Chapter Corner

Communication Keeps Customers

Posted in: Management Methods, April 2013

It's always all about the customer. You could write the most persuasive ad, create the most provocative design, purchase the most expensive media - and, no matter what, it always comes back to the customer. Only the customer can see the value in your offer, make the decision to follow through, and stay with you after the sale.

Sales come from customers. The stronger your relationship with your customers, the better your chance at sales.

With existing customers, studies show you have a probability of 60-70 percent to make the sale. But that number gets comparatively smaller when you realize you have only a five to 20 percent chance of selling to a prospect. I would argue that the differences between those rates of success are related to how willing you are to make a relatively small investment in retention marketing.

In their book, Leading on the Edge of Chaos, authors Emmet C. Murphy and Mark A. Murphy make some important points about the value of your current customers:

  • Acquiring new customers can cost five times more than satisfying and retaining current customers;

  • A two percent increase in customer retention has the same effect on profits as cutting costs by 10 percent;

  • The average company loses 10 percent of its customers each year;

  • A five percent reduction in customer defection rate can increase profits by 25-125 percent, depending on the industry; and

  • The customer profitability rate tends to increase over the life of a retained customer.

Insights_SpecOffer.gifThe other side of demonstrating the value of your current customers is that customer retention marketing is the most cost-efficient marketing you can create. Retention programs are about communication, keeping your name in front of customers and reminding them that you care. This is not an expensive concept.

The most basic elements of communication to customers involve thank-you cards, follow-up phone calls, reminder emails, customer newsletters, reactivation letters, and referral requests. So, how much will all of this set you back? Less than six dollars per customer, maybe.

How much is that investment going to pay? You can figure that out by knowing that repeat customers spend an average of 67 percent more than new customers.

Now ask, how much will you pay if you don’t do any of the above? That cost comes from lost sales and lost referrals that go to competitors actively working to keep their customers.

For residential contractors, newsletters are the premier vehicle for customer contact – if done correctly. A newsletter with online integration filled with interesting “home-care” tidbits can generate huge responses. Best thing of all, this is not perceived as “advertising” and thus forges a far better image and strengthens the relationship. Better relationship equals better retention.

Using QR codes to link your offline and online world can increase web traffic and allow you to fit more quality content (how-tos, energy saving tips, home remodeling) into your newsletter.

On the other hand, a newsletter that focuses on you and what you want customers to buy (for only your benefit) will be quickly discounted as the self-centered sales piece that it is. Battered relationship equals battered retention.

The Fundamentals of Customer Retention

  • Regular communication – The principles of customer retention are, again, about staying in touch and keeping your name in front of customers year-round;

  • Respect your customer – To build loyalty, demonstrate to your customers that you appreciate their loyalty. The tendency in acquisition marketing is to give someone a great deal just to lure them into the fold. But don’t offer “strangers” something better than you’d offer your friends. Instead of taking customers for granted, reward them with customer-only offers;

  • Collect customer information – Keep your customer database current with every interaction. Record service history, upgrades, and installations; and

  • Serve your customers – Give your customers a higher level of service than they’d expect. In this new age of consumer empowerment, doing what you say you’ll do inspires confidence. So keep your promises and go the extra mile. Treat customers in a way that shows you value their business.

The culmination of customer loyalty is, of course, the maintenance agreement whereby customers pay to stay with you and, as a result, enjoy a higher level of service and discounts on repairs in addition to routine maintenance on their electrical system. This is a well-planned program that lessens cash flow concerns and helps keep you busy and profitable during the slow times of the year.

As a residential electrical contractor, you have much you can do to improve your customers’ home life. By this service in the home, you have the opportunity to enter into a relationship with your customer. While in the home, you can exceed their expectations. Then, after the sale, service, or repair, what comes next? You can keep building on that principle of exceptional service by staying in touch and demonstrating how much you care.

Adams Hudson is president of Hudson, Ink (www.hudsonink.com), a national contractor marketing firm serving the contractor trades and an IEC National Bronze Industry Partner. Insights Readers can get the complimentary report “Endless Referrals” and a free Spring Newsletter Sample by sending a polite request to freestuff@hudsonink.com or by calling Hudson, Ink at (800) 489-9099.