4 Ways To Retain Service Contracts
Growing recurring income is vital to increasing the profitability and value of a business. In this article, I share 4 ways to retain service contracts once you have won them.
1. Recognise the critical importance of contract recognise the critical importance of contract retention
It is far more expensive to acquire new customers than it is to keep and develop existing customers. Do everything you can to recognise the signs of an “at risk” customer and win back their loyalty. Even more now than ever, due to the impact of COVID 19 on the economy, customers are looking harder at their costs and how to reduce them. This can lead them to seek alternative quotes for service contracts at renewal time.
2. Deliver a positive experience throughout the customer journey
Much business advice is focused on sales and marketing and on attracting new customers. Yet retention of customers and service contracts is of paramount importance – and this can fall between the cracks of a dual focus on technology and on winning sales to new customers.
I like the “ICARE “model described in Ken Blanchard’s book “Legendary Service”:
- “I” stands for ideal service. Begin by asking yourself how you can ideally meet your customers’ needs.
- “C” stands for customer service culture. Develop an environment which focuses on delivering what your customer needs.
- “A” stands for attentiveness. Be attentive to what your customers are saying and what they want.
- “R” stands for responsiveness. Show your customers how much you care by the speed and effectiveness of your response.
- “E” stands for empowerment. Empower your employees to deliver great customer service
3. Measure and analyse contract attrition rate levels
Measure contract attrition levels so that you know your contract attrition rate. Annual structural attrition, in normal business cycles, runs at around 5% i.e. lost contracts due to customers moving, business liquidations, etc. If attrition is greater than 5%, this indicates that contracts are being lost because the customer has chosen to engage a competitor due to perceived poor service or because they do not believe they are getting value for money.
Track the reason why the cancellation has occurred e.g. poor service, price (value for money), liquidation, move of home or business etc. When it is not about relocation or liquidation, take action to address the customer’s concern.
4. Develop and deploy multiple retention strategies:
a) Have regular service level agreement reviews with key customers and make customer care calls
Segment your customers to identify those that represent 80% of your total contract value. Have regular face to face SLA meetings with your highest value customers. Make a planned call to customers whose annual contract is more than £1000 three months before the contact expires. Confirm during this call that the customer is satisfied with the service you provide and that there are no service delivery issues. If there are issues, resolve them speedily. Confirm their intention to renew the contract in advance of the renewal notice being sent. If they are satisfied, use the call to cross-sell other services on disciplines you are not currently servicing.
b) Review your written renewal communications
This can often just be an invoice with the price for the coming year. Why not also include a reminder of the benefits of the service contract you offer and a reference to the full range of product disciplines you can service?
c) Respond effectively to a cancellation request
When customers request to cancel their contracts, ask them for their reasons and offer them an alternative that counteracts their perceptions. Make sure your staff is well trained in offering alternatives and have access to all relevant customer data.
d) Market to new occupiers
Develop a clear sales process for communicating with the new occupiers of a private residence or commercial building. This may involve direct mail followed up by telephone.
e) Develop win-back strategies
Contact your lost customers and make them an offer to win them back. This can be done by email, or by letter, ideally followed up by telephone. The customer may have initially left you to take up a lower priced offer from a competitor - but their service experience with the new supplier might be negative and they may be having buyer’s remorse.
Retention of customers and service contracts are vital for business success and profitability. Given its importance, it makes sense to deliver a positive experience throughout the customer journey, measure and analyse the attrition rate and develop and deploy multiple retention strategies
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