Loyalty Is Key to Customer Retention
October 29, 2007
ORLANDO, Fla. - HVAC contractors who focus on attracting new customers to their business often spend a lot of time and money with unsatisfactory results - sometimes money losing results. According to Terry Nicholson, president of Success Group International, keeping existing customers happy and nurtured is time better spent. Nicholson was addressing members of AirTime 500 at their fall meeting in Orlando.
He asked contractor members if they knew the percentage of time they spent nurturing existing customers versus wining new customers. He reminded them that the goal of any successful contractor is to know how to spend the right amount of time, proportionately, on each segment of the business. Nicholson said ultimately, a contractor needs to put a high focus on nurturing existing customers and winning new ones. “If you do that, there is a pot of gold awaiting you,” he said. “You are going to reap a lot of profits.”
He said that almost one-half of a business’s potential customer base never hears any advertising or marketing messages because of a few different factors, including:
• People are unserviceable because they will always be loyal to their own contractor.
• People are locked out forever because you made them mad and they won’t come back.
• People don’t hear your messages because they don’t use the medium on which the messages are advertised.
“You have to realize that there are a certain number of people you will never reach,” Nicholson said.
He noted that a lot of money is spent on getting new customers, which can lead to increased advertising costs as a percentage of sales. Nicholson introduced the second maximum theory to show the importance of getting a customer and keeping a customer.
“The second most important thing is to get a customer to use you a first time,” he said. “The most important thing is to get customers to use you a second time. Smart companies focus on lifetime client value.”
He asked AirTime 500 members if they would guess how many years it would take for a customer to become a non-customer because they hadn’t reused them for service. Nicholson estimated that 85 percent of the room guessed three years or less, which led to his explanation of loyalty facts.
“Sixty-eight percent of consumers change their place of business for little or no reason,” he said. “And a 5 percent reduction in lost customers can increase profits by up to 75 percent. A first-time customer has a 30 percent chance of becoming a long-term profitable customer.”
Nicholson listed several advantages of having loyal clients:
• You are saving on marketing dollars.
• Long-term customers tend to be less price sensitive.
• There is a greater probability of free word-of-mouth advertising.
• Loyal clients don’t shop you.
• More trust means they are willing to buy additional products from you.
• There is a higher probability of replacement sales in the future.
• You have a base to call on when you are slow.
• Happier customers and increased loyalty makes your employees’ jobs easier and more satisfying.
Nicholson summed up by saying what loyalty is and how it affects HVAC contractors. “Customer loyalty is customers choosing you repeatedly over others when they have other options,” he said. “People make decisions with their heart or their head. What you are really trying to do is to capture heartshare.
“Keep this in mind: You aren’t after 100 percent customer satisfaction, you are after 100 percent customer loyalty.”
Publication Date: 10/29/2007