When is a customer ‘lost’? – Segmenting by activity rate.

Central to the principles of strategy dynamics is knowing how quickly resources are being won and lost. This is easy enough for most – you know when you close capacity, hire or lose staff, or discontinue products – but can be surprisingly tricky with customers. You would imagine that banks or telecoms firms, for example, know exactly when a customer is lost because that’s when they close their account – not so!

Often, the customer is really lost much earlier, when their activity falls off. So it’s good to see McKinsey suggesting this as a useful way of segmenting customers in this article looking at activity segments amongst mobile phone subscribers.

Intriguingly, consultancies and other large professional firms themselves often don’t know when a client is lost. Some clients will only ever seek one-off projects, of course, but larger ones might become regular customers by buying project after project. So when is one of these ‘annuity’ clients lost? .. when they have not bought for 3 months .. or 6 months .. or 12?

Over the last 3 years, I’ve come across this problem with a marketing agency, a law firm, and an HR consultancy. None of them knew how many real clients they had [i.e. active ones]. In each case, it turned out there was a small gold mine to tap amongst clients who had gone dormant – after being contacted, one even said “Good to hear from you. That was great work you did for us last year, and we were surprised you did not follow up.” !!

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