GIE 2002: The Loyalty Effect

On average, U.S. businesses lose 50 percent of their customers over every five-year period, 50 percent of their employees every four years and half of their ownership in less than one year, pointed out Jeff Topley, The Brickman Group, Columbia, Md.

At the Green Industry Expo, Nashville, Tenn., in his session titled, “The Power of Recurring Revenue,” Topley explained to contractors his theory on how client and employee loyalty can result in recurring revenue and prevent contractors from having statistics in their businesses like those listed above.

CLIENT CONCERNS. Selecting the wrong customers through pushing commission sales instead of earning customer appreciation and loyalty through quality customer service may bring aggressive growth, but since most contractors have many competitors in their area, there’s nothing stopping clients from going elsewhere when they reach their maximum frustration breaking point, Topley shared. “This industry isn’t a monopoly like cable television and telephone service,” he said. “In monopolies, there’s not a lot of loyalty because clients are trapped. But in our industry, improving loyalty can increase client retention. Customers are annuities – they require an upfront investment, and the long-term streams of revenue and costs they generate are the building blocks of cash flow.”

A simple customer survey can help contractors determine what customers’ needs and issues are. “Most of the time, when we thought it was price, it was actually some other thing – the customer will tell us what they want if we let them,” Topley stated. “We have to resist the temptation to tell them what we think they want. We can’t uncover practices we’re performing incorrectly if we don’t stop and listen.”

Topley showed contractors through graphs how, if they have a client for many years, that client’s referrals and revenue growth increases, proving that loyal customers are more profitable.

EMPLOYEE EVALUATION. The same can be said for loyal employees, Topley said. “Too much turnover creates a drag on company earnings,” he said. “Most managers today would, of course, prefer to have loyal employees just like they would prefer to have loyal customers, but few are willing to spend the money and make the effort to earn employee loyalty.”

To make the effort, first, contractors must let go of the mentality that people need them more than they need people, Topley suggested. “The longer you have employees, they more client retention, employee efficiency and customer referrals will grow,” he said.

When hiring employees, look for individuals who share in the company philosophy, who stretch the business’ quality standards and are a different breed than a competitor’s employees, Topley advised. “Promote from within for key leaders whenever possible and interview good potential employees even if you don’t have a position open because you have to retain this mentality of searching for the right people for your organization,” he said.

Then, once contractors obtain a strong group of employees, Topley said they should resist following the traditional steps toward promotion within the company. “Be ready to answer the question, ‘What is a career here?’ and build a system that allows leaders to be both productive and proud of their association with the company,” he said.

Another tip Topley suggested when dealing with employees is to study failures in addition to successes. “Most people use the traditional sense of bureaucracy in a company – the key to success is keeping the boss happy,” he said. “But that sets up an organization built on fear and then things aren’t shared and most employees will try to get away with things rather than fix problems. So, it’s better to pay attention to why people go astray and why a certain employee-employer relationship didn’t work to learn from mistakes.”

In addition to using exit interviews to find out why employees are leaving companies, Topley recommended contractors keep their eyes open for other trends that can affect employee retention and then do what they can to fix any snags in the system to ensure smooth employee growth and maintain a positive and motivated team.

The author is Managing Editor of Lawn & Landscape and can be reached at nwisniewski@lawnandlandscape.com.