What is the risk of losing clients, and how worried should you be?
In previous blogs, I discussed how clients feel about their relationship with you and what strategy they are likely to follow. In this one, I will talk about how you can manage risk based on how likely it is to happen, what impact it will have on your business, and what you can do.
Which of your clients are most at risk
Each of these areas is complex, but you can use available data in your CRM to give you some indication. That data becomes a risk profile tested with past data and adjusted (or you could use AI trained by past and current data)
Background factors that could predict risk
Some factors are well understood to be good predictors of risk. These include the following:
Number of products used – The more product groups used, the less easy it is for a client to substitute another supplier. You may also have built efficiencies in billing, for example, a single invoice.
Length of relationship – Contrary to intuition, the longer you have had a relationship, the longer it is likely to last
Sector – you are more likely to lose clients in unfamiliar sectors because they are not in your “sweet spot.”
Behavioral indicators that could indicate risk
One variable risk indicator group is behavioral factors, such as whether the client is opening your emails and answering your phones. Changes to purchasing patterns (FRM, for example) could be another.
Modern CRMs can track both of these.
Management of support issues and complaints
Tracking the numbers and resolution of support issues and indicators such as Net Promotor Score for the services delivered and issues resolved will be essential.
The better CRM systems offer Case management for support issues and track KPIs and NPS scores at each point in the client journey.
The nature of your relationship
In a previous blog, I have covered what clients believe their relationship is with you. The nature of this relationship impacts the risk that they will find alternative suppliers for their goods and services.
Strategic Partners – if the client perceives the relationship with you as strategic, they will try to work things out with you.
Leverage – if your product or service is essential to the client, but they can get it from elsewhere and their behavior changes, for example, at the end of a contract, then that could indicate they are contemplating going elsewhere.
Bottleneck – If the client up to this point has needed your products and can’t get them from elsewhere, but their actions show that they no longer feel this way, your risk of losing them would be very high
Cash Clients – If these clients have purchased via the website and have a minimal relationship with them, you may have to accept that they will leave whenever they get a better deal. How serious is that? If it’s severe, you must develop the relationship – how?
Using the approach in my previous blog, you could attach a score to clients you feel fall into each group.
What impact will losing a client have on your business?
There are two aspects to the impact that losing a client may have on your business.
There is an immediate impact on factors such as cash flow, where, for example, the loss of regular income from a client could place a heavy price on the business. That is relatively easy to calibrate based on the average annual revenue contributed by each, ranking them on this basis, grouping them, and then applying a score.
A less straightforward assessment is the client’s future Lifetime Value, which I have covered in other blogs.
How can I prevent client turnover?
By comparing the two aspects of risk, likelihood and impact, you can start thinking about managing or mitigating the risk.
One way of thinking about this is to use your risk and impact scores as two dimensions in a mitigation matrix.
How can you stop losing clients?
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