In a world where labor costs are rising, franchise owners are facing a new set of difficulties. To stay successful, it’s more important than ever for these franchise owners to keep an eye not just on the obvious costs, but on the cost of lost opportunities.
The cost of a lost opportunity is a little bit harder to pin down than some of your other operating costs. It’s easy to calculate how much you’re paying employees, how much you’re paying in rent, how much your products cost, and so on. But how can franchise owners factor in the “costs” of missed chances to gain customers or make a sale when making these calculations?
The exact calculations may vary from business to business. To start with, consider the contrast between a lost customer today and a lifetime happy customer. Research shows that it costs businesses between 6 and 7 times more to attract a new customer than to retain an existing one. Additionally, a totally satisfied customer contributes 2.6 times as much revenue as a “somewhat satisfied” customer does, and a remarkable 14 times as much revenue as a somewhat dissatisfied customer does.
Put together, what does this show? Quite simply, it’s worth making a great impression the first time, and every time. A single lost opportunity may not seem like much to you, but to the customer, it’s enough to shift perceptions permanently, which in turn leads to a loss of revenue from them and, potentially, from other people they tell about their experience. On the other hand, a happy customer is an incredible asset, likely to return and to spread the word. Every interaction has the potential to create a lifetime, loyal customer, so take advantage of that every time you can.
There’s also the review effect to consider. It’s been proven that, unfortunately, customers are more likely to share their negative impressions than their positive ones, meaning that one bad experience or lost opportunity can quickly snowball far beyond that single customer. One Deloitte study reveals that customers are likely to mention a positive experience to nine people, but a negative one to sixteen. That means that one missed opportunity at a good impression can have nearly double the impact – proving that it’s something to be avoided as much as possible. With the far-reaching impacts of online reviews and social media, it’s even easier for one bad impression or missed opportunity to spread.
What can franchise owners do to address this? There are several different tips and techniques to try, but they all boil down to one thing: showing respect and appreciation for customers. If waits are long, for instance, it helps to acknowledge people who are waiting in line. Make eye contact, smile, and thank them for waiting. It’s a way of showing that you appreciate the effort they’re making to patronize your business while also making it less likely that they’ll leave. If there are service challenges or delays, offer a coupon to entice customers to return. Show that you value them and that you want to make things right, and they’ll often respond in kind.
The exact nature of these opportunities may vary from industry to industry, but they’re all connected by the need to provide a positive experience, even if customers encounter unexpected issues along the way. Yes, it may cost more up front to offer a coupon, hire and train more and better-qualified staff, and take care of the little things. Without those, however, the real “cost” of losing great opportunities to earn customer loyalty is much greater and has a much longer-lasting impact.
About the Author
Nancy Estep-Critchett is a founding Partner of Blue Rock Search, with oversight of the Franchise Practice. She has 30 years of successful working experience as a business advisor and executive recruiter in the franchising space. Nancy has built solid relationships which have spanned decades with industry professionals and internationally recognized brands.
Blue Rock Search is a 100% minority/female-owned executive search firm, an SRA Network member, a Hunt Scanlon Top 10 global recruiting firm, and a member of the Hunt Scanlon HR/Diversity Recruiting Power 65. We specialize in the targeted identification, assessment, and placement of executives across four distinct practice areas: Human Resources, Franchise, Higher Education, and Customer Experience.
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