5 Ways to Boost Your Customer Retention

Running an independent Springville, Utah-based electrical company with just five full-time employees, Ken Erdmann knows his crews must distinguish themselves to earn repeat business.

Specializing in high-end, custom electrical jobs such as advanced audio-video/home entertainment systems and motion-detection lighting, Erdmann Electric Inc. is known for treating customers’ homes with the highest degree of professional courtesy. Workers politely ask for permission before entering any room—even when they need to use the bathroom. Drop cloths are used for every project. When there’s garbage remaining after a job, crews pack it in the truck and dispose of it in the company dumpster—not the customer’s garbage can.

“We not only try to do good work, we do it as cleanly as any contractor they’re going to hire,” says Erdmann, who has been a co-partner with the company since 1992. “Clients have paid notice. We want to be known as the guys you didn’t even know were there, but got the job done.”

Erdmann Electric has reaped rewards from these practices, as about one-quarter of its jobs come from repeat customers. Some of those customers started out in condos, then moved on to townhouses, and now are hiring Erdmann Electric for major jobs in luxury homes. “We’ll be doing a project in the fourth or fifth home for the same customer, when that same customer has used three or four general building contractors within that same period of time,” says Erdmann, who also serves as vice president of the Indianapolis-based Custom Electronic Design and Installation Association. “We recently did a job in a $10 million home for a long-time customer, a job that amounted to $150,000 for us. That’s a major chunk of our annual revenue right there.”

Clearly, a critical component of success for electricians is the ability to retain customers. For starters, return on investment increases significantly as repeat business grows, especially when it comes to reduced time and expense spent on marketing and promotion.

Customer retention is a value, an asset to cultivate and grow. But, like any asset, it should be cultivated and managed effectively. Here are 5 tips to retain customers:

1. Make your customers feel special. As electrical contractors like Erdmann have discovered, often the way to emerge as a valuable asset to your customers is to make your customers feel like they are your most important client. This requires a combination of human interaction—expressing a genuine interest in their needs—and business incentives, such as extending a special, exclusive deal or providing a service that’s above the standard call of duty. “These are considered ‘soft benefits,’” says Rick Ferguson, editorial director at Milford, Ohio-based Colloquy, a customer-loyalty consulting and publishing firm. “They are intangible, but they are critically important to your valuable customers. Their loyalty demands legitimate evidence of their special status. That means special deals, special access, special events—whatever it takes to reinforce the sense of importance of those top-tier, high-value customers.”

2. Don’t be lulled into a false sense of security. Many business owners think that customers leave only when they’ve expressed dissatisfaction with the work. Not true. Most customers actually say they’re satisfied before leaving even if they don’t mean it, according to Kyle LaMalfa, loyalty expert and principal consultant for Allegiance Inc., a Salt Lake City, Utah-based firm specializing in feedback management for companies. "Many customers don’t even bother to complain before they leave, or they say they’re satisfied” to avoid conflict, LaMalfa says. “Businesses are losing customers at a staggering rate without really hearing from them or understanding why.”

3. Take advantage of complaints. You shouldn’t write off a dissatisfied or even angry customer as a one-and-done opportunity. Actually, LaMalfa and other experts say a customer complaint is a great opportunity to solidify customer loyalty. “That will be the case if you resolve the complaint as if you really care,” he says. “Monitor how long it takes to solve the problem, and how well the customer feels that your company stepped in to make a bad situation a good one. Surprisingly, a customer whose complaint is resolved quickly and correctly is on average more loyal than the customer who never has a problem.”

4. Measure customer retention trends. Ferguson advises independent contractors to analyze customer loyalty trends into quantifiable levels. Identify which customers are loyal supporters of your business and which ones ”cherry pick” only when you’re advertising a major special for your services. Then, Ferguson says, you need to ”score” your customers’ value and project what you can expect from them in the indefinite future. “Loyalty is about more than purchase behavior,” he says. “It’s about a consumer’s engagement with your business and service.”

5. Use your Web site to track devotion. You can tap into your company’s Web site to get a sense of how customers feel about your work. Encourage them, perhaps through a loyalty discount for future business by letting them know they can make a positive impact by giving honest feedback via online surveys of forums. “Then, respond to it quickly and personally in an engaging way,” LaMalfa says. “Next, you can take it a step further by using this information as an analytical tool. Over time, track positive and negative customer feedback over time and compare that with revenues and profits over that same period. Analyze the information to reveal the most important area of focus for customer loyalty and how it changes over time. Use feedback to understand customer intentions and motivations—not just what they buy, but why.”