisition practices and focus more on retention strategies? I don’t know. Maybe they need to get hit in the head with a racquetball a couple times to knock some sense into them. Or maybe they should give us a call so we can show them how to do this the right way.
Don’t forget your existing customers and they won’t forget you!
Good luck and good selling!
Russ Lombardo is President of PEAK Sales Consulting, LLC and an experienced CRM and Sales consultant, trainer, writer, speaker and radio show host. Russ works with businesses to help improve their customer acquisition and retention for increased revenue and success. Russ is author of the books, “CyberSelling”, “CRM For The Common Man” and “Smart Marketing”. He can be reached at 702-655-5652 and emailed at russ@peaksalesconsulting.com.
One reply on “When Customer Retention Goes Bad”
Great article, enjoyed reading. Companies can sometimes be so focused on targeting new customers that their existing customers gets taken for granted when it comes management making decisions. When you also consider that selling to a new customer is usually more difficult in terms of resource and time than up-selling an existing customer. In my opinion, one factor is that businesses get stuck in a kinda new business only gear, in other words, they find it difficult to consolidate growth particularly if this growth has happened over a short space of time. In the past I have worked with companies that excelled at generating new business but were surprisingly weak when it came to holding on those same customers. This problem being further confounded by having a sales team in place that are all hunter type sellers. The key is for management to get the balance right in terms of strategy, personnel and supports and manage growth so that it is sustainable over the longer term.