Keep Your Customers, Keep Your Profit - Lauren Brown, CO2 2017
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Your techs are the face of your business, interacting personally with customers every day. Is the experience they’re providing in line with your unique brand? Learn how implementing a few simple strategies can improve your profitability and increase your cash flow.
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Keep Your Customers, Keep Your Profit - Lauren Brown, CO2 2017
- 1. Keep Your Customers, Keep Your Profit Lauren Brown, Account Director Coalmarch Productions
- 2. We all know having happier customers makes life easier.
- 3. But it also makes business sense.
- 4. Assumptions Customer Base: 5000 Cost Per Sale: $150 Cancellation Rate: 1.5% per month (Industry Standard)
- 5. To Remain Steady You would need to acquire 900 new customers at a cost of $135,000. To make what you made last year!
- 6. To Grow by 10% You would need to acquire 1400 new customers at a cost of $210,000.
- 7. To Grow by 20% You would need to acquire 1900 new customers at a cost of $285,000.
- 8. You need to improve. Because eventually you won’t be able to outsell your cancellations.
- 9. Triangle Pest Control Case Study 4:00 am text from Donnie: Jesse, We need to look into our retention numbers.
- 10. In 2014, TPC was doing everything right. Effective Treatments Great Customer Service Outstanding Team Members
- 11. Because customers expect to get what they pay for. Effective Treatments Great Customer Service Outstanding Team Members
- 12. The numbers... First, they dove in to PestPac and found their Y1 and Y2 cancellation rates per service. Recurring Pest Cancellation Y1: 30.5% Y2: 23.3% Recurring Hybrid Cancellation Y1: 11.2% Y2: 23.7%
- 13. Break it down. They then broke this down by what month the cancellations were happening and found that most cancellations occurred between 8 and 16 months.
- 14. Break it down...even more. And the top cancellation months were at month 8, 12, and 16.
- 15. And after 16 months... The likelihood of them cancelling was reduced by 50%.
- 16. To maximize profits... They needed a customer to stay on for at least 12 months.
- 17. Retention = Profitability Keeping a customer for 12 months vs 6 months showed a 300% increase in profitability.
- 19. So what did they do?
- 20. So what did they do? They instituted a customer retention system that focused on proactive and reactive measures.
- 21. The proactive measures... They used surprise reciprocity to keep their customers during the top cancellation months.
- 22. The proactive measures... Month 7: Credit towards month 8 Month 11: Free add on service for month 12 Month 15: Free of service for month 16 Month 24: #customer4life
- 23. A free month???
- 25. Go above and beyond... Carry the newspaper to the front door Take up the empty trash cans Help bring groceries in the house
- 26. The reactive measures... When a customer called in to cancel CSR’s could offer: ● Discounts on the service ● A free month of the service ● Free months of service up to the CPS
- 27. The reactive measures... Identified the 2 most common reasons for canceling: ● Moving ● No Need for Service
- 28. THE RESULTS
- 29. THE RESULTS They saw a drastic 37% reduction in cancellations. 2013: 28.51% Cancellation Rate 2014: 17.94% Cancellation Rate
- 30. THE RESULTS They saved $71,340 in recurring revenue the first year. 2013: $348,276 Lost Revenue 2014: $276,936 Lost Revenue
- 31. THE RESULTS If TPC had the same 28% cancellation rate as 2013, they would have lost $382,981 in recurring revenue.
- 32. Hiring the right people... “What is the difference between customer service and customer experience and what do you think makes a bigger impression on the customer?”
- 33. Training new hires... They recently added their customer retention strategies into their onboarding training and have pop quizzes to ensure all new hires know what is expected of them.
- 34. Incentivizing employees... Tie customer customer service scores and retention numbers to employee bonuses so that they have a stake in the game.
- 35. HOW CAN YOU DO THIS?
