The profitable marketing of customer relationships
Two kinds of retention.
What would you do without your customers? More frighteningly, are you trying to find out? All you have to do is forget about them and soon they’ll forget about you.
Contractors have a bad habit of servicing a customer once and thinking, because they did a great job, that customer is theirs for life. But that’s not what happens.
Customers wade in and out of customer files in huge numbers. Even if they’re happy with you, the risk is still there. You could do a good job at a fair price and finish on time, but 60 days of not hearing from you and nearly half of these costly “acquisition customers” can’t recall your name. Your lack of re-contact sends them to Google. Not good.
Understandably, survey results reveal the reason most of them (55%) leave you is due to your perceived indifference. They think you don’t care whether they stay or not! How could you possibly allow that perception to go unchallenged?
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 which serves as the foundation of an effective Customer Retention program.
Level of commitment
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 and is called open because there’s no obligation. It’s for all your customers. They’ve earned the right to be your customers by paying you. By doing so, a door opened in the relationship; you want to keep that door open by maintaining contact.
That’s how 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 building confidence, recognition and word-of-mouth referrals.
Closed retention is a smaller — but more lucrative — 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 on your part to solidify the relationship. 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 of your entire retention marketing efforts is to move more acquisition customers into your open group, who ultimately join your closed group.
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. Better relationship equals better retention.
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. Battered relationship equals battered retention.
For those who do it right, customer retention newsletters are among the most cost-efficient marketing methods around. Think of it. It costs you $275 to $325 in marketing costs for each customer, and that’s money you’ve 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% of total marketing budget. You should send newsletters between two to four times per year to every customer who has written you a check in the last 48 months. That’s a paltry expense when you consider all you’ve just read. But for you fence-sitters, look at these figures:
Loyal customers spend 33% more than non-loyal.
The sales cycle is two-thirds shorter among loyal customers. This means you can sell three customers before you can convince one price-shopping, low-balling new customer.
Closing ratios among loyal customers are nearly double that of first-time callers.
Referrals among loyal customers are 107% greater than non-loyal.
Rate of referral is highest when closest to the point of contact.
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 techs to their homes twice a year. In time, your customers become unswitchable. You’ll get more referrals, greater loyalty and more sales.
Readers can get a free Customer Retention Kit by emailing a polite request to freePMstuff@hudsonink.com or by calling 800/489-9099. Readers will also receive a complimentary subscription to the Sales & Marketing Insider with their request.
This article was originally titled “Two kinds of retention” in the September 2016 print edition of Plumbing & Mechanical.