If you’re sure they’re loyal, think again
Are you one of those home service business owners who assumes your previous customers are so satisfied with the work your team performed that they’d never dream of doing business with a different company? It’s a good feeling … even if you don’t have data to back it up.
We say that because if we analyzed your data, we’re pretty sure most of your customers will never buy from you again. It isn’t that they were unhappy, or that you did something wrong. It’s just that they’re human.
Here’s what really happens
When those customers you see as loyal have a need for service (or equipment replacement), they’re not sure where to turn. They don’t remember your company’s name and only have a vague memory of your tech coming to their home and doing a great job.
They go online and search for “repair near me,” or maybe they call that company with the cute cartoon on the van that just did some work at the neighbor’s home, or that other company with all those billboards around town. In other words, they’ll call a name they remember. And unless you’ve made a concerted effort to remind them that your business exists and has served them well in the past, they’re not likely to call you.
Your data is misleading
If you ask your field management software (FMS, also called a customer relationship management or CRM system) for a count of your existing customers, it will produce a number that will give you a warm feeling. Essentially, it’s going to classify anyone who ever did business with you as a current customer. They consider a new customer to be anyone who’s on your books for the first time.
We take a different view. We classify new customers as anyone who has been on your books for up to a year. All the revenue you’ve earned from that customer during that first year is what we call new customer revenue.
Why is that distinction important?
Although you may not realize it, 75 percent of the lifetime revenue you’ll earn from an “existing” customer will happen during the first year. Your FMS system will lump that revenue in with everything earned from existing customers, which will lead you to believe that you get a bigger share of business from your current customers than you actually do. We’ve spent decades helping companies like yours grow, and one thing that has become clear is that every owner wildly overestimates the percentage of customers who are likely to return.
The lone exception is homeowners who have a maintenance agreement with you. But in our experience, that represents only about 10 percent of the average home services company’s book of business. In other words, 90 percent of the homeowners you consider to be loyal customers don’t have any reason to do business with you or a competitor until they have a need. Typically, a homeowner is likely to need your help just every four or five years.
Does this ever happen to you?
A homeowner calls and insists they had you out a couple years ago, but you can’t find them in your FMS system. It’s obvious they were someone else’s customer and have mistaken your business for that firm. You’re happy to have their business, so you don’t attempt to correct their mistake. But how many of the customers you believe you “own” are having similar conversations with your competitors?
The key to keeping customers
If you want to make sure homeowners remember you the next time they need your services, don’t rely solely on their memory. Prioritize your efforts to sell maintenance programs and similar approaches that put your team in customer houses on at least an annual basis. In addition, your marketing mix must include strategies that ensure your customers will see your business name regularly.
In other words, the secret to repeat business isn’t doing a good job the first time. It’s making sure that they still remember you when they need you again — especially when they do a search for help. If your company name is the one they recognize, you’re the one they’ll call.