Do you make the #1 marketing mistake?

I have teenagers, just barely. My 13-year-old daughter who used to think I was the smartest man alive now ranks my intelligence just below French toast. My 14-year-old son, who once believed I could lift a small building, considers me a frail wimp whose relevance disappeared with the 8-track tape. Woe is me. But I still control their allowance, which gives me remarkable power. Theres a point to this.

I have teenagers, just barely. My 13-year-old daughter — who used to think I was the smartest man alive — now ranks my intelligence just below French toast. My 14-year-old son, who once believed I could lift a small building, considers me a frail wimp whose relevance disappeared with the 8-track tape. Woe is me. But I still control their allowance, which gives me remarkable power. There’s a point to this.

Sure, our relationship has changed, just as has been happening since the very first gland was invented. All relationships change: stable or not, family or not, for love or not. Yet — and hear me on this — there is no relationship without contact.

With my kids, or with you and your family, we’re stuck with each other. With others, it’s purely optional.

Now for the clincher: what relationship do you have with your customers who, by the way, control your allowance?

Over the last seven years or so, I’ve been screaming, politely, about this topic to contractors. I’ve polled seminar attendees, CONTRACTOR magazine readers, membership groups, direct mail lists, and contractor consulting clients. Nearly all agreed with the following…

  • Customers paid for everything in their businesses.
  • Customers generated every referral in their businesses.
  • Repeat customers accounted for roughly 65% of their total sales, almost exactly the trades industry average.
  • Repeat customers bought sooner and more often and paid more (by roughly 33% on each score).

Maybe you agree on those points too. Yet when asked, only 3% had active customer retention programs in place. Is this any way to treat your allowance givers?

This caused me to yell (again, politely) and begin a customer retention crusade, creating programs to solve the problem.

And years later, things have changed. Contractors have caught the message (from many influences) and now a full 11% have active customer retention programs in place. Am I satisfied the market has nearly quadrupled?

Hardly. Because without question, “no customer retention program” is still the number one plumbing marketing mistake. It is inconceivable that any business be so smug and disrespectful as to think customers unworthy of even minimal contact. Far too many plumbers “assume” that a single service call equals a customer for life. Sorry to disappoint. Most can’t remember your name 30 days later.

Not a day goes by that a coaching client doesn’t tell me the tale of his plumbing company that has been in business for “X” years and, for some reason, can’t break through to the next level. You’ve got one guess.

They’re spending money chasing the “new” customer, forgetting the one they just got, and are thus patching a hole in the growth bucket with soggy hundred dollar bills.

Don’t take my word for it. Scott McKain, whose best-seller, “What Customers Really Want,” studied the problem of deteriorating revenues and growth. His words are even harsher than mine: “If you’re not willing to differentiate your customer relationship, you’re a commodity destined to stagnate. Live with it.”

And Frederick Reichheld in “The Loyalty Effect,” commands that if you’re not practicing customer retention, you’re “designing in” non-growth. His example:

Two companies. One with a retention rate of 85% and the other with 80%. Not bad for either. Assume each acquires new customers at a rate of 20% a year. The first company has a 5% net gain in customers per year, while the second will have none. Zero. But he has wasted all the money they spent on acquiring those new customers — typically between $225-$375 each.

That ’s why cont ractor s with customer retention programs have increased 375%. Contractors who wait to try it may find “their” customers have moved on to someone who does customer retention well. Good luck getting them to change back.

Reichheld also found that at rates of more than 90% retention, the life of a customer doubles, so the more customers you keep, the longer the life-cycle of the individual relationships. His point: Start today, somewhere, to prove that you value the relationship with customers. Aside from these authors, there’s another source of wisdom to consider.

There are 10 Commandments. Seven pertain to our relationships. Shouldn’t a few find their way into your relationship with your customers? I’m about to give you a list of 10 things. You do not need to do all of them unless, of course, you want to retire sooner, very rich, with an excellent tan while on a yacht being fed grapes. If you do just three of these, you’ll likely trounce every other effort in town and reap the rewards. The first one, however, is not optional.

1. Commitment. Contractors who think retention is one follow-up call or one postcard are clueless. It just doesn’t happen. I mean, think about it. Did your wife agree to marry you after one date? Doubtful. I’m betting she expected, deserved (and potentially demanded) your time, attention and commitment to the relationship. Customer retention isn’t an event but an ongoing program. If not, the relationship will dwindle and then cease to exist. Upside? Start a program, put it on autopilot, walk away. Ways to do that? Here you go…

2. Appointment confirmation — A two-minute phone call, highly appreciated by you and your tech. And in case the tech arrives and the customer doesn’t show …

3. “Sorry we missed you” door hanger. Many companies don’t even let the customer know, causing them to feel “stood up,” so they call elsewhere. You could spend 6 pennies on this card and avoid that. When you two do connect, send a …

4. Thank you card and/or call. Spending 39 cents to differentiate after every service call, plus offer an incentive to call again, is a huge ROI. The phone call is personal, pleasant and stands out. Another two minutes.

5. Customer survey card — You can include it with the invoice or later mailing to ask, “How did we do?” If you’re scared what they might put down, then your business really needs this.

6. Referral request — If you do any of the above, you’ve “earned” the right to ask. One card or letter (within 30 days of your visit) should do it.

7. Customer newsletter — Without question, the #1 tool for regular retention. Send them two to four times a year. (Call, fax or e-mail for a free sample from us. See below.)

8. Birthday reminder on the anniversary of service. Like a “dating” anniversary.

9. Service Reminder — Seasonal reminders of service due are appreciated and remembered, which is the main point.

10. Did we make a mistake? A card with this headline goes out to every customer you’ve not serviced in more than 18 months. This is called “reactivation” and is very powerful. Our clients have literally pulled “forgotten” customers right out of the market with this one effort.

Bottom line: stay in touch. The only relationship that flourishes without contact is hatred. Don’t be trapped by indifference or procrastination. Your customers didn’t become your customers by accident and they won’t stay your customers by accident.

If I stay in touch with my kids through their teenage years, maybe we’ll survive.

Here are two bonus items: Get a four-page report and sample customer retention newsletter. Just fax your letterhead with a polite request to 334/262-1115. There’s a free High Performance Plumbing Marketing Tele-seminar with Adams Hudson for CONTRACTOR readers. Put the word “Tele-seminar” on your fax or go to www.hudsonink.com/teleseminar to register now.

Adams Hudson is president of Hudson Ink, a creative marketing firm for contractors. He’ll be speaking at the PHCC – National Association Network ‘07 Conference in Anaheim, Calif., Oct. 24-27, 2007. Attendees will see many of the pieces referenced in these articles, plus get many “walk away” bonuses. Additional information is available at 800/489-9099 or at www.hudsonink.com

TAGS: Marketing