Referrals are the lifeblood of any business. In the real estate industry, for example, in which referral business is always a topic of conversation, referrals and repeat business constitute 32 percent of all the business generated. They’re tremendously advantageous, not only in terms of volume, but also because they significantly boost the return on investment for all of your marketing efforts.
Whether you’re a real estate agent, a contractor or home builder, it makes sense to maintain long-term relationships with clients. First, because they themselves may be a source of repeat business. When past customers come back for another deal, the profit margin increases, because marketing and acquisition costs are negligible at that point.
In fact, it costs 5 to 8 times less to generate revenue from an existing customer than from a new one.
The research on repeat customers shows clearly their potentially outsized impact on profits. Another report cites that “repeat clients tend to spend more money over time, offer more customer referrals and word-of-mouth recommendations, make fewer demands on service professionals, and can even lower your business costs since they’re cheaper than acquiring new customers.”
Second, as noted above, your existing customers are also your best source of recommendations and referrals. The National Association of Realtors® Member Profile for 2016 tells us that, while repeat customers represent 14 percent of all business generated, referrals account for another 18 percent. Some research indicates an even higher level of business via referrals, taking “word of mouth” into account.
Given these figures, there can be no doubt that expenditures of time and revenue on customer retention are a good idea. Keep in mind, however, that there are some factors influencing whether customers stick with a service or company that are often out of your control. Research indicates that there are 4 common reasons that clients may feel locked in with their service providers:
- Perceived switching costs (they believe it would be too big a nuisance or relatively costly to find anyone else);
- Relational benefits and satisfaction (a good experience; satisfied with the job you’ve done so far);
- Obligatory factors (they feel obligated to use you, either because you were recommended by family or friends or because of the work you’ve already done for them);
- Personality factors (they may be resistant to change or even may want to avoid the discomfort in hurting your feelings by using someone else).
Knowing these factors, as well as your clients’ personalities, can guide your contact with existing customers. For example, pointing out the length of the relationship or thanking the client for their longtime loyalty can encourage them to stay with your company.
The Benefits of Staying in Touch
Staying top of mind with existing clients maximizes both repeat business and referrals, which are major profit generators. Here are several reasons why keeping in touch with your clients has such great impact.
- It’s Cost-Effective
A recent study put out by the Wharton School found that referred customers generated 16% more profits than their non-referred counterparts. Considering that the cost of marketing to referrals is minor or even non-existent, this means that more of the revenue generated from these new customers goes into your pocket.
- It Builds Loyalty
Customers that come to you as referrals are more likely to stay with you for the long term, because they’re entering the relationship with a higher level of trust already established. The same Wharton study found that client referrals are also 18% more likely to stay with your business. When they took into account the higher profits and great loyalty of referred customers, researchers found that the lifetime value of a referred customer can be up to 25% greater than a non-referred customer.
- It Makes You the Expert
The communications you provide in staying in touch with your customers should include information that’s relevant to them and also increases their awareness of the services you can provide. For contractors or home builders, for example, staying in touch after the sale allows them to demonstrate their expertise —whether that be through maintenance, side projects or new business.
Making After-the-Sale Communications Work for Your Business
The keys to effective communication after the sale are consistency and relevance. Set up a schedule for making contact, and stick to it. Keep track of your clients, and of how their needs may change over time, so that you can share information that matters to them.
While the real estate industry as a whole has focused on strategies to build and grow referral business, the construction side of the industry has seemed to lag behind —finding it difficult to develop “reasons” for contact after the sale.
Today, Glasshouse is solving this problem for real estate agents and contractors alike. For agents, the preventative maintenance services delivered by Glasshouse Service Providers make an ideal closing gift. We’ve talked about this before in our “Modernizing the Closing Gift to Maximize Referrals” article.
And, for contractors and home builders, Glasshouse is the perfect “reason” to initiate a touch point. Some of our clients start out by continuing communication with their customers via our Done-for-You newsletters, a branded monthly email full of home maintenance tips, advice on home upgrades, and more. While others maintain more direct contact through our plug-and-play software platform and app.
With our proven technology, builders can provide and manage invaluable after-the-build home maintenance plans —customized to their client’s homes—that not only keep their homes in tip-top shape, but keep the builder top-of-mind unlike ever before. What’s more, it’s a revenue source for builders that is more likely to withstand the ebb and flow of the market.
To learn more about Glasshouse partnership opportunities including Done-for-You Newsletters and how our service platform can help you maximize referral business after the sale, contact our team today!