Is Your Customer Database Helping You Make More Money from Customers?

Jason Morjaria
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It’s a great feeling when you get a new customer—and when you’re building a new business, attracting new customers is not only exciting, it’s essential.

But one of the biggest mistakes that a field service business can make is to spend too much time pursuing new customers, while neglecting existing ones. In fact, one of the biggest reasons why many established companies go under is what marketers call customer attrition or churn—in other words, the steady loss of business to the competition.  

Customer loyalty pays handsome dividends.

Think of acquiring customers in terms of turning on a tap to fill a container. If the container is a bucket, then the only problem you're going to face is that sooner or later you'll need a bigger bucket. (That's a good problem to have!) If you're trying to fill a sieve, even if you turn on the tap to the maximum, you will lose more than you retain. That's why nurturing customer loyalty is so important.

customer retention is more cost effective

Customer retention is more cost-effective.

A good rule of thumb is that it costs about five times as much to acquire a new customer as it does to keep an existing one. (Want to determine the exact cost for your business? Check out this Forbes article on how much it costs to get a new customer.)

There are two main reasons for this: satisfaction and inertia. If someone has already used your service and is satisfied, why would they go to the trouble of finding another company?

By contrast, you can spend a lot of money on advertising to get new customers through local publications, Google AdWords, and so on. These might get you attention, but until you've established a solid reputation the conversion rate is likely to be low. 

A major issue with advertising is that many field service businesses spend money on advertising without really understanding whether it's working. Keeping a simple customer database outlining where a customer came from can turn a business's profitability around. Instead of spending money on advertising that isn't performing, a company can focus its efforts on what is working.  

By having all this information available in a customer database, companies can also afford to experiment with new marketing channels.  If it's possible to quickly identify whether a channel is working or not, you're more likely to take a risk and try out new things—and this may lead to new jobs! 

Think in terms of lifetime value instead of individual sales.

A reputable car dealer will always tell you that the objective should not be to sell a car to a customer, but to sell him five cars over a lifetime.

The temptation is to go for the quick win, but what’s better: to win a customer who pays you £1000 today, or to retain a customer who will pay you £500 a year for the next five to ten years? Marketers call this the concept of lifetime value (LTV).

Lifetime value is incredibly important when building a business, because it puts your long-term profitability ahead of short term wins. It’s this focus that lets you build a successful, profitable plumbing & heating, HVAC, electrical, or security business.

The LTV is the amount of revenue your business will generate from a customer over the lifespan of them working with you. This may start with a simple boiler service and later turn into a new boiler, a new set of taps, and any other service you may offer.

Maximising the LTV might seem difficult, but it really isn't. It's just this: Understanding every customer and what services you can offer them. The simplest first step is to send out regular service reminders. This will at least provide a touchpoint with the customer once a year.  If you're already doing this, you might consider looking at new technologies.

The Internet of Things (iOT) has recently become more and more popular. Offering clients the opportunity to change their thermostat or TRV's for internet-connected devices (like Nest) is a great way to actively engage customers and improve your LTV.

customer database

Retaining customers brings in new customers.

Here's a great principle to work by: 'If you are dissatisfied with our service, tell us. If you are satisfied, tell others'.

A business should always welcome feedback and be open to reasonable criticism, and should be ready to put things right if the customer is unhappy. Because the next stage after customer retention is customer referrals.

Your reputation will grow and when a satisfied customer’s friend, neighbour, or social media connection asks them to recommend a plumber or heating installation, and the customer offers up your name. If the customer wasn't merely satisfied but delighted, he might also post a positive review on a site such as CheckaTrade or Yell.com.

Reviews are critical to all field service businesses.  With limited advertising budgets, smaller companies should be encouraging their customers to leave reviews on public sites.  With more and more people making decisions based on online reviews, it's increasingly important to have an online presence that shows off how well you treat your customers.

It's no longer possible to expect 'word of mouth' to do the job. If you want to grow your businesses, you need to leverage your customer database to help you win new customers. 

What's the best way to get these reviews? Ask. If you don't ask, you don't get. Simply talk to your customer at the end of the job. Ask them to review you, then drop them an email with a link to the review site.  This way you've personally asked them and made it easy, reducing the chance of them not bothering.

In our experience, the best way to ask a customer for feedback is to be honest. Explain that the only way you can grow your businesses and help other people is to get referrals and reviews—and that you'd appreciate it if they would review you online.  Explain that it'll only take two minutes, and that you'll send them an email later that day.

Once you've asked, don't forget to send the email! Even waiting one more day will reduce the chances of you getting that review.

This is also a cost saving for your business—if you're building your clientele through referrals, you don't have to spend as much on advertising.

Take your time.

Having said all that, retaining customers is easier said than done—and you need to think long term because it may take time to see major returns.

For example, it's easy to grow tired of a customer who only seems to engage your services for simple, low-margin jobs. However, if you do these smaller jobs well the customer is likely to put you at the top of the list when the time comes to install a new boiler, bathroom, or, if it's a corporate customer, expensive equipment.

Given time, you'll find that your customer database grows. You'll continue to acquire customers, but you will keep them.

The bottom line is that you need to provide customers with a reason to choose you next time they need a service rather than a competitor. People are smart: They're not willing to deal with you simply because they know you or because you're just 'round the corner', or even because it’s the easiest option.

These days, people know how to get the best deal, and it doesn’t take long to find competitors online. So how do you keep people coming back for more?

We look at some of the ways you can do this in our post on how to build a database of loyal customers.

In the meantime, read our free customer management kit below to learn how to build a powerful and profitable customer database.

customer management kit

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If you want to learn more about Commusoft's field service software, please see our product blog.