Resources can continue to be relevant even after they are lost. Former customers recommend or dissuade others to buy a product, and former staff may recommend or dissuade friends about joining an employer. A clear case concerns university alumni. Most universities now have substantial programs in place to keep in touch with former students, predominantly with the aim of raising money from them, but also to attract future students and commercial partners. Whilst this alumni-recommendation process is widely understood in qualitative terms, few institutions go to the trouble of tracking quantitatively the significance of its contribution to enrolment. Nor is the cost–benefit balance of these programs generally evaluated in comparison with other student acquisition strategies.A version of this mechanism is used to great effect by many professional firms, especially the big consultancies such as McKinsey and Monitor. Their “alumni” are former consultants and partners who, for various reasons, have departed. Rather than lose this valuable resource, these companies go to great effort to place them in client organizations. From these positions, the consultant-alumni are ideally placed to engage their former employer if ever they find themselves in need of consulting services—occasions that may become more frequent after they join the client! (See figure 1.)
Figure 1: The contribution of consulting firm alumni in client-firms to future project work. (click to enlarge)
This policy illustrates the value of staying in touch with former employees — a principle that can even extend to staff who switch to competitors. Often, organizations reassure themselves that departing staff were not actually all that good, and that they are certainly not welcome back if they joined a rival. But in an era where talent is scarce, this can be badly misguided. One public relations agency adopted policies that are quite contrary to this philosophy.
- Anyone leaving was told “Sorry you have decided to leave us, but we wish you well in your new situation. If it doesn’t work out, please do get in touch and we would be delighted to have you back.”
- They also organized half-yearly reunions with former employees, at which they discussed exciting changes in their own firm, and asked how their former colleagues were getting on.
These policies created a very high rate of returning employees. People often believe that “the grass is greener” in another organization, only to find it is not true, but they may feel too embarrassed to ask if they can return to their old job. By making departure-and-return a phenomenon to be encouraged and celebrated, this company enjoyed considerable benefits:
- They could hire staff at a low rate, saving money and management time.
- Returning staff brought back valuable experience — even intimate knowledge of competitors and clients.
- Returning staff were even more content and committed than those who had never left.
Even your lost customers can be valuable, provided they had been satisfied, and left only because their needs changed. One supplier of solar-heating systems for domestic hot water — a purchase not likely to be repeated — leaves every customer with recommendation cards for friends, each worth $50 if it leads to an enquiry and $200 if it leads to a sale.
Until next time…
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One category of former customers deserves special attention—those who may not recently have bought, but who nevertheless remain known to a business. “Mining” such dormant customers or clients can be highly profitable. One marketing agency discovered that its client database included large numbers of clients who had not used its services for many quarters or even years. The firm had not done bad work for them — it had simply not been in touch and so had fallen from the client’s mind. It built a rich seam of new work from simply reconnecting with former clients it had ignored. Some clients even expressed surprise that the firm had not been in contact before, given how happy they had been with its work!
This briefing summarises material from chapter 6 of Strategic Management Dynamics, pages 393-398.
Read more about the book on the strategy Dynamics website