From The Mistake Bank: Surprised by a large customer defection

From The Mistake Bank:

The following story is excerpted from "The Knack: How Street-Smart Entrepreneurs Learn To Handle Whatever Comes Up," by Norm Brodsky and Bo Burlingham. This is a terrific book with great storytelling throughout. Brodsky uses so many examples from his storage company, CitiStorage, that by the end of the book you feel like you know that industry. To learn more about the book, visit the web site. I highly recommend it.

I still remember the moment, many years ago, when I found out we’d lost one of our biggest customers…. One of my salesmen called me in my car and told me we’d just received a fax from the customer, a major law firm, announcing its intention to move its boxes out of our facility when the contract expired three months later.

Now you have to understand that, in this business, moving your boxes is a big deal.... So it’s a real loud message when a customer leaves, and this one came completely out of the blue. I was stunned. “What are you talking about?” I said. “Man, how could we lose this account? What happened?”

The salesman didn’t have an answer, and we couldn’t get one from the customer. The people in charge at the law firm wouldn’t see us or talk to us on the telephone. Our urgent messages brought perfunctory replies: “The decision has been made, and it is final.”

Obviously, we had screwed up. The guy who had closed the account had left us five years before, and we hadn’t stayed as close to the customer as we should have been. A week or so after receiving the fax, I came up with a proposal that finally got us a meeting with the firm’s managing partner—to no avail. The situation was too far gone. We could offer good financial terms, but we couldn’t fix problems that had been festering for years. Our competitor matched the terms and got the account.

So I called my managers and salespeople together and said, “What did we learn from this? What do we have to do differently in the future?” The real lesson, I knew, was not that we had made mistakes. You always make mistakes. We failed because we’d waited too long to find out about them. We decided that, from then on, we’d go to each customer eighteen months before the end of the contract and offer to negotiate a new one. If the customer hesitated, we’d know right away that we had a problem—while there was still time to fix it.

As soon as we began implementing the new policy, we made a very important discovery. We had unhappy customers and didn’t know it. One customer was upset about our system for providing information; we fixed it. Another customer felt it deserved a lower rate because its volume had increased dramatically; the customer was right, and we made amends. A third customer didn’t like a particular aspect of our inventory system; we changed it. A fourth customer was miffed that we hadn’t been sending regular monthly reports; we started sending them.

So, in four months with the new policy, we made four improvements, pleased four customers, and locked up four accounts, and all these benefits came from one failure. In the long run, that failure proved to be one of the best things that ever happened to the company.

(c) 2008 Norm Brodsky and Bo Burlingham. Used by permission

Tags:
Mistake Bank, mistakes, narrative, customer relationships, defection, renewal, entrepreneurism