A rule of thumb says it costs five to seven times as much to get a new customer as it does to keep an existing one. I've seen several research studies through the years that validate those numbers. Customer acquisition is more expensive that customer retention. So why do so many companies plunge into programs targeting new customers before they've developed the necessary systems to retain existing ones? It's kind of like buying more ice cream than you can eat in one sitting without a freezer to store the leftovers. Your customers, like your ice cream, will all melt away.

The very first step you should undertake, of course, is to implement a follow up procedure for every sale. Depending upon the size and the volume of your transactions, it may take the form of a written or electronic survey card, interactive voice response (IVR), or a personal call. Tracking your customer service is a valid and important reason for following up, but not the only reason. In fact, it's not even the most important reason.

You want to put a follow up procedure in place to identify and resolve customer service problems before they cost you a customer. That's the most important reason for following up. Everything else is a bonus.

Objectives
Since the identification of problems is the primary reason for following up after the sale, your objectives should be to:
1. Follow up quickly.
2. Make it personal.
3. Take little of the customer's time.
4. Empower people with the ability to solve any problems to the customer's satisfaction.
5. Reach as many customers as you can.

In the ideal world, you will follow up by telephone. In the real world, this may not be possible. You may not have the customer's telephone number. The size of the transaction may not justify the expense. The sheer volume may necessitate a more efficient method. Nevertheless, a quick telephone call is always preferable.

Telephone Follow Up
Keep the follow up succinct. You want to thank the customer for doing business with you, track your performance, provide a vehicle for identifying dissatisfied customers so that you can correct problems, and ask for the customer's business in the future. Limit yourself to five to 10 questions.

An example might be:

Dear Mr./Mrs. Smith:

Hello, this is Matt Michel with My HVAC Company. We recently performed some work for you and I'm calling to thank you for your patronage. I also want to follow up and make sure we completed the work to your satisfaction.
Did we arrive when we promised we would?
Was our technician neat, clean, and professional?
Was the work performed to your satisfaction?
Do you consider our prices fair for the work we did?
Did the technician clean up when the job was finished?
Were all of your questions answered to your satisfaction?
Would you recommend us to a friend or a neighbor?
Is there anything else you would like us to know?

Thank you for your time today and thanks again for thinking of us. We really do appreciate your business and would welcome the opportunity to be of service to you in the future. Our best customers usually come from word-of-mouth recommendations by people we've served in the past, so we'd be grateful if you would tell your friends and neighbors about My HVAC Company. Goodbye.

In the example above, all questions are answered yes or no, except for the last one. If the customer answers no for any of them, the caller should immediately probe to clarify the situation. Based on the nature of the problem, the customer should be apologized to and asked what could be done to make amends.

Most people are reasonable and will usually ask for less than you're prepared to offer. Listen to what they think is fair, give it to them, and then give them something extra. It's far more powerful to give the customer more than is asked for, than to make an offer up front.

If the customer refused to tell you what they want, or claims they do not want anything, offer something of value anyway. It's always preferable to offer a gift certificate or something comparable that necessitates an additional interaction, another opportunity to perform and get it right.

Whoever is assigned responsibility for calling customers should be empowered to do whatever it takes to satisfy the customer on the spot. If you're uncomfortable giving them carte blanche, give them a limit and instruct them to notify you immediately. Then, act fast. Research studies by the Texas A&M Center For Retailing Studies show that correcting problems quickly demonstrates your sincerity and is one of the most critical components in service recovery.

Tracking your company's performance is a secondary reason for following up. You want to capture and record all of the information from the call. It's a report card on your organization. Track the scores and post them weekly and year-to-date. Set goals with company rewards (e.g., hold a company pizza party every month that the satisfaction rating is 98% or higher).

Some owners want more in-depth information than a yes/no question will offer. If that includes you, ask the questions on a scale. Keep the scale consistent across all of the questions to make it easier on the customer. For example, you might phrase the questions as:

"I want to ask a few questions about how well we performed. Each question will be on a one to five scale, where one means not at all satisfied and five means very satisfied."

