Using a qualitative critical incident research technique, this paper examines how sales firms evaluate defected customers in order to determine their worthiness for reacquisition. Findings from interviews with fifty professional salespeople suggest that, when sales firms assess reacquisition opportunities, these opportunities are evaluated based on the likelihood of reacquisition and the value of the customer (i.e., ease of reacquisition and value of the customer). Salespeople report that the barriers to reacquisition, leveraging remaining customer relationship and investigating their own value-adding capabilities are critical in determining the ease of reacquisition. In addition, salespeople report that account size, profitability, market influence and cross-selling potential are fundamental in determining the value of a customer. Furthermore, the importance of ease and value in reacquisition assessments varies with (1) the reason for the customer defection, (2) the formalization of a firm's reacquisition process, and (3) market opportunities. Managerial implications and future research directions are discussed.
Salespeople constantly search for opportunities to gain, retain, and grow business opportunities for their organizations. No matter how effective a company's sales process or customer relationship management (CRM) program is, inevitably, some customers will defect and switch to alternative suppliers. Although there are well established sales processes guiding salespeople to acquire new accounts and to maintain customer relationships, scant literature and processes are in place to guide salespeople to reacquire lost accounts. More important still, no sales research has examined customer reacquisition strategies or has developed a systematic framework to help train salespeople to thoroughly evaluate reacquisition opportunities. Left unguided, salespeople can often ignore a valuable lost account, seek unsound advice, or re-approach lost accounts that are unwinnable or not worth their efforts.
When customers defect, they may leave behind a wealth of transaction specific information, including transaction history, preferences, motives and evidence of what prompted their defection. Strategic leveraging of customer relationship portfolios will facilitate an effective and efficient reacquisition evaluation (Thomas, Blatiberg, & Fox, 2004), and help design attractive reacquisition offers. Furthermore, by reacquiring lost customers with the right reacquisition strategy, salespeople may be able to communicate to the customer the importance of their relationship, form stronger bonds with these customers, and redevelop highly profitable exchange relations with these buying firms. A well-designed reacquisition program may also help sales organizations and the sales force better understand their market and competitive position. For these reasons and more, a comprehensive reacquisition sales program should be properly integrated into companies' sales process and established as the strategic second half of CRM (Liu et al., 2012 and Stauss and Friege, 1999).
Research suggests that a comprehensive reacquisition sales process can be separated into three distinct stages (see Fig. 1). A first stage consists of the process of identifying lost customers. For a reacquisition process to be effective, sales firms must have the right tools in place to identify when customers are subtlety switching versus requiring different or fewer products (Akerlund, 2005 and Liu, 2006). The second stage comprises the process by which reacquisition opportunities are evaluated to determine if and when the lost customer should be targeted for reacquisition efforts (Thomas et al., 2004). The third stage is the process of developing and executing reacquisition strategies and offerings (Stauss & Friege, 1999). Each of these stages is important to a comprehensive reacquisition sales process and is critical for the successful reacquisition of a lost customer. However, the specific purpose of this research is to gain further insight into the second stage in this process to better understand how lost customers can be evaluated for reacquisition efforts and what motivates salespeople to attempt reacquiring a lost customer.
Thomas et al. (2004) advocate for sales firms to adopt a strategic approach to reacquiring lost customers. Gonzalez et al. (2010) and Smith and Karwan (2010) have emphasized the importance of the firm's recovery culture and systems. This study explores one initial step in a firm's systematic customer reacquisition process; specifically, the evaluation of reacquisition opportunities. In general, findings suggest that salespeople assess both the value of the customer and the ease of reacquisition and do so relative to other sales opportunities.
Our findings are consistent with expectancy theory (Vroom, 1964) and lend support for the importance of this theory to the understanding of how salespeople evaluate reacquisition opportunities. Expectancy theory would suggest that the motivation to pursue a lost customer depends on: (1) the expectancy that effort will lead to performance; (2) the instrumentality that performance will be associated with the outcome; and, (3) the desirability of the outcome. Consistently, we find that selling firms often assess how easily a lost customer can be reacquired (i.e., the expectancy and instrumentality of reacquisition) and they assess the benefits of reacquiring a lost customer (i.e., the valence of reacquisition). Of course, these two evaluation criteria (i.e., the “value of the customer” and “ease of reacquisition”) are not only consistent with motivation theories, but also with economic and statistical calculations specifying an expected value to be the probability times the value. Thus, our findings suggest that salespeople not surprisingly evaluate the expected value of reacquisition opportunities to determine what customers to try to reacquire.
