MegaMarketing: The Great Marketing Myth of 2008

March 1, 2008
Once upon a time, in a land not so far away, there lived a contractor who worked very hard each day. He was honest, his staff well-trained, and his service impeccable. His customers seemed to like him, word of mouth was his ally, business was steady.

Once upon a time, in a land not so far away, there lived a contractor who worked very hard each day. He was honest, his staff well-trained, and his service impeccable. His customers seemed to like him, word of mouth was his ally, business was steady.

Then one day, the economy changed. And that’s where the fairy tale takes a decidedly wicked turn.

Competitors poured into his marketplace, fleeing new construction jobs that were no more. Their prices were all lower, since that was their model. Concurrent with receding economics, customers pulled back on their upgrade and replacement dollars. Seeing these elements converge, our contractor figured that he too would cut prices just to stay afloat. “A good idea,” he thought.

Soon, he noticed many of his old competitors in retreat mode, mostly waiting to see what happens. So our contractor joined them, huddled defensively inward. As they predicted and discussed, reassuring their mutual hibernation, jobs and profits dried up. Times were hard.

They forgot one rather large lesson.

Yet, a few wise contractors sensed their fear, and capitalized on a very large, very unguarded market, now ignored by the cowering masses. At the same time, the wise contractors protected their hard-won customers, so that the new, cheap contractors couldn’t pry them away.

The wise flourished, gathering customers and sales in an acquisition frenzy. When the fear cleared, so had dozens of their bedraggled competitors, leaving even their crumbs for the nearly-overstuffed contractors.

They had remembered the lesson.

The need for heating and cooling never changed. Nor did the desire of the market to be helped quickly and treated fairly. The scared crowd forgot, shed their confidence, and joined the forlorn in false security, having predicted and engineered their own failure.


Or Is It?
There has never been a greater opportunity for the in-home service contractor than right now. The alarm of fear is sending half or more competitors into hiding. Their customer bases have never been more vulnerable, but sadly, neither have yours.

When your customer base is left wide open in a declining economy, you’re going to get robbed. Period. Now, if you allow this to happen, all my sympathy and all that of your former customers won’t hire even a half-wit bankruptcy attorney.

So you’ve got a real choice here: You either rally harder than ever around your customers, and get extremely smart about acquisition of vulnerable clusters, or you don’t. In lean times, there’s no middle ground.

What’s Happening Now
When times are good, we’re swept into believing they’ll stay that way. The pipeline seems to magically fill, with less effort, and the attitude of “So what if we lose a few customers?” creeps into the overly-comfortable mindset.

In fact, most contractors’ customers don’t even know they’re customers because the reminders of this presumed status are either non-existent, infrequent, or merely a plea to buy more. When a lean, aggressive contractor comes along with a “great deal,” the customer migrates. Why not? They’d prefer loyalty, but you gave them no real reason to stay or go. No ties, no relationship, no loyalty. Not their fault, either.

Maybe you’ve been making too much money lately to care, but the above is becoming a daily occurrence in the face of a looming recession, and a flood of competition. Don’t feel alone.

I asked a national crowd of about 650 pretty enlightened contractors recently, “Who in here has an active customer retention program?” About 100 hands went up. The dozen or so whose faces I could make out are the movers, award winners, multi-millionaires, or the up and coming.

That means close to 85% were playing recession roulette with a bunch of hungry, aggressive, low-balling contractors loaded in the chamber. Bad odds.

Retention has never been more necessary. Without it, your high-value customers (the goal of prudent business) will leave you for the underpriced, overly-aggressive competition. You leave them no option.

Recession-Proof Your Business
Retention marketing keeps customers. That’s its sole purpose in life, and it’s a very good purpose to have. A retention effort is not about pumping a sale in someone’s face with each contact. It’s about maintaining credible, reliable, trustworthy relationships with your client base.

A strong retention program will out-pull, out-profit, and generally outperform other forms of marketing — dollar for dollar. The cost of prevention is always less costly than the cure.

For now though, the prevention and cure are the same.

The value move now is to increase the retention rate (the persistence) following the first sale. As exhaustive studies in insurance, banking, and catalog retail have shown, when people own two (or more) products from a company, their loyalty and value increase.

In other words, the more they buy, the more they stay and pay.

Echoed by M.L. Kelly, vice president of marketing for Ashford, “When customers return, their purchases are almost double (+84%) the size of their first purchase.”

The identical outcome of repeat buyers comes from Dr. Freidrich Reicheld in The Loyalty Effect, who found that repeat customers spend 67% more than new customers. This higher value/transaction size, coupled with the fact that 80% of a company’s revenues come from 20% of the customer base, generate an even more staggering statistic.

Just a 5% increase in retention yields profit increases of 25% to 100%.

“This alone,” says Reinheld, “can easily double profits in seven years over the company whose retention remains at the industry norm.”

If you choose not to protect your customer base, please know that many will celebrate your inaction and collect accordingly.

Yet you, and your customers, will celebrate if you remind them of your great value to each other during tighter times. And that is no myth.

Adams Hudson is president of Hudson, Ink, a creative marketing firm for contractors and author of the newly published Contractor Marketing Secrets. Call 800/489-9099 or visit for additional information.