As a business owner, do you know the value of a lifetime customer? Did you know that businesses with a higher repeat customer ratio generate more revenue than those with lower numbers? What’s that? You already know this? Outstanding, then you’re halfway there. Whether your business is apparel, auto parts, or home improvement, the formula to calculate the value of a repeat customer is the same:
(Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time)
If you are an HVAC contractor, then you likely offer maintenance plans to your customers. Let’s take a look at a possible scenario for your business. For the purpose of our example, let’s assume you offer a one year maintenance plan at the rate $30 a month. We know that the life expectancy of the average heating and air conditioning unit is 8-10 years, so:
$30 (value of sale) x 12 (number of repeat transactions) x 10 (average retention time in years)= $3,600 in Revenue
Not bad, but we’re not done yet. This figure doesn’t include the initial HVAC unit installation. Let’s use $4000 as the cost for the system. Given that the unit will need to be replaced/upgraded after a decade, and assuming your customer will once again hire you to do the replacement, we can then add $5,500 (the increase in price is an estimate of the new cost at the time of replacement). So now we have:
$4000 (Initial HVAC Cost) + $3600 (Revenue from Maintenance Plan) + $5,500 (New Unit) = $13,000 Total Revenue
You can then go back to your initial formula to determine the revenue that would be generated by a maintenance plan for the new unit and add it to the total revenue. Looking at our hypothetical example, it’s clear to see just how important and lucrative that initial meeting/job can be. I encourage you to plug in your own numbers to find out exactly how valuable each lifetime customer really is to your business.
When you realize the potential value of your customers, you can begin to understand how important it is to deliver an exceptional experience for them. Of course I don’t have to tell you that this could parlay into additional work from the satisfied homeowner. By exceeding your customer’s expectations, you gain their trust and loyalty. In today’s digital world, that happy customer can easily spread the word about your business. A single posting on social media has the potential to reach thousands of people. Word of mouth is a powerful marketing tool, it’s what consumers trust above all else, and it all starts with you recognizing the value of each customer.
SUMMING IT UP
It doesn’t take an astrophysicist to understand that the first step in gaining a lifelong customer is to start the relationship with a Big Bang. Yes, I said relationship. It’s exactly what you are pursuing and like any relationship, first impressions are incredibly important. You want to wow them; sweep them off their feet and exceed their expectations.
To accomplish the wow factor, you could take them through an inter-dimensional portal, which transports them several months into the future (after the completion of their project) to see how happy they are with your work. This would undoubtedly impress them and ensure that you get the job. Unfortunately this isn’t an option yet, but when it is, I hope to be among the first to travel through time. Until science fiction becomes reality, you’ll need to find an alternate way.
I want to reiterate that you need to exceed their expectations right off the bat. You need to stand out and give them what they want and do what no one else is doing. Can you guess what a homeowner shopping for a contractor wants? They want to know what their project will cost! It’s true, 40% of the time, a homeowner shopping for a big ticket home improvement project will use words like “price”, “cost”, or “estimate” when conducting a search on the internet. Your customers are looking for upfront prices and they are not finding them anywhere.
THE WOW FACTOR
ServiceWhale lays a solid foundation for an ongoing relationship with a customer. Using our patent-pending technology, a homeowner answers a few simple questions about their project to generate a quote from you using your pricing. It’s quick, it’s custom and it’s accurate! ServiceWhale fulfills the customer’s need (a price for their project), showing them that you understand what they want and you aren’t making them jump through hoops to get it. Providing upfront pricing also saves time for both parties involved and benefits everyone.
When you shift your thinking from “getting a sale” to “gaining a customer”, something incredible happens. Instead of one-time purchases, you end up with lifetime customers which translates to long-term success for your company.
If you’re ready to increase customer retention and want to learn more about the benefits of signing up with ServiceWhale, please visit our website.