Electrical contractors must establish a proactive customer management program to help them identify and secure untapped profit potential
Congratulations! You just landed a new customer. For many electrical contractors, this is where the game ends — the culmination of an aggressive customer acquisition campaign. But stopping here could cost you. How do you reap the full revenue benefit out of this new customer?
Most electrical contractors fall victim to the “one-off” sales phenomenon. A customer is acquired, a project gets completed, and the hunt begins for the next new customer. Little is done to cultivate existing customers. In some situations, this means leaving behind more than nine times the value of the initial project — a veritable pot of gold that lies just outside your grasp. These riches can be unlocked with a simple key: a customer management program. This is an effective way to analyze all of the relationships inside your customer, identify the best way to touch new contacts, and leverage these new contacts into additional revenue.
Why people buy
Customers purchase your services for one of three reasons: 1) to increase their revenues; 2) to decrease their costs; or 3) to mitigate their risk. Referred to as the “value proposition,” these three reasons form the only basis for a customer sale. Remember, a buy-sell transaction is quantitative in nature, not qualitative. Your challenge is to figure out why your customer bought your initial service.
Arguably, most long-standing electrical contracting firms sell their services based on the mitigation risk perspective. Long-term customers stay with you because they trust your work/product — no surprises, no on-site drama. The work is completed even though your cost may be higher than some of your competitors.
Newer contractors that have not established a strong and predictable customer base usually try to use the “decrease-your-cost” approach. Their argument is straightforward: By charging the customer less than competitors, the contractor will be able to reduce the overall cost of the project. Referred to as “commodity selling,” this approach has a tendency to blow up as newer contractors provide services for far lower than actual cost — eventually running their new companies into the ground.
Map your customers
Your initial sale probably targeted one primary customer representative. This is the person that accepted your project bid, negotiated terms with you, and is set up to be your point of contact throughout the customer relationship. But what happens if this individual leaves the company? All of the hard work that you invested in building this single relationship is gone — at least as it relates to that existing customer. Now, from a customer relationship perspective, you're back to the beginning — as if you never existed.
Your customer is made up of several individuals — all with different responsibilities inside the organization. Your objective is to establish relationships with as many of these key individuals as possible, thereby ensuring your visibility remains intact, even if your single point of contact leaves the fold. How do you accomplish this objective without appearing pushy? The answer revolves around leveraging your initial point of contact.
Your customer — whether a commercial or residential entity — understands that you're in business to make money. Your business purpose, beyond servicing the needs of your customer, is to always be looking for new revenue opportunities. As such, explaining that you have an interest in retaining your treasured vendor status to your initial point of contact usually serves as enough of an incentive to help you achieve your objective. In most cases, your initial point of contact will work with you to make introductions to others in the organization — first, as a way to show off their good vendor find and, secondly, to form a tighter bond with you.
In some cases, you will run into the “dictator” personality that precludes you from establishing broader customer relationships. When this occurs, seek favorable vendor terms either in the form of sole source status or as a referral for another new customer project. Gaining neither, you (as a business owner) need to determine whether there is any value in retaining this customer for future work — as the cost of sales will continue to be as high as the initial project effort.
Look at a spider's web. The lines are logically linked from the center of the web as it expands into a larger circle. Every strand has a relationship with every other strand in the web. The same holds true with your customer and its relationships.
Your customer, like your business, is comprised of many relationships with external entities. Vendors, customers, bankers, and advisors are all part of every business. With each contact comes another spectrum of new relationships that can be turned into new customer revenues. Again, the way to unlock these relationships is to ask for an introduction. Once introduced, the process of seeking new work begins again — all with the benefit of a “warm touch.”
Social business networks, like Linked-In and Plaxo, provide an automated window to potential “spidering” candidates. Instead of asking for an unnamed introduction (i.e., “Could you introduce me to your largest customer?”), you can view the individual's network and identify the specific person you wish to meet — ah, the benefits of technology.
Customers assume you do not exist unless they can see you. This fallacy of the human condition must be overcome to ensure the visibility of your firm. Obviously, as an electrical contractor, the majority of your work is done at the customer site, making you very visible. But what happens when the project is completed? How do you maintain your visibility?
