CXM is intrigued by the idea of companies “breaking up” with their poor-fit customers, instead of the other way around. Therefore, when this report came across our digital desks, we knew we had to share it.
Gartner, Inc reveals that by 2025, 75% of companies will “break up” with poor-fit customers as the cost of retaining them eclipses good-fit customer acquisition costs.
What does “breaking up” with a poor fit customer mean?
When “breaking up” with a poor-fit customer, organizations proactively end the relationship on their own terms rather than waiting for the customer to end the relationship.
This shift will expose silos among customer-facing functions, as a customer breakup strategy must be developed cross-functionally. This will force leaders in sales, marketing, customer service and customer experience (CX) to collaboratively execute a common customer-facing strategy.
“Business leaders are starting to recognize how costly keeping a poor-fit customer can be for business, such as custom-made solutions and outsize time spent on servicing,” said Neha Ahuja, director, team manager in the Gartner Marketing practice.
Why “break up” with poor-fit customers?
Gartner’s research shows that all functions must agree on a common set of attributes that define a poor-fit customer and then determine how each of those attributes would appear in related functions. Functional leaders must also adjust their teams’ processes to deselect poor-fit customers.
For example, customer service and support leaders will need to rethink their routing and queuing processes and ensure reps don’t give preferential treatment to poor-fit customers. Marketing teams will need to adjust their advertising strategies to deliberately deprioritize customers who are not a good long-term fit for the organization, instead of repeatedly marketing to every existing customer.
“Organizations cannot overlook how poor-fit customers impact the bottom line in different ways: emotional toll on employees, brand and credibility risks, and misallocation of resources. Once a ‘fit’ measure is established, organizations will need to determine a threshold beyond which to break up with a customer that makes financial sense, said Emily Potosky, senior principal, research in the Gartner Customer Service & Support practice.”
How to “break up” with poor-fit customers
As organizations explore breaking up with this customer segment, Gartner recommends the following to align across teams:
- Create a customer-fit score to inform actions to take with a customer, such as deciding to further grow the relationship, maintain the relationship or break up with the customer.
- Work closely with the CFO and the CFO’s team to ensure the organization’s ability to adequately grow business with, and acquire, good-fit customers to compensate for the loss of revenue from poor-fit customers.
- Adjust organizational KPIs, including employee incentives, to include customer breakups along with growth targets.
- Communicate the breakup strategy to the board and investors to ensure they understand that any reduction in overall retention is intentional and done to improve the company’s growth.
- Revise retention targets to centre on the percentage of good-fit customers retained, not overall customers retained.