Causes of customer attrition

SINCE late last year the mainstream media has been abuzz with stories of industries closing down in various parts of the country.

There is no denying that Zimbabwe is going through trying times economically as evidenced by a protracted liquidity or cash crisis.

There is also no sound person who can deny that for Zimbabwe to revive her economy, there is need for collective action to arrest industrial decline which has been occasioned by a multiplicity of socio-economic factors.

All thriving modern economies have viable industry and commerce sectors. An economy cannot survive on the provision of social services by the government and quasi-government entities only. An effective government is always underpinned by a working economy, especially a viable private sector. When the private sector bleeds, the economy will be under threat.

It is in this vein that this article seeks to interrogate one of the key facets of a business enterprise, that is, the customer and the contributions of customers to the survival of firms.

According to marketing, the customer forms the inner core of any viable business model. A company which glorifies production or technical aspects of a product without verifying customer needs is doomed. Most successful business enterprises throughout the world are customer-centric institutions.

An age-old economic adage holds that the customer is king and of course, queen. Customers have a power of their own that is not immediately felt by established firms, but which is easily felt by upcoming ones.

Needs and wants are what explain the existence of firms or businesses. Only society is sui generis (exists as a complete entity by itself). All other institutions, including businesses, exist as derivative organisations and sub-organisations of society. The notion that supply creates its own demand popularised by Jean-Baptiste Say through the so-called law that carries his name is putting the cart before the horse.

Most businesses that have ceased to exist in Bulawayo, Harare and other cities experienced serious customer attrition, among other fundamental factors before they closed shop. What is customer attrition? The online source www.genroe.com defines customer attrition rate either by customer or by product.

In either case, it is the number lost divided by the number at the start of the period and is typically expressed as a percentage of all products/customers and on a monthly or annual basis. So for the customer attrition rate you would divide the number of customers lost by the total number of customers at the start of the period.

Most businesses in Matabeleland especially, need to do regular customer attrition analysis to ensure their viability in the long term. A study of industries and businesses in Bulawayo has revealed that customer attrition is an unknown concept for the majority of the enterprises.

Crying to central government or other institutions as if businesses in Matabeleland are sacred cows or a baby race will not solve matters. Businesses that survive transgenerationally are those which are managed scientifically, not on the basis of supposed inspiration or empty great man theories rooted in temporary individual talents of founders or sponsors of a business.

Customer attrition is also styled customer churn. The online encyclopaedia Wikipedia observes that companies usually make a distinction between voluntary churn and involuntary churn. Voluntary churn occurs due to a decision by the customer to switch to another company or service provider. Involuntary churn occurs due to circumstances such as a customer’s relocation to a long-term care facility, death, or the relocation to a distant location.

In Zimbabwe, studies and surveys have shown that most indigenous businesses have one major problem that explains why they either plateau early or they collapse in the long term. Most indigenous businesses develop a tendency of taking customers for granted.

There are four major signs that a company or firm is resting on its laurels instead of shaping up. The first sign is using harsh or careless language when addressing customer queries or trivialising customer queries. The second sign is failing to deliver on promises or expected products at the expected time. The third sign that a business is taking customers for granted is delivering substandard or out-of-date products. The fourth sign is that of failing to appreciate repeat or high value customers.

Most businesses which suffer from the first sign are normally found in the retail sector where clientèle pressure can sometimes cause company staffers at the front end to lose their cool especially if frustrated customers pour their grief and anger at them.

Businesses that are at the forefront of losing their clients to new ones because of poor communication skills include banks, retail outlets, supermarkets and restaurants. This makes it necessary that company executives regularly ensure their employees undergo refresher courses on basic communication skills and general customer care. This will go a long way in enhancing customer loyalty and hence customer retention.

Businesses that normally suffer from the disease of supplying substandard products are usually found in the manufacturing and distribution subsectors of the economy. Recently some people were arrested for selling unregistered medication. We live during the information age and any business enterprise or person found to be mischievously selling substandard products risks arrest or closure of their business because modern clients compare what they buy with what is sold elsewhere using the Internet and other media of high-powered information.

 Ian Ndlovu is an economics lecturer based at the National University of Science and Technology. His research interests cover business, development, economic and e-commerce issues. He writes in his personal capacity.

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