It never ceases to amaze me just how many companies are clueless when it comes to knowing what their real cancellation rate is.
When I begin working with a company, it’s one of the first questions I ask. The usual responses are, “I don’t know,” “I don’t have a problem” or “It’s very low.” When I do get an affirmative response, the result is normally skewed with a low number (casting the company in a more positive light) that doesn’t hold up under scrutiny.
Based on my personal experiences as an industry consultant, the vast majority of companies have a significant problem with cancellations. Repetitive skips turn into cancellations; it’s not at all unusual to discover cancellation rates in excess of 20% annually.
Consider this: If your cancellation rate is 25% annually, it means you must replace one out of every four customers just to make last year’s numbers. This is why many small to medium pest management companies struggle to grow. If your back door is constantly open, you can’t break through the next revenue wall.
Your existing customers are more critical to the health, prosperity and growth of your business than your potential customers. That’s because you have already paid for them. Replacing them is expensive. For every $1 that could have been invested in keeping a customer happy, it will cost $5 to $7 to find and engage a new customer. Existing customers spend more, purchase higher-margin products and services, and are more likely to refer additional customers. They are low investment and high return for years into the future.
According to a study by the global business-consulting firm Bain & Co., a 5% increase in customer retention can increase a company’s profitability up to 75%. The study also reported: “When MBNA America, a Delaware-based credit card company, cut its 10% member loss rate in half, profits rose a whopping 125%.”
Customer attrition rates, and the reasons behind them, are not just a measurement of service, quality, and brand satisfaction. They also serve as a guide for what is needed to improve your company. They are the platform to create long-term growth and sustainability.
Taking care of business
If you want to reduce customer cancellations, you must walk the talk. You can’t just market “exceeding expectations,” you actually have to deliver on your promises. Are you doing everything you can to keep cancellations to a minimum? If not, review the following checklist and adjust your business plan accordingly:
- Implement written standard operating procedures (SOPs) — This helps to ensure consistent service is delivered by each technician every visit.
- Supervisors should go on regularly scheduled ride-alongs and ride-behinds — Ride-alongs and ride-behinds will help verify and assess the quality and consistency of your service delivery system. Follow-up calls and post-service visits also should be routine.
- Request customer feedback — Regularly conduct surveys via the Web, telephone and direct mail.
- Monitor online reviews — Respond to negative reviews promptly. Similarly, develop a systematic approach to dealing with all customer complaints.
- Train, train, train — Implement ongoing customer service training programs.
You can reach Goldglantz, president of Pest Control Marketing Co. and author of “Marketing Matters,” at firstname.lastname@example.org.
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