You'll find that one of the biggest stumbling blocks to telephone follow up calls is an inability to reach the customer. A good rule is to try three times on successive days. If you're unable to reach the customer, write this one off. You've given it a good effort.

Response Cards
Of course, you don't have to follow up by phone. You can use a response card that is left with the customer, mailed, or e-mailed. There's a few problems with this approach. First, don't expect a stellar response rate. You may only get 2% to 5% of the cards back, even with incentives.

Second, if it's a "leave behind," don't be surprised if some of the cards never seem to make it to the customer. You may be shocked to discover that your employees forget to give cards to most customers in general, and dissatisfied customers in particular. Even when you spiff your employees for every card returned, employees aren't always diligent about leaving them behind. For these reasons, it's better to mail or e-mail them.

Mailing the cards only exacerbates the third problem. There's a lag between the customer's experience and your ability to act on it. Remember, you'll retain more customers if you act quickly than if you let the customer stew. Also, it will take more effort to win the customer back if they've had time to let their anger simmer. E-mail solves this, but only if the customer has e-mail, you have their e-mail address, and they check their e-mail regularly.

Finally, you might discover that the customers who either think you're wonderful or terrible are the ones most likely to respond. If you're any good at all, the wonderful cards will outnumber the terrible ones by a long shot. This can give you a false sense of jubilation since you're not getting a read on the vast majority that think you're kind of mediocre.

To boost response rates, some companies spiff their employees directly for each card returned or they make eligibility for prize contingent on achieving a certain response rate. Some provide direct incentives to the customers in the form of a gift certificate or drawing. Others disguise response cards as warranty registration cards, bordering on outright deception. A more legitimate approach is to extend a service warranty when a card is returned. One innovative approach that reportedly boosts response rates is to mail the customer a small check where the questions are written on a tear off stub and the answer boxes are placed on the check. When the check's cashed and returned, the responses are as well.

Despite their drawbacks, response cards are appropriate in certain situations. In some situations you may not have the phone number of the customer, but have an address or can hand a response card to the customer. Alternatively, the size of the sheer volume of transactions may preclude telephone calls. While you may sample a portion of your customer base by telephone to get a valid reading on overall satisfaction, you're missing the essential point of following up. You want to provide a follow up mechanism to identify dissatisfaction across 100% of your customer base.

Interactive Voice Response
A final option is to use interactive voice response (IVR). Here the customer calls a phone number and a survey is administered by computer, with the customer responding through the phone's keypad. To get any kind of an acceptable response rate, you must give the customer an incentive to participate. Even so, IVR is a tremendously impersonal method.

IVR does have its place, however. Similar to response cards, IVR is appropriate when you are not in a position to capture the customer's phone number. With IVR, you can print the phone number and incentive description on every receipt. As with response cards, IVR makes sense where the transaction amount is too low to justify the phone call or where your volume is so high that the economics preclude the telephone despite its advantages. Unlike response cards, IVR is not something to use for just a few service calls per day. It is volume dependent.

Computer technology is making IVR more attractive today and gives it several advantages over response cards. If the customer gives a negative answer to a key question, the IVR program can immediately kick the call to a customer service hotline where a human being can intervene. It's also possible to program an IVR system to record a customer's description of a problem and fax or e-mail an alert immediately. The e-mail or fax can contain a phone number and code so you can listen to the actual message left by the customer. The message can even be attached to an e-mail in the form of a sound file.

A Final Follow Up Step
Whether you're using the phone, a response card, or IVR, you should also create a thank-you letter to mail out to every customer who responds. Depending upon the size of the purchase, mail it to all customers for whom you've captured a name and address. Thank them for their business. Ask them for their future business. Ask them to recommend you to their friends and neighbors.

Matt Michel is president of the Service Roundtable (www.ServiceRoundtable.com), an organization dedicated to helping contractors prosper. Matt is also the publisher of Comanche Marketing, a free marketing e-zine. Subscriptions are available at www.ComancheMarketing.com. You can contact him directly at matt.michel@serviceroundtable.com. Or send your comments to Contracting Business at letters@contractingbusiness.com.