“Thank you for having been our customer!”

The art of actively say good-bye to customers

There are three core questions at the forefront of active termination management in customer relationships:

1. What advantages does professional termination management offer the company? 

2. What do analysis and planning of a fair termination look like? 

3. What practical implications result for termination management?   

Core Question 1: What advantages does professional termination management offer the company? It should come as no surprise that the most common reasons behind a company’s termination of its customers are of financial nature. Either a customer has not paid his bill, or he is ­simply not profitable enough. Against this background, the direct benefits of successful termination management are revealed in three points, namely, from economic, communicative, and competitive perspectives.    

In terms of economics, the benefits result from the increase in the profitability of the customer portfolio. First of all, the portfolio is cleared of customers with low customer value. Practice shows that a “loyal” customer with average price willingness is occasionally quite a “cost-intensive” customer as well and that his positive word-of-mouth communication – as a ­compensatory counter-argument for the low customer value – is frequently overrated. The concentration of resources on the most profit­able customer relationships produces a positive effect on ­return on capital (ROA). Moreover, practice shows that ­customer ­fluctuation also declines because the resources for customer care are utilized more specifically.    

Second, customer relationships with negative customer value ­often have a short-term skimming potential. This happens when the customer still owes the provider a balance payment. In this case, it is profitable for the provider to start the termination process in a customer-friendly and professional manner because this step increases the probability of the payment of the balance.    

Successful termination management is also rewarding from a communicative view. Customers who were satisfied with the termination process have a more positive attitude towards the company. This can act as a preventive to negative word of mouth and even increases the probability that the customer will recommend the company because of his positive experience.   

Finally, it is a sign of organizational maturity for a provider when he is capable of actively and successfully ending customer relationships. This higher level of maturity gives the company a competitive edge over its competitors in its positioning as relationship leader. The benefits of relationship leadership turn up in the form of positive effects in the competition for winning new customers.

But the first step to maximizing the economic, communicative, and competitive benefits from each termination is careful analysis and planning.     

Core Question 2: What do analysis and planning of a fair termination look like? One of the first conditions for the successful termination of a customer relationship is understanding the reaction of the ­customer when the provider terminates the relationship. This is achieved by analyzing the customer’s perception and expectations ahead of time.    

The results of the study have determined two key findings in this respect. First, unhandled emotions in the termination process have a negative influence on the attitude towards the company; second, the customer expects first and foremost a fair procedure from the provider. The customer’s expectations can be translated into concrete demands, namely, those which the provider must meet, those which he should meet, and those which he can meet.   

The fulfillment of “Must” demands are regarded as self-evident by the customer within the framework of a termination, else they become so-called knock-out criteria. They include the ­reachability of the provider, the identification of alternatives to the termination – the conversion of the contract relationship in the event of insolvency, for example – and sympathetic understanding of the situation in which the customer finds himself. If the provider does not fulfill these criteria when he terminates a customer, the customer will be strongly dissatisfied when he leaves the company and can harm the company’s image through his negative comments.   

“Should” demands are expected by the customer at a certain level characterized by its personal nature. This means that the more skillfully the provider satisfies the demands, the more satisfied the customer will be and the more likely he is to recommend the company or at least to have a positive attitude towards it. These demands include friendliness and professional competence as well as the ability of the contact personnel to listen to the customer actively.    

If “can” demands are fulfilled, the customer will be delighted or at least be pleasantly surprised because he does not expect this kind of service. In the case of a termination, such demands include discretion and transparency in particular. Interestingly, terminated customers appreciate it greatly, for example, if the provider guarantees that their personal data will not be disclosed to third parties even after the termination. Customers also show an overproportional level of satisfaction when the reasons for the termination are disclosed frankly, i.e., the strict observance of transparency principles. The benefit for the company is an additional image gain as a discreet provider, raising the former customer’s trust in the company.   

Once awareness of the customer’s expectations in a termination has been created, the second stage is the planning of the channel for the termination chosen by the provider. This is a major challenge for the provider, especially with respect to communication, and it demands a suitable communication and termination strategy.   

Four ways to say good-bye  

The strategies for a termination by the provider can be ­derived from the four basic models of inter-human relationships ­described in social psychology. Starting from the degree of consideration and customer friendliness which the provider shows and the form in which he addresses his intention to terminate the relationship, it is possible to describe four fundamental approaches to a termination.    

The least expensive, but also the least customer-friendly ­approach is to present the customer with a fait accompli in the form of a written and one-time notification (letter of termination). This course of action has the objective of either processing the termination “quickly and painlessly” or – in rare cases and depending on the reason for the termination – acting as a deterrent on the customer in the sense of an educational measure to communicate the message: “We do not accept this kind of conduct.”

