Never let a customer learn to live without you

4 May 2015
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MANILA, Philippines – One of the more common questions I am asked by students or on the speaking circuit is, “What is the biggest mistake/failure in your business career?”

It’s a good question; the only issue is identifying the biggest mistake among the myriads of mistakes I have made over the past 30 years!

Yet there is one that really stands out — one that cost the company a great deal of money. And one that gave me two related learnings that have served me well in making subsequent business decisions.

It was the year 2000 in Poland, and one of our top five customers decided to change their business model and offer a reduced array of SKUs on shelf. So alongside this change, they opted to demand higher levels of support from the suppliers of the leading brands, of which P&G was one of the leaders. The CEO and I met multiple times and I can still recall precisely his “price tag” to keep all our brands in store: two million US dollars and more! It was a large sum then, and a large sum now. We could not afford it despite the fact I did understand their rationale for asking and had sympathy for it. The figure was just too high. So my regional boss and I decided to walk.

So we called their bluff, figuring they would not drop such leading brands as Pampers, Pantene and Ariel. But they did. We shook hands amicably and they dropped all our brands and took in a competitor who met the terms a week or two later.

We hoped they would feel a large contraction in their business, not having market leaders on shelf. And they did feel some pain. But after a few months, the business gradually rebuilt for them. Consumers found other brands that satisfied them. And the customer learned something very dangerous to a supplier: “I may not want to live without this supplier and their brands, but I can survive without them.”

After two years of this stalemate, we went back in to renegotiate as the prior contracts were coming up for renewal. And we had learned our lesson and needed — wanted — back in so their consumers could find our brands. But now the playing field was different: previously they had wanted us in the stores, yet in the two years afterwards, they found out they did not need P&G brands.

We were determined to get back in. And we did. But the price tag was nearly $4 million, double the initial amount. And therein lies the second learning: It is always more cost-effective to spend to keep a customer than to lose them and have to win them back later on.

It was a mistake of twos: two million dollars’ increased cost, and loss of two years of sales to the customer. A huge price to pay.

My advice is simple, and please learn from an old-timer! The next time you have a customer dispute and things are getting testy, cool off. Drop the ego. Don’t let it get into showing who can heave the bigger threats. Figure out a way to satisfy your customer. Don’t risk losing the business in the hope that they will “learn their lesson” and come back.

Never let a customer learn to live without you. When they learn to live without you, and they will, you will be in far worse shape.

And you will spend money more effectively keeping customers than by losing them and having to win them back later on.

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