All contractors would be wise to recognize this important warning: Some of your customers don’t know that they’re your customers.
If you don’t understand how this is possible, maybe you’re operating on the assumption that if you serve a customer once — and do a great job — the customer is yours for life. You add him in the database, and that’s where he’ll be when he calls you again. Most times, however, that’s not what happens.
Calls from returning customers don’t automatically come. In fact, quite a few of the ones you rushed out to see on a cold winter (or warm summer) day for an emergency repair don’t even remember your name. So, how could you expect them to remember that they’re your customer? When they need a contractor again, they’ll probably be flipping through the Yellow Pages — starting the process all over.
Now, don’t be offended that customers are so fickle. Instead, you’d be much better off recognizing that human nature and sound marketing practices can work together to keep your customer files filled with active customers.
First, let’s clarify why your customers would lose interest in your company anyway. According to a survey of 9,000 paying customers, customers leave for any of the following reasons:
• 4% said your pricing was unfair.
• 9% died or moved away.
• 12% had an unresolved complaint.
• 16% took a competitor’s offer
• 55% left due to your “indifference”. This just means they didn’t think you cared!
The second reason is the only one you can’t do anything about. And, the last two figures actually relate to the same reason: 71% left because you weren’t there . . . but your competition was.
Customers value relationships with their vendors. In fact:
• 37% said the relationship was the most important reason they bought
• 22% said it was because they owned another product of yours
• 14% were referred by a friend or family member.
Add those up, and 73% of your business has some relationship tie in.
Now you know two key points: customers leave because you aren’t there for them, and they’re looking for a relationship.
But here’s where these issues get further complicated. Contractors typically spend up to 80% of their marketing money going after people with whom they have little or no relationship (Yellow Pages are the best example). Yet, if they would redirect a portion into effective retention marketing, they could transform their contracting business.
The simple fact is this: Contact is the way to keep customers. And, “contact” isn’t some kind of big marketing mystery. It’s easy things, like follow-up phone calls after repair or service calls, thank you letters, holiday cards, and customer newsletters.
That last example, the customer newsletter, is the crown jewel of retention marketing. They’re simple to use, quick, and customers keep them around. Best of all, it’s not perceived as “advertising” and thus forges a far better image, and strengthens the relationship. A better relationship equals better retention.
One other important note: You’ve already paid to get these customers. Studies show that it costs you $275 to $325 to get a customer. Yet, a good customer retention newsletter only costs about $3 a year, including postage, for four issues. It doesn’t take a financial genius to see that retention marketing is far less costly than acquisition marketing — and just as important.
Investment and Payoff in Customer Retention
A customer retention campaign investment will range from a minimum of 6% to 8% of your total marketing budget. You should send newsletters 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
• Referrals among loyal customers are 107% greater than non-loyal
• Rate of referral is highest when closest to the point of contact.
The fact is your company’s current customers are the absolute number one source of your future sales. When you lose customers through neglect, you lose all of their future business and all of their referrals to your competition. When you keep customers by maintaining regular contact, you keep that pool of sales for yourself. A strong customer retention program is the tried-and-true method for making that happen.
Adams Hudson is president of Hudson, Ink, a creative marketing firm for contractors. CB Hotmail readers can get a free bi-weekly marketing newsletter by calling 800/489-9099, faxing the request on letterhead to 334/262-1115, or e-mailing [email protected]. Visit www.hudsonink.com for more free sales and marketing reports.