- 36. HOW CAN YOU DO THIS? 1. Identify your top cancellation months
- 37. HOW CAN YOU DO THIS? 1. Identify your top cancellation months 2. Develop a proactive plan for drop off months
- 38. HOW CAN YOU DO THIS? 1. Identify your top cancellation months 2. Develop a proactive plan for drop off months 3. Create reactive scripts and processes
- 39. HOW CAN YOU DO THIS? 1. Identify your top cancellation months 2. Develop a proactive plan for drop off months 3. Create reactive scripts and processes 4. Train employees on the what, why, and how
- 40. QUESTIONS? Lauren Brown, Account Director Coalmarch Productions lauren@coalmarch.com linkedin.com/in/laurenhenderson1
Editor's Notes
- Hi everyone! My name is Lauren Brown, some of you may know me as Lauren Henderson but that has officially changed as of October 7th. Happy to talk about that tonight, but today I’m here to talk with you about how use some real world data to get ahead of the problem of customer retention and maximize your profit. So who here can tell me what your most important service is? Wrong it’s customer service! OR Correct! Because we all know...
- We all know having happier customers makes life easier. They don’t complain, they leave good reviews, they refer people, but it also makes...
- But it also makes business sense because it should come as no surprise that it costs more to replace customers than it does to retain them. Today I am going to go into a lot of numbers, but try to stick with me. To start out the numbers game, I want to take you through an example...
- Let’s say you have 5000 customers, a cost per sale of $150 dollars, and a cancellation rate of 1.5% per month.
- To remain steady with last years revenue you would need to acquire 900 new customers, and with a CPS of $150 which would cost you $135,000 dollars - just to make what you made last year.
- If you wanted to grow by 10%, you would need to acquire 1400 new customers at a cost of $210,000.
- And for 20% growth you would need 1900 new customers at a cost of $285,000. Now if you have a marketing budget like this, we want to talk to you! But I think it's pretty obvious that it’d be much cheaper to just retain those customers in the first place. Now I know it's not realistic to keep all of your customers; some will move, some will lose jobs, but if you can save the ones that leave you for a competitor, you are only going to set yourself up for success.
- So in order to do this, you have to get better at retaining your customers because eventually you won’t be able to outsell your cancellations. Now I have a story for you about Triangle Pest Control, in 2014...
- in 2014, Jesse woke up to a 4:00 am text from Donnie that prompted Jesse to dig into the numbers. Now I don’t know about y’all - but a text like that from Donnie would make me jump right out of bed... so Jesse began to dig in and at first glance...
- and at first glance, it looked like TPC was doing everything right...Based on all their metrics they were trending above. They had... Effective treatments that solved customers problems. Great customer service And a team of trustworthy, polite, and helpful employees. But after looking at the retention numbers Jesse found...
- Because customers expect effective treatments good customer service and nice, polite team members. This is just meeting their basic expectations and they can get this almost anywhere. You have to go above their expectations in order for them to notice. So... once TPC realized the retention problem...
- they dug into the numbers to figure out when clients were leaving throughout the service. And from this they made 2 key findings: They found that the first year of a recurring pest account was the most susceptible to cancellation, with a significant reduction in Y2. They also found that their hybrid services had a much lower cancellation rate in Year 1 and since those clients stayed on for longer than 12 months they should be pushing this more profitable service over the recurring pest. They then broke it down by month...
- ...broke it down by month to understand the top cancellations months and they found that the highest cancellation rates were between 8 and 16 months And to break it down even more, they found...
- ... they found that months 8, 12, and 16 were the most likely cancellation months. A few more things they found that are worth mentioning is that after...
- And after 16 months the likelihood of cancelling was reduced by 50%!
- That knew that in order to maximize profits they needed to keep a customer on the program for at least 12 months, and even more telling...
- Even more telling, if they kept a customer on for 12 months vs 6 months they increased their profitability by 300%.
- If only you knew the power of data, and really this data was powerful in helping TPC take the necessary steps to improve.
- So what did they do.
- They instituted a customer retention program that focused on proactive and reactive elements.
- For the proactive measures, they were able to use those top cancellation months to put together a proactive plan that focused on surprise reciprocity. I spoke a lot on reciprocity last year at CO2... but to recap, the act of reciprocity is all about doing something nice for someone and them then feeling compelled to do something nice in return. You scratch my back, I’ll scratch yours. So to apply this to TPC...
- they would offer gifts to reward customers for staying on the program. In month 7 they would call the customer to offer them a $5-10 credit off their next month’s service, at month 11 they would give a free add on service for month 12, and in month 15 they would give a free month of service, all out of the blue. The script went a little something like this: “Hi Mrs. Brown, this is Josh from Triangle Pest Control. On behalf of the entire team here we would like to give you your next month’s service for free because you are such a valued customer.”
