This guest post was contributed to FieldEdge by JB Warranties, the nation’s leading provider of Extended Warranties to the HVAC and Plumbing Industries.
Did you know that acquiring a new customer can cost five times more than retaining an existing customer? By simply increasing customer retention by 5%, HVAC business owners can increase profits by up to 95%. So instead of searching high and low for new clientele, it’s time for business owners to learn how to extend the lifetime value of existing customers to earn more money.
Let’s dive into the specifics of Customer Lifetime Value and the various practices HVAC business owners should follow to help extend customer relationship lifespans.
What is Customer Lifetime Value (CLV)?
As an HVAC business owner, you know firsthand that strong customer relationships are the key to a successful operation. But did you know that ongoing relationships can also save you money in the long run? The trick is creating a solid Customer Lifetime Value (CLV)—the total revenue a business can expect from a single customer.
Since it costs significantly less to retain customers rather than acquire new ones, CLV is a crucial metric for HVAC companies. So, you need to know how to calculate CLV.
To determine the CLV of your business, estimate a base amount of the potential annual revenue derived from a single customer. For instance, a customer with a bi-monthly tune-up service that costs $300 each visit has a CLV of $1,800 per year.
A customer with a strong CLV is a significant opportunity for additional services, as you can almost guarantee your technicians will be in their home or business several times per year. However, the accuracy of your CLV is only as strong as your customer retention efforts. By driving focus to your current customers, HVAC business owners can drive growth, solidify and enhance potential CLV, and even encourage new referrals—for free.
Three Ways to Extend the Lifetime Value of Customers
When refocusing your efforts to boost overall CLV, HVAC business operators must prioritize the long-term quality of customers over the quantity of customers. For example, suppose you focus solely on expanding your customer base rather than enhancing your CLV through customer retention. If that’s the case, your service quality and customer relationships may slip and further reduce customer retention rates.
Instead, consider these three ways to expand your relationships with existing clients to enhance your customer experience and boost your overall CLV.
1. Offer an Extended Warranty
One of the simplest yet most effective ways to secure a returning customer is to offer an HVAC extended warranty program. Initially, an extended warranty acts as a secondary transaction for your business that instantly boosts a customer’s Average Order Value (AOV). In the months to come, an extended warranty essentially locks a customer in with your company.
An HVAC extended warranty can help you improve Customer Lifetime Value because you’re locked in as the contractor for a set period. In the event of a maintenance or repair request, a customer calls you. Additionally, these return visits throughout the coming years create opportunities to upsell services. A simple maintenance visit can yield excellent opportunities to boost CLV from upgrading to smart systems to cleaning ducts.
What about when the 10-year warranty expires? Well, you’ve got an opportunity for more business. Once the life of that initial install ends—the average lifespan of residential equipment is 10 to 12 years—you’ll probably be the one who gets the call for the replacement.
2. Evaluate and Measure the Customer’s Experience
Customer experiences must remain positive to successfully boost customer retention and CLV, as even the slightest negative interactions can quickly turn a customer away from your business. However, you can’t improve on areas where you don’t know what’s lacking. So, be sure to evaluate and measure your customers’ experiences and use the feedback for improvements.
After each service call, direct your technicians to offer surveys that better gauge the overall customer experience. Use these details to address specific issues, such as technician or timeliness concerns. Similarly, always follow-up with customers via email or phone after a visit. This follow-up demonstrates dedication to top-tier customer service and helps gather specific customer feedback.
Aside from personal assessment efforts, remember that third-party reviews also play a crucial role in customer retention rates. Research shows that 94% of consumers will stay away from a business because of one bad review. Therefore, HVAC business owners need to properly manage third-party reviews on sites like Google and Yelp.
Be sure to respond to each review, both positive and negative. Following up on negative reviews creates opportunities to turn a poor experience into a positive one and turn a one-time customer into a lifetime customer. Check out tip number three to better track existing customers and ensure they remain happy service call after service call.
3. Incorporate a Field Service Management (FSM) System
You should use an FSM system to streamline operations and generate positive customer experiences that contribute to increased CLV. While obtaining new customers may be the hard part, field service management software, like FieldEdge, makes it easier to manage customer experience and retention.
An FSM solution equips technicians with customer information, including service history and warranty details, to help promote a fast and efficient visit that improves the customer experience. Furthermore, by using FSM software, HVAC business owners can reduce paperwork and manual processes, allowing you to allocate more time to customer retention efforts.
FieldEdge customer management software has helped HVAC business owners eliminate approximately 60% of their manual preventive-maintenance mailing efforts and instead converted them to automated phone, text and email alerts. By digitizing and streamlining time-intensive processes, HVAC companies can place more emphasis on measures related to customer retention and boosting CLV.
Lock in Efforts to Extend the Lifetime Value of Your Customers Today
Between lingering pandemic challenges and growing local competition, there is no better time for HVAC business owners to focus on extending the lifetime value of customers. By working to retain customers, you can earn more revenue in the long run.
To help boost the CLV for your HVAC business, remember to:
- Offer an extended warranty program
- Evaluate and measure customer experiences
- Incorporate the use of a customer management system
With these three practices, you can significantly grow your repeat customer base, drive higher CLV, and become a local leader in the HVAC industry—a true win-win for everyone involved.
And the best field management software can help you drive your CLV even higher. Book your FREE personalized demo of FieldEdge today!