Chapter Corner

The Profitable Marketing of Customer Relationships

Posted in: Marketing Matters, August 2013

Target_Insights.gifWhat would you do without your customers? More frighteningly, are you trying to find out? To find an answer to these questions, all you have to do is forget about them, and soon after they will forget about you.

Contractors have a bad habit of servicing a customer once and thinking because they did such a great job, that customer is theirs for life. It’s not always that simple.

Even if a customer is happy with you, the risk is still there. You could do a good job at a fair price and finish on time, but in just 60 days of not hearing from you, nearly half of these very costly “acquisition customers” cannot recall your name. The lack of contact sends them to Google.

Understandably, survey results reveal the reason most of them (55 percent) leave you is because of your perceived indifference. They think you don’t care whether they stay or not. Allowing that perception to go unchallenged could be highly detrimental to your business.

The simple fact is this: Regular contact keeps customers. That involves a number of tried-and-true techniques, such as follow-up phone calls after repair or service calls, thank-you letters, holiday cards, customer-only direct-mail offers, and a customer newsletter. All of these materials serve as the foundation of an effective customer-retention program.

Two Kinds of Retention: Open and Closed

Different kinds of retention programs require different levels of commitment on your part as well as the customer’s. Open retention is the broader method. It is called open because there’s no obligation; it’s for all of your customers. They have earned the right to be your customers by paying you. This keeps a door open in the relationship, and you want to encourage that door open by maintaining contact.

That is the way they become automatic newsletter subscribers. Your open group gets a newsletter from you at least twice a year, along with any other customer-only offers to build confidence, recognition, and word of mouth.

Closed is a smaller–but more lucrative–group that involves a forced loyalty program such as a maintenance agreement program. Closed retention involves obligation. It takes a financial commitment on your customer’s part and a service commitment from you to solidify the relationship. But once that’s done, it keeps customers on the “inside” by making it unprofitable and simply illogical for them to turn to another contractor.

The goal is to move more acquisition customers into your open group, who ultimately join your closed group. This is the goal of your entire retention marketing effort.

Customer Contact Through Newsletters

Without question, newsletters are the premier vehicle for customer contact–if done correctly. An online, integrated newsletter filled with interesting home-care tidbits is not perceived as advertising and thus forges a far better image and strengthens the relationship.

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

For those who do it right, customer retention newsletters are among the most cost-efficient marketing methods around. It costs $275-$325 in marketing costs for each new customer, and that’s money you have already spent. A good customer retention newsletter costs less than $3 a year per customer including postage for four issues! Not a bad return on investment, especially since it involves returning customers.

A customer-retention campaign investment will range from a minimum of 6 to 8 percent of total marketing budget. You should send newsletters four times (seasonal) per year to every customer who has paid you in the last 48 months. That’s a paltry expense when you consider all alternative methods. But for you fence sitters, look at these figures…

  • Loyal customers spend 33 percent more than nonloyal.
  • The sales cycle is 2/3 shorter among loyal customers. This means you can sell three loyal customers before you can convince one price-shopping, new customer.
  • Closing ratios among loyal customers are nearly double that of first-time callers.
  • Referrals among loyal customers are 107 percent greater than nonloyal.
  • Rate of referral is highest when closest to the point of contact.

Take it one step further by using Quick Response (QR) codes to link your offline and online worlds, which can increase web traffic and will allow you to fit more quality content (how-to tips, energy-saving ideas, home remodeling, etc.) into your newsletter.

Build a fence around your customers with a solid customer-retention campaign. Invest in a good, regular customer newsletter that keeps your name and your services in customers’ minds all year long. Next, establish a maintenance agreement program that takes your technicians to their homes twice a year. In time, your customers become “unswitchable.” And you’ll get more referrals, greater loyalty, and higher sales.

Adams Hudson is president of Hudson, Ink, a creative marketing firm for contractors and IEC National Bronze Industry Partner. Insights readers can get a free “Customer Retention Report” and a no-cost Fall Newsletter Sample by emailing their request to INSIGHTS@hudsonink.com or faxing to (334) 262-1115. See other marketing reports at www.hudsonink.com or call (800) 489-9099.