Helping organizations succeed through
customer service performance and leadership
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Helping organizations succeed through
customer service performance and leadership |
What is the cost of a lost customer? |
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How was all this calculated? Good question. The first part, establishing the CLV (Customer Lifetime Value) is pretty straightforward arithmetic. The second part - the potential - is where it gets a bit tricky. For the potential cost of word-of-mouth, we used the statistic from David Collier's findings (“Modeling the relationships between process quality errors and overall service process performance”) showing that the average customer experiencing a service failure told nine-to-ten others about the experience, and that one out of eight people will tell 20 others. This research was done in 1995, so did not include any social media factors. For the negative social media potential, we looked a the data for North America - that the average Facebook user has 130 friends, the average Twitter user has 128 followers and the Average LinkedIn profile holder has 60 contacts. There is no reliable or useful information about blog reading, google searches, YouTube visits etc, so we tried to just be incredibly conservative and just stick with the facts we had. 14% of the North American population as of 2011 are active users of Facebook. We don't know how much crossover there is with users of Facebook, Twitter, LinkedIn, but we conservatively assumed around 80%. This gave us a range between 130-160 contacts. None of this takes into account the viral factor, like the United Breaks Guitars YouTube video, that has been seen by over 10 million people... |
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