The value of a customer was gauged from various sources. Most often, salespeople equated the value of the customer with the amount of lost sales revenue and the larger this loss, the greater the desire to reacquire these sales. As such, the ability to generate immediate sales may be the most salient customer attribute examined by salespeople when determining the value of reacquiring a customer. However, salespeople also reported customer attributes that contributed to more long-term value generation. In fact, salespeople often assessed “customer potential” when evaluating their desire to reacquire. High growth customers were, for example, reported to be highly valuable. As such, this research suggests that the concept of the “value of the customer” is likely to be multidimensional and it provides initial insight into plausible dimensions; specifically immediate and potential value.
Salespeople also reported various situations that either enhanced or diminished the probability of reacquisition. Situations that reduced the likelihood of reacquisition or made it more difficult included things that salespeople had direct control over and things that they did not. Interestingly, when salespeople discussed areas over which they felt in direct control, they often perceived the situation less difficult to overcome. Whereas, situations appeared to be more precarious when they perceived less direct control. For example, when customers were upset with the salesperson, salespeople saw this “as easy to remedy”. When customers were upset with product quality or delivery issues, salespeople became more skeptical of their ability to successfully reacquire the customer.
Interestingly, the value of the customer and the ease of reacquisition are the same two criteria sales firms use when assessing new customer prospects. However, evaluations of lost customers are based on direct past experience with the customer and should, therefore, have fewer ambiguities and a higher level of certainty. Therefore, a more detailed examination of how salespeople determine the win-ability and the value of a lost customer highlights important differences between the choices that salespeople make pertaining to new customer acquisition opportunities and lost customer reacquisition opportunities.
Some of the most interesting findings of this study pertain to the importance of remaining relationships within the defected customer's firm. We find that these remaining relationships made salespeople feel like reacquisition efforts could be improved. Both continuing relationships within the customer firm (i.e., with influential buying center members), and relationships with other firms in the network (i.e., members of the lost customer's value-chain) were perceived by salespeople to be helpful. For example, salespeople made statements like,
“One of the big wig's kids was working in the purchasing department. We had been working with him and he helped push things through,” and, "We work with their customers,” and “We have close contact with one another and share information on their suppliers.” One salesperson stated, “If you have a good relationship with someone and a project goes wrong, it is easier to deal with that same contact and make things right in order to win their business back.”
In general, findings from this study identify the importance of a customer's reason for leaving on shaping the reacquisition evaluations. As such, findings support relationship marketing research. Specifically, findings support the typology of customer defections developed by Stauss and Friege (1999); defections in this study were attributed to customers being bought away, pulled away, or unintentionally pushed away. Furthermore, reacquisition opportunities were evaluated differently for bought away and pulled away customers compared to unintentionally pushed away customers. Specifically, salespeople reported that pushed away customers often exhibited a level of dissatisfaction. When the source of this dissatisfaction was not easily remedied, it was perceived to be a significant impediment to reacquisition. These findings are similar to the findings of Palmatier et al. (2013) that exchange performance is hindered when relationships are deteriorating. Findings from this study suggest that negative sentiments in a dissolved relationship alter salesperson assessments of reacquisition opportunities.
Our findings suggest that reacquisition concerns become more important to firms when market conditions become more competitive. Competitive pressures may also require reacquisition strategies that demand more organizational support. As such, as markets mature, firms may need to strategically consider reacquisition efforts as part of a more encompassing customer relationship management strategy. Without this support, salespeople may assess the probability of reacquisition as low and neglect high-value opportunities. Likewise, as reacquisition efforts become more important, salespeople will need to develop a set of skills and capabilities that will allow them to evaluate the expected value of win-back efforts with a level of cognitive maturity. As such, one element of effective customer relationship management may require salespeople with high levels of reacquisition intelligence.
When more formalized processes are in place, our findings suggest that these policies and procedures guide how evaluations of lost customers are made. However, findings suggest caution when instituting technology enabled processes as they often focus exclusively on the second-lifetime value of lost accounts without regard to why the customer left, surviving customer relationships, and other important factors that would help determine if a customer is likely to be reacquired. Conversely, when policies are in place that help structure and guide the analysis of reacquisition opportunities by salespeople and sales teams, assessments tend to be more focused, comprehensive and accurate. As such, our findings suggest that the type of policy is important. Until technology is better able to assess both the economic value of the customer as well as the probability of reacquisition, policies that encourage and enable appropriate evaluation by sales personnel may be most helpful at aiding reacquisition sales efforts.
Based on the findings from this study, four research propositions are put forward:
P1)
Salespeople assess reacquisition opportunities by examining both the value of the customer and the ease of reacquiring the lost customer.
P2)
Salespeople assess reacquisition opportunities relative to other competing opportunities.
P3)
The attractiveness of reacquisition opportunities varies with the reason for the customer leaving.
P4)
The process by which salespeople evaluate reacquisition opportunities can be improved by developing appropriate sales processes.
These propositions may help structure future research in the areas of customer reacquisition, customer relationship redevelopment and sales processes.