- Can you imagine how that makes a customer feel? Jaw dropping!
- A few other examples of this are how Zappos does this by automatically upgrading every customer to free next day shipping so they get their shoes earlier than expected. Another great example comes from Annie, a presenter you will hear from later today, who actually had a similar experience from Verizon. They called her out of the blue offering to reduce each phone line by $30 saving her $60 per month. She ended up telling everyone about the great experience and is now a loyal customer for life. There are so many examples of this today, but in your industry you can shine. A few other things TPC did to take this a step further was to...
- technicians give their service a personal touch. A few examples of this included carrying the newspaper to the front door, taking in the empty trash cans, and offering to carry groceries to the house. And something important point out is that if the customer wasn’t home when the service was performed, it was crucial for technicians to communicate what they did on the leave behind, because otherwise they may just think someone else in the family did the good deed.
- Now for the reactive plan. When a customer called in to cancel, TPC gave their CSR’s full control to do whatever it took to save the customer as long as it didn’t cost more than the CPS. This was huge, because not only did this increase customer satisfaction and retention numbers but it also increased productivity and happiness of the CSR’s. I cannot harp on this enough, trust your people with this because no one wants to hear “well let me go talk to my manager” when they are trying to cancel your service.
- Another thing they learned throughout the process was that there were 2 common reasons for cancelling, the customer was either moving OR they no longer needed the service. So in understanding these top reasons, they developed phone scripts for both situations for their CSR’s to follow. If they were moving, they would ask for their new address to see if the new home was in a different service area they offered, and would get them switched over. If they said they didn’t need the service anymore, they focused on educating the customer on why it was so important to keep the service during that season. And if they still decided to leave they would add them to a remarketing list and contact them again in the Spring.
- So how effective was all of this?
- In the first year of the retention program, they reduced their cancellation rate by 37%.
- And saved $71 thousand in revenue.
- If they still had the same cancellation rate as 2013, they would have lost almost $383K in revenue due to cancellations that could have been saved. Instead, this year they have a 17% cancel rate and are continuing to improve by... placing an emphasis on the employees.
- ...by placing an emphasis on the employees. I won’t talk too much about this because you will hear a lot about hiring and training today, but I’ll go over a few key takeaways. To start, during every interview, no matter the role, they ask the candidate “What is the difference between customer service and customer experience and what do you think makes a bigger impression on the customer?” This answer not only reveals how well the candidate will fit in with the company culture, but it also starts the candidate off with understanding that customers are the top priority.
- They also recently added in these customer retention strategies to their first week of onboarding training and they give out pop quizzes to ensure employees retain the information on retaining their customers.
- Another way they take this even further is by incentivizing employees on customer satisfaction scores and retention by tying this to their bonuses. Maria will talk more about this at the end of the day, but this makes it so your employees have a stake in the game and you, as the owner, aren’t the only one thinking about this late at night. Plus, how are you supposed to do this alone when your people are the face of your company? I’ll leave this with if you don’t hire, train, and incentive your people on this, you won’t be able to sustain the results.
- So how can you do this.
- So first, you need to identify your top cancellation months. I have posted a blog post to help you figure out how to calculate this. Like I said, knowing these months is the key...
- Is the key to the next step. Once you have your drop off months, you can then develop your proactive plan to keep customers from cancelling during those historically common months. During this, you need to figure out what you are willing to do in order to save a customer. As I mentioned, TPC allows CSR’s to offer free months of service up to the CPS, you can use that as your starting point or create your own. Now for the customers who have already decided...
- Now for the customers who have already decided to make their way out the door, you need to create reactive scripts and processes for your CSR’s to save as many customers as possible. I cannot encourage scripts and processes enough if you want to make this consistent and effective. And lastly...
- And lastly, you need to train your employees on the what, why, and how of these customer retention strategies so that they buy in to this program as much as you do. They need to know what they can offer customers, why they should care, and how they can make an impact. So I hope...
- So after all of this, you better see the value in instituting a customer retention strategy, because I want you to succeed next year and without this key piece, you are only going to make it harder on yourself. Let’s keep those customers and maximize that profit. Thanks for your time, and now I’m happy to answer any questions!