Over the Christmas break I indulged in one of my favourite past times, something that always takes me back to my childhood.. Watching Christmas movies, or in this case, the heart warming Santa Claus the movie with the famous Dudley Moore playing the character ‘Patch’, one of Santa’s elves.
In the film Patch (Moore) goes head to head with another elf for the chance to become Santa’s right hand man. For those of you who haven’t seen the film (like my wife!), Patch builds a machine that churns out an incredible number of toys, whilst his rival goes for a conventional approach, producing ‘elf’ handmade gifts. The sheer quantity produced by Moore’s character lands him the coveted ‘red apron’ and he is appointed as Santa’s assistant.
Unfortunately for Patch, the finished article didn’t have that same attention to detail as his opposition and the North Pole is faced with a PR crisis, as for the first time in existence broken toys are returned by unhappy girls and boys!
With the upturn in construction, I could relate Patch’s predicament to many construction businesses (particularly SME’s), who are constantly balancing that fine line between managing resources, winning new business and most importantly, the continued delivery of a great service to existing clients. But why are our existing clients so important?
The thought of client retention reminded me of a recent article that I read by Kevin McKeown about ‘Growing Your Existing Clients’, where he talks about the well known 80/20 rule. ‘80% of your existing business comes from 20% of your existing clients’. So what do businesses need to consider when trying to capitalise on a market that is on the up? For a start don’t bite the hand that fed you through those dark hours! McKeown’s article, all be it related to the legal services industry, offers key insights for any business to consider before running off to chase down ‘new’ clients:
- It’s 50% easier to sell to existing clients than it is to new
- 60-70% of existing clients convert compared with an average of just 5-20% of new prospects
- Repeat clients spend 33% more compared with new clients
- A boost to client retention by just 5% can raise profits by 75%
Of course it isn’t all about client retention and as (Sir) Richard Branson puts it in his book ‘Business Stripped Bare’, businesses still need to “protect against the downside”. Existing clients do move on for a number of reasons, so companies shouldn’t avoid pursuing new clients; however they must not lose sight of the potential for future work from their existing client base.
So as UK construction continues it’s post-recession march, don’t forget to look after the girls and boys you serve most often… Or you might find yourself on someone’s naughty list!
The full article by Kevin McKeown, which explores the concept of client retention thoroughly, can be found here.
Construction Buzz (UK) 