There have been many articles written on customer retention, but this one is going to take a little different direction than what you might expect. Customers, you can’t live with them and you can’t kill them. Did I just say that? You may want to cause some customers bodily harm, but you would be better off just firing them. However, for the most part, a customer, saved is many dollars earned. It takes many dollars to get a new customer. What does it cost you to get new customer, not a referral, but a customer from scratch?

Do you know your customers? Do you know why they use your services? What attracted them to your company? What keeps them coming back to you? What does it cost you to generate a new customer? How much does it cost you to keep an existing customer? These are good questions to ask. We all know that the biggest problem for small contractors is they spend most of their time working in their businesses and not enough time working on their businesses, but this is also true of larger companies.

When you think of customer retention, think retention marketing. What is retention marketing? Retention marketing is the art of developing programs and promotions to engage and retain existing customers so they remain loyal to your company. However, is also includes developing a dialog with your customers so that you can become familiar with what they need and what they want.

Create a conversation with your customer; it has to be a real conversation with some back and forth communication. You talk to them, they respond, you must hear and understand what they tell you. Then you respond to that feedback accordingly. In addition, you must know how your industry’s metrics relates to your company and what to do about it.

If a typical residential service customer uses your service twice a year, say spring and fall, and you pick up a new customer in the fall but that customer does not contact you in the spring, that customer is not following the established pattern. Retention marketing tells you to send that customer an offer for a discount on a spring tune-up or something to reestablish communication. If you know, it costs you $1,000 in advertising to get one new customer, then offering a discount on a spring tune-up puts money in your pocket and it retains a customer.

Think of it this way, some marketing promotions, programs, and customers can generate higher profits than others can. You can keep your existing marketing budget or reduce it and still increase profits if you allocate a portion of your marketing budget to your most profitable marketing activities and away from lower profit activities.

For instance, if you had 500 customers and $1,000 marketing budget, or $2 per customer to spend and each customer generated a $2.20 profit, it would generate a 10% return on investment (ROI). Now if you knew that 200 of those customers were high profit customers and if you spent $5 on each of those 200 customers, spending the same $1,000 marketing dollars, and you could generate a $10 per customer profit that would produce a 200% ROI. What would you do?

The key to customer retention is data. Moreover, the key to getting data is having a two-way conversation with your customers. One way to do this is create a survey for your website or email a survey to your existing customers. Your best customers will answer your questions. Don’t be afraid to ask the hard questions. Take that data, sift through it, and find the gold nuggets that can lead you down the road to profitability.

Do you know why your customers like your business? Would that be a good thing to find out? Why do your loyal customers remain loyal? Why do customers leave your company? Once you know what factors are important for customer retention, they can become possible measuring sticks of your progress. Remember that it’s important to choose goals and measurements that are meaningful and to consider all of the factors; just don’t focus on one or two of them.

David Garfinkel, author of The Money-Making Copywriting Course, says there are five important answers you need to get from your customers, directly or indirectly:

1. What do customers like about buying from us?

2. Why did they buy from us in the first place?

3. What problems did they have before they bought from us?

4. How did we help them solve those problems?

5. How are things better for them now?

Remember that your goals, plans, and deliverables are important to your business, but customers like working with people who enjoy what they do. The more fun you can have while providing strong products or service, the longer your clients will stay with you. As you think about 2011, how can you inject more fun into what you and your employees do?

Another thing to consider is developing some type of loyalty program for your long-term customers. What can you offer them for their loyalty? Could you develop a program that rewards them with a gift card or some other offer? Do you offer a referral program? If you can develop an approach that makes customers happy, then they will reward you with loyalty.

Our topic has been customer retention, but you should remember that in the overall scheme of things, having good profitable customers is going to make your year. If you have customers that suck the life out of your company, you have to ask if it’s worth having them. Sometimes good customers have problems that take a while to solve and they may get upset during the process, but we are not talking about those customers.

I have a good friend who owns an auto repair shop and over the years, he has had to let a few customers go. His reasons are they were unreasonably demanding and no matter what he did for them, it wasn’t good enough. Do you have customers like that? Have you ever let them go?

Do you have a customer who is too demanding, or never satisfied? Have you have gone out of your way to do everything to make that customer happy? Does it appear that you can’t make them happy no matter what you do? How many of your resources does one customer tie up? If it’s too many, you may have to decide if that customer is worth having. Maybe you would be better off letting your competition have that customer.

Also, consider that as your business grows and evolves you may move away from old time loyal customers. When this happens, hand that customer off to someone you trust who still provides the type of service they may need and which you no longer provide. Your customer will appreciate it and may continue to refer additional business to you.

If you need help in this area, contact a marketing professional. As always, I am available to assist you in your marketing efforts. If you need a consultation or a complete strategic marketing plan, feel free to call or send an email to discuss your needs.

I want to take this time to thank you for reading my articles this year. I hope you have enjoyed reading them as much as I have enjoyed writing them. I’m looking forward to writing new articles in the coming New Year. I’d like to wish you all a Merry Christmas and a healthy and prosperous New Year.

Andy Fracica is president and CEO of Fracica Enterprises, Inc., a consulting firm specializing in marketing, PR, social media, and lead generation strategy. He has over 30 years of sales, marketing, technical training, and product management experience in the heating ventilating and air conditioning (HVAC) industry. He concentrates on helping manufacturers, distributors, dealers, and startup companies find their voice in an ever increasingly crowded market place. Contact him at 260-338-4554, andy@fracicaenterprises.com or visit the website www.fracicaenterprises.com