Customer loss: do you know how much you are losing every year due to loss of customers?
The Customer Churn Conundrum: Seeing the Forest for the Trees
At Moby Analytics, our mission is to create metrics that enable decision-makers to see, understand, and account for the impact of their decisions on all their clients, not just the big ones. We believe in solutions to better engage all of those involved in your supply chain, no matter how small they are or how varied their needs are.
With that in mind, and after analyzing the data of many thriving wholesale businesses dealing with different types of products and clients, we came to the conclusion that a weak spot of many wholesalers is not seeing the forest for the tree.
Therefore, in this blog post we have created a short video, displaying Moby’s dashboard and analytics so that we can talk about why, in the wholesale business, it's crucial to see the forest (all your customers) for the trees (those big spenders).
Understanding the Revenue Impact
Every customer, regardless of their size, contributes to your revenue stream.
Sure, landing those high-volume clients can be exciting, but have you ever calculated the actual impact of losing the loyalty of the many smaller, seemingly insignificant clients that make up the bottom 50% of your customers? It's like losing a single piece from a puzzle – the bigger picture gets a little blurrier.
Analyzing Growth or Decline
As a wholesale business owner, you've probably been obsessed with growth and profit margins, but you should also not forget to take a moment to analyze the growth or decline of your existing clientele.
Those customers you might not notice at first glance may be small, but they have been with you through thick and thin. Think of them as the loyal saplings in your business forest: just like your business, they might also thrive and grow, and, if their needs are not being met by you during the growth phase, don’t expect to retain their loyalty once they become bigger. As any thriving business, they will look for suppliers who they believe will be ready to tend to their needs and demands.
How then, can one avoid customer churn? That’s the tricky part.
Evaluating how you distribute your attention
Most wholesalers focus a lot of their time on tending to the demands and needs of their biggest clients, afraid of losing them to their competitors. The pressure of doing so is so high that many wholesalers will neglect their other, seemingly less impactful customers, to make sure their top 3 buyers are happy. At first, this might sound like a strategy that pays off, but it's not that simple.
When we at Moby Analytics asked ourselves – does the revenue from your top 3 clients alone compensate for the loss incurred from churned clients? What we found out was surprising!
Evaluating Compensation from New Clients
Also, some wholesalers might betempted to think that replacing a lost clients with new ones will lead to gains. Again we asked ourselves: Based on real-world wholesalers data, does the revenue from new clients compensate for the loss incurred from churned clients? This isn't just about maintaining the status quo; it's about thriving and growing. A positive balance here is crucial for business sustainability.
The Moral of the Story
To answer these two questions, we created a short video.
The video above shows a comparative analysis of our sales between 2021 (Total sales recorded for the year 2021) and 2022 (Sales recorded for the year 2022), segmented by different client types:
1. New: Clients who began their engagement with us in 2022;
2. Existing: Clients who made purchases in both 2021 and 2022;
3. Reactivated: Clients who made a purchase in 2022, did not buy in 2021, but had been our customers before, e.g., in 2020.
4. Churn: Clients who purchased in 2021 but didn’t in 2022. We categorize clients as 'churned' if they haven’t made any purchases in the last 3 months (keeping inmind that our customers typically make recurring purchases every 2 months).
What this analysis (based on randomized wholesaler’s data) shows is that the delta in sales for a customerfrom one year to the next can be huge (just look at id 201!), while theloss of many small customers (Churn) can offset the gains attributed to all newcustomers (New).
Therefore, what data analysis shows us is that it pays off to minimize your churn rate both due to the possibility ofseemingly small clients turning into big clients, and due to the fact that losing small, already existing clients, might offset all the effort made to attractnew clients.
In your wholesale business, every client matters. Analyze your client base, cherish the loyalty of yourlong-standing customers, and understand the real revenue impact of churn. By focusing on both the forest and the trees, you'll be well on your way to ensuring a thriving wholesale business that stands the test of time.
Remember: mighty oaks from little acorns grow!
If you would like to know more about how Moby Analytics can help your team diminish the risk of churn, improve their relationships with all your clients, regardless of their size, and maintain loyalty and satisfaction across your client holster, contact us for a free demo!
