Over half of all businesses are service businesses. These industries include many professions from legal and engineering to hair cutting and plumbing. All these services require excellent management, positive company culture, and most important, return clients.
Brian Tracy says, “If you want to be successful, ask yourself this question: How can I increase my service to my customer today?”
More than any other type of business, service businesses are reputation driven. After just two years, most service businesses are fully reliant on 80% return business. Are your clients sending in more clients?
Here are four ways to classify your clients and customers to help answer that critical question and provide some insight about your ability to satisfy them:
1. New: These folks are new to your business. They walk in the door, either because of your advertising or because of the general reputation of your business. In the early days of your business, they represent the majority of your clients. It is critical that each one of these new clients, “trying out” your business for the first time, leaves with glowing reviews to pass on to their friends and associates. But new, first time clients, can’t go on forever. Sooner or later you will go through all the new clients in your area. If you are in business for even 6 months and you still have 75% new clients, you are in trouble!
2. New Requests : These are New Clients who are requesting a specific person on your staff. This benefits the overall reputation of your business, and ultimately, its very security. The requested party needs to be rewarded for this personal reputation. Conversely, your associates who never get requested by new clients may be going through the “new” clients without them ever recommending your business or coming back to your establishment. Time to review their tenure.
3. Returns: (not necessarily requesting anyone in particular): These clients are good news – bad news. The good news is that they trust your business as a whole, without loyalty to any one particular associate. They are touting the merits of your business in general. The bad news is, if they have a bad experience, they are liable to say that the whole business is going down hill and hurt your reputation. Aside from a “New” client who is dissatisfied, that you never hear from again, “Returns” are the next most likely type to disappear. Try to find someone with whom they will be happy with as soon as possible.
4. Return Requests: These clients are returning to your business, requesting a specific person. They are loyal to the person who provided dependable and added-value service in the past. If that person leaves your business, those clients will follow him. Associates who have a large percentage of “Return Requests” should enjoy higher compensation and ultimately some equity in your company to reduce turnover. Your compensation plan should encourage this type of service professional. That plan will attract and keep the type of performers you need to grow your business. It is critical that you know early and often who they are.
The best time to find out what type of clients your service business is attracting is when they make an appointment or reservation. A few short questions at that point will quickly tell you into which category they fall. Constant vigilance and analysis of these four simple client types will give you the insight you need to craft compensation plans that get and keep return clients and customers.
Today there is much talk about Customer Relations Management, but it’s critical to step back and look at the big picture with these four general categories in mind, especially when you are in a service business.
Next time we will discuss some tips to attract new business, keep your performers, and increase your service to your customers.
Who We Are
Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.
Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.
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