If the provider wants to give the customer an indirect signal that he intends to terminate the relationship in the near future, he can either reduce the “service level” or raise the costs. This approach is not always deemed to be fair because the intention in both cases is to provoke the customer into terminating the relationship himself. If the customer stays with the company despite, for example, a rise in charges, he will at least be raised to an acceptable profitability level. However, there is a danger here of a negative effect on company image which can come from customers who leave the company in anger because they believe the company is too expensive or provides poor service.   

Another possible way to initiate a termination discreetly is the strategy of retreat. This refers to the steady phasing out of the contract frequency to the customer and with it a reduction in intimacy in terms of trust to the provider. In the extreme case, the provider can simply not be reached when the customer wants to contact him. This strategy allows the “silent” execution of the termination at a certain point in time. It means that from a ­certain point in time the customer has become accustomed to the provider’s absence and will consequently not even be aware of the actual termination that follows.    

The fairest, but also the costliest, option is the end-of-the-relationship-talk with the goal of convincing the customer of the objective necessity for the termination. Since the irrevoc­able termination occurs within the framework of a dialog, the customer can respond to the circumstances of the termination immediately. The challenge for the provider in this case is to tell the customer of the termination, accept and clarify any possible complaints and emotions, assure mutual understanding, and, finally, say good-by to the customer “with no hard feelings” on anyone’s part, and to do all of that within a short time. Excellent providers make that happen – although this option is undoubtedly one of the most demanding. But it is worth the effort. The study shows that customers who have been terminated within the course of a meeting have a significantly more favorable long-term attitude towards the company.    

These different approaches for a termination clearly demonstrate how a goal-oriented procedure within the framework of realization of termination management is possible. Now the question arises as to how successful termination management can ultimately be realized. It is of fundamental importance in this respect to understand the termination as a process.    

Core Question 3: What practical implications result for ­termination management? Besides the customer analysis, the practical challenge of termination management is primarily in the communication of the termination to the customer. It is assumed here that direct communication in the form of a termination meeting occurs. That is why findings from mediation and communication psychology for conducting and resolving difficult discussions are integrated into the comments below. The feedback loop of termination management is described in this respect as a practical implication. It encompasses four phases, whereby the transition from one phase to the next takes place when the objective of the particular phase has been achieved. The sequence of the objectives is based on the following chain of effects (see figure as well):   

1. Dispelling emotionalism and reaching an objective and unemotional level  

2. Creating transparency with regard to content  

3. Presenting possible approaches for a resolution 

4. Confirming the mutual consensus on the resolution proposal.  

During the course of the termination process, it is essential that the (interim) objectives in the various phases be achieved. If, for example, no mutual consensus can be found during the resolution phase, it is necessary to return to the step of making circumstances transparent to the customer because this is the only way to ensure that the customer will ultimately accept the termination. And if the customer has accepted the termination, there will be a reduction in emotionality, first of all. Secondly, the resolution of the termination process is then possible. This means that the path to the goal of successful termination management does not only lead through a resolution of content. The communication itself must be understood as a resolution and, in the long term, will contribute to the company’s positioning advantage as a relationship leader.    

Imperative of termination management: Stay friendly and keep cool   

In practice, companies must face the fundamental question of how they should deal with customers who destroy company ­value instead of creating it. At this point at the latest, the termination of a customer relationship becomes a component of comprehensive customer relationship management. The objective of successful termination management is primarily the maximi­zation of the profitability of the company’s own clientele. ­Ultimately, this means carrying on classic portfolio management. But the assets in the portfolio here are not real estate properties, products, or securities, but customers – i.e., human beings. So one must keep in mind that the termina­tion of customer ­relationships can easily result in negative side effects, namely, angry customers who in turn negatively affect their surroundings and other (profitable) customers, possibly even convincing them to change providers. In the long run, this would undermine the benefits of the portfolio clean-up as ­originally planned.   

However, the termination of customer relationships must be seen much more as an opportunity to master successfully a ­delicate customer situation and to turn it into advantages in terms of economics, communications, and, ultimately, competition. In this context, the feedback loop of termination management represents the ideal basis for implementation of the portfolio management as appropriate for customers. The termination management examined in the study also clearly shows that the quality of the communication – especially the components “friendliness and active listening” – is what distinguishes an outstanding provider. Yet another finding is that the more objectively the termination is handled, the more favorable the later attitude of the (former) customer towards the company will be. So this is the most important starting point for providers so that the profitability advantage, especially that of positioning, is obtained from the termination of customer relationships.

In view of this background, the overriding idea for successful termination management by providers can be summed up as follows: stay friendly and keep cool!