Four Steps to Improving Retention and Growing Market Share

In today’s tough economy and challenging competitive market, mid-size and independent textile rental companies can’t afford to lose any customers. Before you can focus on getting new customers, it is important to look at what you need to do to keep the ones you already have. After all, it is much easier and less expensive to keep customers than to get new ones. Consider the following statistics1:

• Acquiring new customers can cost five times more than satisfying and retaining current customers
• A 2% increase in customer retention has the same effect on profits as cutting costs by 10%
• The average company loses 10% of its customers each year
• A 5% reduction in customer defection rate can increase profits by 25% - 125%, depending on the industry
• The customer profitability rate tends to increase over the life of a retained customer

Step 1: Force Rank Your Customers
The first step is to gain a better understanding of how your customers view your services. Get the management group together with your delivery team and force rank all of your customers by asking yourselves, “How likely would this customer be to renew their agreement if you asked them today?” We recommend you place every customer into one of the following categories:

1. Definitely Not – If asked, this customer would “definitely not” renew their agreement
2. Most Likely Not – If asked, this customer would “most likely not” renew their agreement
3. Consider – If asked, this customer would “consider renewing but would require large concessions”
4. Most Likely – If asked, this customer would “most likely” renew with minor concessions
5. Delighted Partner – If asked, this customer would “definitely” renew

Make sure your delivery team is always on the lookout to identify signs of trouble from the competition. If they see samples or a mannequin from another supplier, this should be a red flag. Have they seen business cards on the desk of a customer or noticed a competitor’s name on the sign in sheet? Are the product levels in the warehouse shrinking? Has the customer asked for a line-by-line review of an invoice? All these are signs of trouble and should be brought to the attention of both the account manager and the sales team.

The second step in this process is to take a look at the profitability of each customer to make sure that you want to retain everyone. Sometimes this process reveals that there are customers who are actually hurting your bottom line. Re-evaluate if you want to keep these customers at all and if so, how you can help move them into the profitable category.

Step 2: Create a Culture of Pro-Active Communication with your Customers
Have your route reps take an extra couple of minutes each week with the decision maker at each customer location. (For more information on how to strengthen the relationships between route reps and external customers, click here to see Troy’s latest article in the December issue of Textile Rental.) In addition to building relationships by conveying the value added propositions discussed in the article, make sure your route reps take time to ask the following questions during each visit:

• Do you have any new employees or deletions (for uniform customers)?
• Do you have any other changes to the service?
• Is there anything I can do to better serve you?

As the relationship strengthens, don’t be afraid to ask for referrals. And, discuss all the above feedback along with best practices observations during daily route check-in/debrief sessions.

Based on the customer stratification conducted in step one, create a strategic action plan to bring each of your customers up to the “delighted partner” category. Identify the biggest obstacles that prevent each customer from being fully satisfied and create solutions to address each challenge. Now for the important part – not only should you implement the necessary changes, but don’t forget to communicate these to your customers. Explain to them that you are making the adjustments because you want them to see you as a partner, not just a vendor. At the end of the day, what really matters is the relationship your staff has built with your customers. After all, people don’t buy from companies – they buy from people.

Step 3: Create a Contract Renewal Program
Growing your company’s market share should be a group effort. When working on renewals, consider who has the best relationship with each specific customer and who will have the best probability to secure the agreement. Deciding who should manage the renewal process should not necessarily be determined by the size of the account or the amount of weekly revenue – really take a look at who is best positioned for every individual customer and don’t underestimate the power of a route rep’s relationship to get a renewal.

So, when is the best time to begin the renewal process? Many competitors begin their sales process at least a year in advance of your contract expiration date. After all, they can afford to have telemarketers who call to find out who prospective customers are currently using, when their contracts expire and even details of what they are paying. For this reason, we recommend starting the process 24 months in advance of a contract’s expiration and securing renewals at least 18 months before. This includes customers with automated rollover or auto renewal status. (Some in our industry don’t begin worrying until an automatic renewal comes up for a second time but that type of thinking will leave your company in a very weak competitive position.)

Step 4: Grow Your Market Share
While you may not be able to hire telemarketers to do research, consider the resources that you have in house. What about the accounts that you used to have that left and went to a competitor? Consider having your service team go back through their old quit account files each month and pull out contracts that were lost three years ago that month. Now is the time to start targeting them. Get your team together to develop an approach for each lost account prospect. This should include members of both your sales team and service team. For example, ask the account manager and route reps who used to service that account about their experiences with the customer. Were they a good customer? Did they pay on time? Were they profitable? Why did they leave? Once again, analyze who had a good relationship with the customer and who would have the best chance of regaining the customer’s business. Often, this simple process is overlooked and a great opportunity for new sales is lost.

If you haven’t already started, now is the time to really analyze your retention and market share strategies. As we prepare for 2010, and hopefully, a stronger economic year, don’t overlook the importance of force ranking your customers, creating a culture of pro-active communication and creating a contract renewal program.

1”Leading on the Edge of Chaos”, Emmett C. Murphy & Mark A. Murphy


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