[Business Growth] Customer Retention How-To

In order to build a pest management business, the main idea is to build upon your recurring revenue. In order for this to work, you have to retain your current customers. If your present clients leave, then you’re not building your book of business — you’re just replacing your lost clientele. So how do you measure and manage your performance when it comes to maintaining a book of clients? Think of your clients as a herd and you are the shepherd. Keep that retention percentage high and measure your improvement along the way.

Customer retention is simply a game of percentages. It’s vital to know what your customer retention rate is. This will tell you how well your clients like your company and value your company’s pest control services. This will also help you forecast your company’s top line in the future, making budgeting exercises more accurate and reliable.

Customer turnover is a far cry from making the list of favorite discussion topics amongst entrepreneurs. What a horrible topic for the business owner! Well, it doesn’t have to be. What if we could retain 100 percent of our customer base?

That will never happen. Customers leave for many reasons, and it’s not always a customer service thing. But what are these reasons? Perhaps customers move, can no longer afford a pest control service or some other unforeseeable event occurs.

TIME TO MANAGE YOUR HERD. Think of your customer base as a herd. You are the shepherd and it’s your job to keep the herd together. Every once in a while one of your sheep is going to stray. It’s just a fact.

So, when customers cancel their contract, you need to know why. Put together a list of cancellations. Calculate your retention percentage as:

Number of customers that were on service contract last year that are still on in the current year
÷
Number of customers that were on service contract last year
(Do not count this year’s new clients in this calculation.)

If your percentage seems low, you should know what to do about it. Have a system in place whereby you collect customer information. If you can have a customer service representative perform a brief customer feedback survey (somewhat like an exit survey), you will be able to collect some valuable information about your cancellations.

If you have a high number of cancellations, you need to take action. Listen to your clients. Determine if there is a flaw in your pest control services. Or maybe you are lacking something that your competition has. This can be a very telling statistic. But no matter what the results are, don’t take bad news personally and don’t rest on your laurels in light of good news. Know that high retention is a product of your company’s consistent delivery of quality and value to your customers.

TIME TO MEASURE. You must continuously measure your customer retention results. What you are looking for is measurable results. This is the only way you can tell if your business decisions are effective. You need to identify which metrics will provide you with the insight needed to help you make important business decisions. Once you figure out what to measure and how to go about doing it, make sure you don’t stop!

The idea is that over time you will be able to compare one period to another period. This is where real value will be extracted from the data you collect, as it will enable you to make adjustments accordingly.

If you have good, accurate data and a lot of it, then you will be able to make solid business decisions on the fly. This will give your organization the power to be quick and agile with the ability to stop and turn on a dime.

RESEARCH/BENCHMARKS. We’ve discussed the importance of customer retention in your pest management business as well as how to measure it. How do you stack up against the industry? You need to develop a standard against which your business’ performance can be evaluated. You need a benchmark.

Coming up with benchmarks can be a gray area for some. You can’t just say that I have an 80 percent customer retention rate and my competition has a 70 percent retention rate and therefore I’m doing fine. You have to consider other factors such as customer mix (commercial vs. residential), service mix, geographical region and customer demographics for the area. It can often be difficult to tell what is an appropriate benchmark. In fact, you’ll probably have more than one and it’s highly likely that your benchmarks will evolve as your organization’s objectives shift.

Benchmarks serve many uses, as they can be utilized as a point of reference for making critical pest management business decisions as well as a motivational tool for your management team and staff. Applied correctly with good data, the two make for a powerful combination. That being said, it can’t be stressed enough that the accuracy of your data is extremely important. Just remember, if you can’t measure it, then you can’t manage it.

The authors are principals of PMP Wealthbuilders, Newton, N.J., a firm that aims to help pest management professionals make their businesses more profitable. Contact the firm via www.pmpwealthbuilders.com.