Lost Customer Research: What Is It and When Is It Necessary

This blog post is the first of a series of posts that I will be writing over the next few weeks about how to quickly and efficiently plan-out and execute a lost customer research project. This week’s post will explain what lost customer research is, why it is a useful market research tool, and when companies should consider launching this type of an initiative.

What Is Lost Customer Research?

Lost customer research is the process of gathering, analyzing, and interpreting the root causes as to why an individual customer or a group of customers has canceled their service contract and/or ceased using a company’s product. The purpose of this type of research is to attempt to identify trends in these losses, which can be used to improve a company’s overall understanding of its target customer and competitive positioning in the market place, while at the same time identifying product, service, and performance gaps and issues.

Why Lost Customer Research is a Useful Tool

Most startup and expansion-stage companies consider lost customers a lost cause, and disregard them altogether as soon as they cancel service. However, even if your company is not capable of winning back these lost customers, these customers are an important information resource for iterating on or re-focusing your company’s go-to-market and product strategies.

Lost customers provide a unique customer perspective that is facilitated by the fact that they no longer have a stake in the game and are usually forthcoming about the issues they have with your products and services. In other words, they are customers who are in the best position to provide this type of feedback. This information is great for troubleshooting customer churn issues and also bigger strategic issues like competitive positioning, targeting, service or product performance, and product feature issues.

When Is an Appropriate Time to Launch a Lost Customer Research Initiative?

Given that the early stages of company development are all about finding the best-fit business model and strategies, companies should conduct a lost customer research initiative at least once per a year if not more frequently, as this research will fuel your strategy team with the information and data it needs to properly focus and re-fine your company’s business model and strategies. The best time to interview a lost customer is shortly after they cancel your services, but not while they are in the process of doing so. This is when they will have the most open mind and the clearest vision as to why they have decided to leave your service. In addition to a regularly scheduled lost customer research initiative, it is also important to use the following triggers to indicate that it might be time to launch another round of lost customer research:

1. Your company sees an increase in its customer churn rate from one quarter to the next.
2. Your company experiences a sharp decline in its Net Promoter Score or other key customer satisfaction metric.
3. Your company loses a major customer account that fits well with your company’s current customer strategy.
4. Your company loses several long-term accounts that fit into your company’s current target customer profile.

By investing in a regularly scheduled lost customer research initiative and empowering your team to launch special lost customer research projects whenever your KPIs reach a certain level or certain triggers occur, you will ensure that your company is not missing out on the valuable insight that your lost customers can provide your management team to optimize your company’s go-to-market and product strategies.

Next week, I will share the facts that your company should consider when determining whether a lost customer research initiative is a worthwhile investment of its resources.

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Best Practices Lost Customer Research market research