The Greatest Marketing Myth In All of Contracting


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When times are good, we’re swept into believing they’ll stay that way. Been there. 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. So, when a lean, aggressive contractor comes along with a “great deal,” or simply makes more noise than you do, the customer migrates. I mean, why not?

They’d prefer loyaltybut you gave them no real reason to stay. No ties, no relationship, no loyalty. Not their fault, either.

I know I harp on this subject a lot (my calling, as it were), but our closest and most valuable clients have been piling in the leads and erecting walls around customers. Some for years, without relent. Why?

Retention has never been more necessary. As copywriting genius and marketing guru Dan Kennedy put it, “Retention is the new acquisition.” Without it, your high-value customers (the goal of prudent business) will leave you for the underpriced, overlyaggressive competition. Absent effort, or “assuming” they’ll stay means you left them no option. Bye-bye.

Retention marketing keeps customers. A retention effort is not about pumping a sale in someone’s face with each contact. It is about maintaining credible, reliable, trustworthy relationships with your client base. Hear me:

A strong retention program will out-pull, out-profit, and generally out-perform other forms of marketing – dollar for dollar – than any other marketing investment you can make.

You just heard that from a Direct Response copywriter. I’m paid way more to pull someone out of the ditch than to keep them from entering it. 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 very expensive, 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.

Echoed by M.L. Kelly, V.P. 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. Frederick Reichheld 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 revenue comes from 20% of the customer base, generates an even more staggering statistic.

Just a 5 % increase in retention yields profit increases of 25% – 100%. “This alone,” says Reichheld, “can easily double profits in 7 years over the company whose retention remains at the industry norm.”

Then consider these gold nuggets from Leading on the Edge of Chaos by Emmett C. Murphy and Mark A. Murphy:

Acquiring new customers can cost 5 times more than retaining current customers.

A 2% increase in customer retention has the same effect on profits as cutting costs by 10%

The average company loses 11% of its customers each year.

A 10-point reduction in customer loss rate can increase profits by 45%.

The customer profitability rate tends to increase over the life of a retained customer.

The case for retention is more than warm fuzzies – it’s about your bottom line. So how do you make retention “happen?

Retention in 6 Steps

1. Thank you cards, calls, emails

2. Deal Sealer Cards, emails

3. Integrated Retention Program (printed newsletters & coordinated online content)

4. Maintenance Agreements

5. Reactivation letters

6. Referral requests

Our top consulting clients do all 6 steps, but if you can only choose two, pick #1 (current transaction based) and #3 (long transaction based). The beauty of an integrated retention program is that you can also “sell” Maintenance Agreements, IAQ, and replacements in it, for a fraction of the costs of doing it separately, while you build customer relationships.

If you choose not to protect your customer base, please know than 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.

Hudson, Ink, is a creative marketing firm for contractors. Readers can get a free Customer Retention Kit and a complimentary subscription to the Sales & Marketing Insider newsletter by sending a polite request to freeACCAstuff@hudsonink.com or by calling Hudson, Ink at 1-800-489-9099. Visit us at www.hudsonink.com for many other free marketing articles and reports.

Adams Hudson
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Posted In: ACCA Now, Sales & Marketing

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