www.americanlaundrynews.com
June 2024 • Volume 50, Number 06
The Newspaper of Record for Laundry & Linen Management
1974 - 2024
Building long-term customer loyalty The key to success in the industrial laundry industry after a deal has been closed (Photo: © donscarpo/Depositphotos)
BY DAVID BERNSTEIN
A
n oft-repeated story continues to make its rounds among our peers. According to the story, whenever a laundry customer is asked which laundry in their area is the best laundry, the customer will always answer, “The one we just left.” While the story is allegorical, the point is still well-taken. Too often we and our customers take each other for granted and only realize each other’s value after a separation has occurred.
For those who own and/or run industrial laundries, this is a tragic and costly mistake. In our highly competitive industry, customer retention is paramount. Acquiring new customers is an expensive and resource-intensive process with estimates suggesting it can cost 5-25 times more than retaining existing customers. On the flip side, according to Bain & Company research, a mere 5% increase in customer retention can result in a 25% or higher increase in profits (up to a staggering 45%-plus increase for industrial laundries). Therefore, building strong, enduring relationships with your customers should be a top priority for any successful laundry operation. It all starts with ensuring that your team understands the value of loyal customers and what your customers consider valuable. What follows is a high-level overview of this topic to help you on the road to customer retention and loyalty.
THE VALUE OF LOYAL CUSTOMERS
The outsized gain recognized in Bain’s research is driven by the key metrics of Customer Acquisition Cost and Customer Lifetime Value (CLV ). Customer service and customer success teams must understand these numbers and their impact. If they grasp the significant investment made to land each new account and the potential long-term revenue streams that can be unlocked through retention, they will be motivated to make customer satisfaction a top priority. As the graph on page 6 illustrates, the lifetime value and profitability of a loyal laundry customer grow exponentially over time. While it initially appears that the costs of customer acquisition create a loss, as
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the relationship matures, revenue streams expand through new products, services and cost savings. Loyal customers generate referrals (cold calls result in about 2% closed sales as compared to 55-80% for referrals), reduce operating costs through process efficiencies, and present greater upselling and cross-selling opportunities.
UNDERSTANDING CUSTOMER VALUE PERCEPTIONS
To cultivate enduring bonds, your teams must recognize that value is defined solely by the customer’s perceptions and needs— not your assumptions or subjective opinions. A common pitfall is focusing too narrowly on the features or advantages of your services and products because that is not what motivates customers to make buying decisions. Simply stated: customers buy benefits. Think of benefits as outcomes or the “what’s in it for me” for your customers. The benefits that motivate customers to decide whether to buy from or stay with your company can be broken down into the 5 Ps of Profit (how can I make or save money?): Prestige (is it more highly regarded [think Lexus vs. Toyota]?), Pleasure (will this make me happier?), Pain Relief (does this solve a problem I have?) and Preservation (will it save my job, my business, a life?). Understand why each of your customers bought and which benefits appealed to them (sometimes it is only one benefit, but it could be as many as all five). Make sure you understand which specific benefits resonated most for each customer, and then continue to not only reaffirm your ability to reliably deliver on those
LATE NEWS Cintas Board of Directors approves 4-for-1 stock split CINCINNATI — Cintas Corp. reports that its Board of Directors approved a four-for-one split of its common stock. Shareholders of record, as of Sept. 4, will receive three additional shares for each share held, which will be distributed after market close on Sept. 11. Cintas’s shares are expected to begin trading on a post-split basis at the market open on Sept. 12. The company’s most recent stock split was in 2000. “At Cintas, we call our employees ‘partners’ in recognition of the value that each individual contributes to our success as a company,” says Todd Schneider, president and CEO. “Our founder, Dick Farmer, also believed in the importance of each employee-partner having ownership in the company to share collectively in that success. Cintas shares are trading near record highs as a result of our steadfast focus on serving our customers. “We believe that the time is right to split the stock and increase its accessibility to our employee-partners and investors so that they can continue to share in the future growth of Cintas.” The company expects that the stock split will increase the number of shares of Cintas’s outstanding common stock from approximately 101 million shares to approximately 404 million shares.
See Loyalty on Page 6
5/14/24 10:04 AM