Driving Customer Retention
The factors that clients consider when deciding to stay or leave
When considering customer retention, two questions immediately come to mind: “Why do doctors leave?” and “What can we do to make them stay?”
Both are important because if a business’s annual retention rate is 90%, that business begins each new year 10% in the hole and has to replace lost business before showing any real growth. In a million dollar laboratory, losing 10% of your average doctors is approximately 6 clients doing $1,400 per month (6 x 12 x $1,400 = $100,800). In order to make up that deficit, you would need six new accounts by January 1st in order to capture revenue for the entire year. A more likely scenario would be one new client per month for two months, averaging $1,400. If you could do that predictably, and lose only 5% of the previous year’s business, the economic impact of those 12 new clients could amount to $50,000 in growth.
Surveys have continually shown the top three reasons doctors leave a laboratory are inconsistent quality, price, and delayed turnaround time. In order to maintain a roster of clients, laboratories must be able to offer Consistency, a Fair Price, and Prompt Service.
In regards to the quality of the product, consistency is key. Clients are not interested in crowns that in some cases seat in 5 minutes and in others 45. They do not want to wonder if their patients will get fantastic esthetics sometimes and average the rest. Clinicians demand consistent deliverables that meet or exceed expectations every time, even when their impressions and inputs may be the root cause of inconsistencies.
A Fair Price
Clients demand prices that represent the value proposition they paid for. They do not want to pay for features, advantages, and benefits that will not result in reimbursement for their patients. PPO insurance and lagging reimbursement models will progressively drive down the cost of esthetically less critical posterior restorations, but clinicians will continue to be willing to pay a premium for excellent esthetics in anterior cases and non-insurance reimbursed work.
It is absolutely necessary that cases are completed as promised, when promised, and are not delayed or late. It is the author’s belief that absolute turnaround time is less important than the integrity of the date. Even if you could promise a turn time of 3-5 days, dentists would still have to make a provisional. In that case, 5, 10, or 15 days are all the same. When we have to call a client and ask for more time, frustration stems from the fact that they now have the hassle of calling and rescheduling the patient.
Designing a Retention Plan
Now for the bad news—the above are all table stakes necessary to get into the dental laboratory game. They are not differentiating and do not create a value proposition that you can charge more for. They are expected, and thus should be the foundation for your operational model. Orders must be filled on time, in full, for a price that reflects the value proposition that your brand promises. However, unless we are super-human we cannot always meet these goals and objectives. So how do we minimize defection when things go south? What can we do to drive and improve retention beyond striving to deliver on time, in full, and at a fair price?
Businesses should keep three things in mind when designing a retention plan, Knowing Who is at Risk, Making up for Mistakes, and Personalizing Rewards.
Knowing Who is at Risk
Predicting who is leaving so we can be more proactive is critical. The author suggests that business owners create a “Change Report” by comparing a client’s three month rolling average to their current month. Such a report may serve as an alert to behavioral changes in doctors purchasing habits before they leave completely, as a change in purchasing may indicate a client is unhappy with something and on their way to another laboratory. Accounts down 50% or more may be at risk.
The best way to address this issue is head-on. Give the client a call and ask if anything has caused a change in their purchasing habits. You may be relieved to find out they were on vacation for two weeks and are still happy, but if not, you now have a chance to salvage things before they vote with their feet and leave.
Also, don’t hesitate to have some fun and call doctors whose business is up significantly and thank them—they just might do it again.
Making Up for Mistakes
Bouncing back from a mistake allows you to make up for whatever went wrong before a client says anything or asks for some level of compensation. A dozen donuts or a bouquet of flowers go a long way as an apology for not meeting expectations, especially if a client has not yet complained. How good would you feel if someone tried to “make up” for a misstep before you even point it out? More importantly, did your opinion of them grow stronger because of that? It is likely that it did.
Individualizing Rewards is far more impactful than a universal system that gives everyone flight miles for the dollars they spend with you. Those systems are fine but common, and it is much more effective to give rewards that show you’re invested in each customer as an individual. If you know that one of your top clients is planning a big trip, arrange for limousine to and from the airport. Some doctors have pet charities or projects that you can support to personalize the rewards and bring far greater meaning and intimacy to your relationship.
About the Author
Mark T. Murphy, DDS is the Lead Faculty for Clinical Education at MicroDental/DTI Dental Technologies Inc. in Dublin, CA.