Contractors have this costly habit of servicing a customer once, thinking they'll stay as customers. Well, the do stay... in your files.

Contractors have this costly habit of servicing a customer once, thinking they'll stay as customers. Well, the do stay. They "stay" in your customer files, rarely to ever hear from you again. If they do, it's usually to be sold something. That's not a relationship; that's an obligation.

So customers wade in and out of your files, and you never hear when they leave or why. Here's why many paying customers start using someone else:

  • They say your pricing was unfair. (Hey, there are cheap people everywhere.)

  • They die or move away. (Can't really help that one.)

  • They have an unresolved complaint.

  • They take a competitor's offer.

  • They leave due to your "indifference." This just means they didn't think you cared.

    Actually, those last two are for the same reason, so you lose them because your company isn't there, but your competition is. Ouch.

    To make matters worse, customers are the most important group for any business. And customers value relationships with their vendors. Many say:

  • The relationship was the most important reason they bought.

  • They used your company because they owned another product of yours.

  • They were referred by a friend or family member.

    Although most of their business has some relationship tie-in, contractors spend up to 80 percent of their marketing budget going after people with whom they have little or no relationship. It's no wonder why marketing is not performing.

    Once you lose customers on a replacement sale, they're of the market for at least 8 years. What is that worth? And don't scream "no loyalty" among customers. The question is: Are you being loyal to them? Remember, if you haven't created loyalty, then there's no reason for future business or their referrals. In short, you're cutting off a sales stream you never knew you had but was right within your grasp.

    A well-run customer-retention program has - at its center - a customer newsletter. They're simple to use, quick and customers keep them around. Best of all, it's not perceived as "advertising" and so has a far better image and strengthens your relationships. Better relationships equal better retention rates. Period.

    And you've already paid to get these customers. Recent studies shows that it costs you $275-$325 to get a customer. A good customer-retention newsletter only costs about $2.80 a year, including postage for four issues. Not a bad return on investment.

    A customer-retention campaign investment will usually cost 6 percent to 8 percent of a company's total marketing budget. You should send newsletters two to four times a year to every customer who has written you a check in the last two years.

    Remember:

  • Loyal customers spend 33 percent more than non-loyal.

  • Referrals among loyal customers are 107 percent greater than those who are not.

  • Rate of referral is highest when closest to the point of contact.

    Now you know why Jay Conrad Levinson of "guerilla marketing" fame said that a customer newsletter is perhaps the best marketing tool on the planet. Word of Mouth Marketing author Jerry Wilson (whose books have sold in the millions) said that keeping customers is simply a matter or regular communication. A customer newsletter can work wonders.

    Also, your competition probably doesn't do one, so you'll stand out even more if you do. Build a fence around your customers with a solid retention campaign. Invest in a good, regular customer newsletter that keeps your name and your services in customers' minds all year long. You'll get more referrals, greater loyalty and more sales.

    (Adams Hudson is the owner of Hudson, Ink, a marketing firm for contractors. A free sample of his newsletter, plus tips on customer retention, is available if you fax a request on company letterhead to (334) 262-1115. You can also call (800) 489-9099.)

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