Customer churn affects your prospects

Customer churn, the rate at which customers stop doing business with a company, poses a major challenge in revenue, profit and time for any supply business.

Research by Bain & Company found that improving customer retention rates by 5% resulted in more than 25% increase in profitability. The reason given was longer term customers will increase their spend with you over time as you grow loyalty.

Another key factor is the activity level of the sales force. Time spent servicing and retaining existing customers has a value. Endlessly prospecting to replace the churn is far less profitable.

Today's customer

There are signs that farmers are becoming more transactional in their buying habits. Pressure on profits, price volatility and the availability of choice online are among the many reasons why there are no guarantees that farmers will stay loyal to a supply company. In fact, customers are more likely to be loyal to the sales person.

Although not specific to Ag, but likely just as relevant, an article in Forbes magazine reporting a poll of 2,000 people quotes that: "Three out of four (75%) customers are more loyal to a particular employee than to a business as a whole" and "Almost half (48%) of customers are so loyal to that favorite employee, they would follow him or her to a competing business."

In today's fluid workforce job hopping is a risk to any business. It's not just the risk of losing talent, but as the stats above show, customers are attracted to valued people and are more likely to go with them.

Keeping the team

It is oft quoted that 'people leave managers, not companies!'. A recent report by the Chartered Management Institute offered some key insights:

The report further highlights that 30% of the managers surveyed were planning to leave their job in the next 12 months.

There is a huge cultural element here that starts right at the top of the business. Businesses are not preparing managers to manage. The report also highlights that 82% of managers were 'accidental managers' who had received no formal management or leadership training.

This makes things very difficult for sales teams that are managed by the 79% of managers that aren't classed as 'effective'.

Keeping the customer

Likewise, customers will stay with effective sales people and effective companies. People generally value relationships, they also value price, service and overall experience. There is a balance to be met across these values.

Customers are bombarded with options either through reps calling or via online. There is also much more transparency of pricing in the market as farmers openly discuss how much they are paying.

A customer that understands the value of the product and service you bring is far more likely to stay. It does involve reselling the value and providing that reassurance that the customer is doing the right thing. This can be done by taking an interest in the business, doing Dairy Costings or other metrics to ensure that the goals of the farmer are being met.

Providing structure

To ensure that all parties ,from customer through to sales manager, are achieving their goals, a structure can help measure, monitor and provide clear actions.

A good starting point is to calculate customer churn rate. This is a moment of absolute honesty. Coming face to face with your churn rate can be a scary experience, but is a necessary one. Industries differ, but if the rate is >15% then there is an issue.

In the example below is an immaginary sales team selling compound and blended feeds to livestock farmers. The team of 15 have a range of experience and longevity, with the older top performers achieving >10,000t and the 'newbies' starting out at 1,500t.

The average churn rate is sat at 21.2%. This means that instead of having to gain 35,900t of new business to achieve the 'target' tonnes (nice steep budget) the team need to achieve new sales of 55,312t to replace the 19,412t that were lost.

Understanding the churn rate for each individual is hugely valuable for discussions in your 1:1's. Churn rate is such an important metric. For some of the team above they are having to run hard to creep forward in building a ledger.

As a sales manager having a structure to follow can significantly improve effectiveness.

CRM systems can help with this. However, many of the off the shelf options are not as relevant for agriculture and how we operate. 'Sales Tracker' is a system that has been built after years of working in the field and with multiple teams in multiple countries. It is far more than a CRM system. It also includes a comprehensive sales management 'Control Room' which helps the sales person and sales manager work as a team to set goals, monitor progress, share issues and build solutions.

The screenshot below shows the 'Gains & Losses' tab. By sitting in the 1:1 and working through the gains and losses then the conversation builds into finding immediate actions to save business and regain more.

Additional sections facilitate all the actions that sales person and manager should share to grow business together. There are key actions for the manager and key actions for the sales person.

Modelling time spent on activities is an important part of the relationship.

Activities like travel can can create a large proportion of time which is not customer facing or prospecting. Spending time on call planning can help minimise that.

If we have more customer facing time and more time converting quality prospects into quality customers then churn rates will reduce.

Sales Tracker

If you would like to know more about Sales Tracker, please link with me and direct message me. I would be happy to discuss options around bespoke systems and training for your team.