Customers Need Supersize Option

March 20, 2006
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If you want to build loyalty is it more important to increase purchase frequency or purchase volume? In their book, "Meaningful Marketing," researchers Doug Hall and Jeffrey Stamp concluded that focusing on purchase volume is 3.9 times more effective when trying to build annual loyalty.

Why? Loyalty is not static. Your competitors are always out there, trying to make even your best customers try something new. The research shows that it is best to strike when the iron is hot. When the customer is in a buying mode, help them buy. You may not get another chance later. Hall and Stamp recommend that business owners follow the lead of McDonald's, and think about supersizing the offer.

A REASON TO BUY MORE

When your customer is ready to buy, give them incentives to purchase more. Long-term contracts or larger packages offer you more profit, so pass along some of the savings to customers. Offer incentives, such as discounts on multiunit purchases, to encourage them to buy more now.

So how can a contractor apply this principle? Service contracts are an easy place to "supersize." Consider offering your customers discounts on service contracts if they agree to two- or three-year contracts paid in advance.

I know of many contractors who follow up with the customers 30 days after an equipment purchase or repair and offer the service contract at that time. They believe the sale is easier when the customer has recovered from the first expense.

The problem with this approach is that the pain of the expensive repair or replacement is now a distant memory, and customers may be more likely to "play the odds." The research indicated that it is easier to get them to write one check at the point of sale, than to get them to open their wallet again a month or six months later. Also, if they have used a consumer credit plan, the additional contract is just a little more each month.

DO YOU WANT FRIES WITH THAT?

Every time you walk into a McDonald's, and order a hamburger, the person behind the counter asks, "Do you want fries with that?" By simply training their employees to ask the question, McDonald's increased their sales dramatically.

The same technique can grow sales for your business. Do you routinely offer a new programmable thermostat, air cleaner, humidifier, and service contract with every installation? Are these options clearly listed on every proposal with the benefits spelled out for the consumer? If not, it is time to revise your proposal. The research shows that if you don't mention it up front, you may not get a second chance.

McDonald's discovered most customers wanted a drink, fries, and sandwich. As a result, they developed a pricing structure that was so attractive that almost everyone buys a "number 1, 2, or 3."

This concept can work for contractors as well. Bundle accessories and service contracts into the purchase price as standard. Discount the system only slightly when you leave out an accessory and most consumers will buy the whole package.

Offer "free stuff." This bundled approach allows you to offer a thermostat or one year service con-tract free with a high-efficiency installation. As new regulations kick into effect, and it is harder to set yourself apart on the efficiency of the equipment you sell, you will need a point of difference. Offering the first year service included with every installation as a standard or upgrade will set you apart from your competition.

OFFER A COMPLETE PACKAGE

Another tactic is to view your product from the customer's perspective. What will they need to maximize the use or enjoyment of your product or service? If you offer these related products, either directly or through a strategic partner, your customer has fewer reasons to go elsewhere.

What types of services should you offer? In new construction, consider offering a $25 coupon for a landscape company or nursery with every system you sell. In a remodel, maybe it is a gift certificate for carpet cleaning, or floor refinishing. Your customers will appreciate the little extras.

These extra services don't have to be an expense item for you. Many companies pay referral bonuses. Talk to service providers about giving you the coupons for free instead of the referral bonus. And, if you are smart, you will give them coupons for your services as well.

These are just some examples of ways to grow your business by building customer loyalty. For other ideas, simply observe successful companies in industries very different from HVAC, and you may learn other ways to supersize your business.

Publication date: 03/20/2006

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