Why do companies lose customers?

Everyone in business knows that satisfied customers are normally (though not always) more likely to remain loyal and become repeat purchasers. So it’s self-evident that increased customer loyalty can lead to increased company profitability.
According to Reichfeld and Sasser (1990), an increase in customer loyalty by 5% can increase the profit of a business by 100% due to the fact that satisfied customers usually purchase the products of a company more often (and in greater quantities). In addition, satisfied customers are less price-sensitive, and therefore they won’t keep changing supplier according to price changes.
The German statistician Andrew Ehrenberg coined the phrase the ‘leaky bucket.’ He looked at the process of customer gain and customer loss to an organisation, which is sometimes referred to as ‘customer churn’.
Ehrenberg suggested that whilst the company was leaking customers through ‘holes’ in the bottom of the bucket, the business had to recruit new customers to replace them, at great cost to the company.
So why do companies lose customers?

Research by the Chartered Institute of Marketing (CIM) suggests the reasons for why customers will stop buying from a particular company:
1% - Death of customer
3% - Relocation of customer
14% - Better price elsewhere
14% - Dissatisfied with product
68% - Poor service and poor customer care
This research by CIM tells you all you need to know about the importance of customer satisfaction and customer service. Ignore it at your peril.

Ehrenberg A.(1988) Repeat-buying: facts, theory and applications, 2nd ed., Edward Arnold, London; Oxford University Press, New York. Reprinted in the Journal of Empirical Generalisations in Market Science, 2000, 5, 392-770 (www.empgens.com).