The answer is to establish a formal touch program — a detailed approach of how and when to make contact with a customer both during a project and after it's completed. Too much contact lessens the impact of your message (i.e., think about the junk mail and spam you receive every day that you immediately discard). Too little contact erases you from the customer's memory.
In my experience, individuals require face-to-face interaction approximately every 6 months to ensure relevancy as opportunities present themselves. Indirect contact — the kind that can be achieved with electronic newsletters — needs to be limited to a maximum of once a month. I've also found that while face-to-face interaction can remain a redundant effort, the indirect touch initiatives have to change at least every two to three months to remain visible to your customer.
Don't sit by the phone
If you're waiting for your phone to ring, you have a reactive customer management style. You allow the customer to dictate the conditions of your relationship and are viewed as a “jobber,” not an expert in your field. The counter position is aggressively working ahead of your customers — moving them down a pre-defined path. It is this proactive style that will reap higher revenue rewards.
When assessing your business, it's important to remember that a customer relationship is not a one-stop trip. It's a journey where you are the captain to that eventual destination. This does not mean you tell the customer what to do. Obviously, that would be the fastest way out the door. Instead, realize you are the expert and, as such, have a higher degree of knowledge than your customer. Use that knowledge as a way to make your customer better.
Still confused? Then, follow this simple directive: Identify at least three more things you can do for your customer before your current project is 50% complete — and begin the process of selling these services immediately. Proactively selling your future services while working on your current project helps ensure a continuation of your current customer relationship and allows you to minimize your cost of sales. Under this scenario, both you and your customer win.
Customer performance benchmarks
Do you have a good customer? The answer is usually based on the ability to pay and a relatively stress-free relationship with your primary customer contact. But this question really raises the specter of quantifying the value of your customer relationship. What performance benchmarks allow you to measure the effectiveness of your customer relationship?
One useful performance benchmark is revenue per customer. Specifically, when you divide your total realized revenues by the number of active customers, you arrive at an average revenue per customer amount. This amount, in general, sets the performance bar for an acceptable customer relationship. If your customer revenues exceed your average revenue per customer amount, you have attained at least an acceptable (albeit, not extraordinary) customer relationship. Obviously, falling below the line indicates a woefully underperforming customer.
The second benchmark looks at the variety of services that the customer has purchased. As an electrical contractor, you provide a wide range of services — usually with some level of offering diversity. If your customer is buying a variety of different offerings from you, they have a high level of trust in your firm — a good customer attribute. Conversely, if the customer only buys a single offering, it is an indicator that the customer is either unaware of your offering diversity, or has not established a level of business trust to move the customer relationship forward.
Tell the world
You just finished a project to the rave reviews of your customer. For many electrical contractors, the last step in the process is to final bill the customer and move on. But this customer project still has a life that can be leveraged. Don't you want to share your success with those other potential customers that could also benefit from a relationship with you?
Bad news has a way of infiltrating every industry while good news gets lost in conversation. It's your job as a business owner to trumpet your successes at every opportunity. Whether that communication takes the form of an article in an industry trade journal or as part of your next public relations campaign, you want to leverage your success as a way to get more customers. By the way, if you are able to get your satisfied customer to write the review, your stock with potential new customers will rise exponentially — as customers always like to see the comments of their colleagues.
Finally, are you able to replicate your success with another customer? Too often, electrical contractors will hit on a new solution and only implement it that one time. In nearly every case, a successful project has positive ramifications for other active customers of your firm. Ask yourself the question for every customer: “Would this project solution benefit this customer in any way?” If the answer is yes, then begin the process of up-selling it today.
Customers are not one-off opportunities where a single sale should be considered acceptable. Every new customer acquisition puts you, the business owner, on the precipice of another journey filled with new revenue opportunities. A successful contractor realizes the treasure trove that each new customer provides and leverages those riches for the benefit of the customer and their business.
Dawson is the managing director of LTV Dynamics, located in the suburbs of Washington, D.C. He can be reached at BLDawson@LTVdynamics.com.