Remodeler's Exchange: Effective customer relationships

Professional Remodeler’s Tom Swartz spoke with Sal Ferro and Tim Shigley about how their firms manage to balance the customer service relationship between homeowners and remodelers.

May 28, 2014
Remodeler's Exchange: Effective customer relationships

"First and foremost, it [customer service] starts with the culture of the company. In order for anything to be effective you need to have a culture that makes your customer service practices effective"--Sal Ferro, president and CEO, Alure Home Improvements.

This month, the Remodeler’s Exchange focuses on effective customer service relationships. Professional Remodeler’s Tom Swartz spoke with Sal Ferro and Tim Shigley about how their firms manage to balance the customer service relationship between homeowners and remodelers.

This month featuring:

Sal Ferro, President & CEO
Alure Home Improvements, Plainview, N.Y.

Established in 1946, Alure Home Improvements is a full-service remodeling company that specializes in siding, roofing, and finished basements. In 2013, Alure billed $42 million and currently has more than 130 employees.

Tim Shigley, President & Founder
Shigley Construction Co., Wichita, Kansas

Established in 1988, Shigley Construction is an exterior and kitchen/bath remodeler that generates over $1 million annually. The firm has two full-time employees and is associated with more than 70 subcontractors.

TOM SWARTZ: How important is effective customer service today?

SAL FERRO: Customer service is always important. Anyone who doesn’t understand customer service, I wish them luck staying in business. First and foremost, customer service has always been a vital part of doing any business. Today, it is scrutinized more than ever and a big reason is increased competition and technology including social media, which has changed the game quite a bit. If you weren’t paying attention to customer service 10 years ago it was “shame on you.” If you are not paying attention to customer service today, you’re not going to be in business. I believe that people are more in-tune to what’s going on and they are judging the experience more than they are judging the quality of work.

SWARTZ: What is the most effective customer service practice or action used by your firm?

TIM SHIGLEY: First, I do believe that customer service has been an integral part in the success of our business. We like to stay in contact with past customers to find out if they have any needs. Furthermore, when we are on the job the communication level is critically important. We do one-offs on everything, and it’s a very unique process so every job needs to have an incredible dialogue with the homeowners. The communication varies from smartphones to texting homeowners. Ten yeas ago we never thought about texting homeowners, but it is one of the things we do today. We have a great amount of communication with the homeowners including daily and weekly contact. The main thing is being consistent with communication; it is an integral part of customer service.

FERRO: First and foremost, it starts with the culture of the company. In order for anything to be effective you need to have a culture that makes your customer service practices effective. It is not a matter of giving someone a system and saying, “This is what we are going to do.” You have policies, mission statements, and everything else, but if you’re not cultivating your culture you’re not going to be successful. The culture must be about following your client’s agenda and not your own. If you can be on the clients’ agenda and understand their agenda, everything else will work. For example, we have production software that is part of our overall customer service plan. We also use our smartphones to stay in contact with clients. The number-one thing I look at when we break down the customer-client relationship is the communication patterns, especially if our client is not happy with the relationship. It’s never the quality of work and it’s never the timeframe of the job. It’s usually the lack of communication. If you can leverage all the tools we have access to today in order to stay in communication with the client—and communication that makes the client truly understand the job process—you can improve the customer relationship quite a bit. This lends itself to being on the client’s agenda. It’s not about pumping out the work, this is about you building their dream kitchen, basement, or whatever it may be. Understand this is the client’s only project. The most effective measure we have is making customer relations part of our culture.

SWARTZ: Are there different types of customers that you deal with regularly?

FERRO: Yes. The internal customer and the external customer became popular after the book by Ken Blanchard called “Raving Fans.” The book describes the two clients we deal with regularly. Everyone is my customer; I am the CEO and the bottom line at the end of the day is everyone reports to me internally. My external customer is the customer we do business with who basically provides us with the revenue to operate. We are installing the customer’s kitchen, we deal with them on a day-to-day basis and produce their work. The internal customer is the client that works for you, works next to you, and depends on you the same as you depend on them to do their job. Back to the culture: If there is a culture of understanding about an internal or external client, it really does lend itself to an overall atmosphere to create raving fans not only externally but internally as well. The internal client is very important and as the company gets bigger, you are focused on growth, building that volume, and building that backlog, but you need to understand it can only be done with your employees. There is a difference between internal and external customers but both need to be treated equally well.

SWARTZ: Do you have a written customer service plan, and who is responsible for that plan in your company?

SHIGLEY: The production manager was the person responsible for the customer service plan. The person we had in this position retired, and we are currently looking for a new person to handle the customer service responsibilities. As it stands right now, I am responsible for ensuring a proper customer service plan.

FERRO: We have a mission statement that I wrote back in the early 2000s. I wrote the mission statement after attending a one-week course at Ken Blanchard’s school in San Diego. After reading “Raving Fans” I became so focused on the premise of this book, it truly became the concept and spirit behind our customer service philosophy. We ended up incorporating this mission statement, which we still use to this day; in addition, we have a customer service policy that we give to our clients when we sign a job. The client is getting a guaranteed customer service plan from two different perspectives so they can see what Alure is all about. The mission statement centers on customer service and it also mentions not only the external customer but also our internal customer. We want a harmonious and enthusiastic environment, and that is necessary to drive the customer service relationship. As I said earlier, the culture is what makes this work. When everybody is working in the same direction, it is worth the effort to go the extra mile to enhance the client’s experience. It is also a heck of a lot easier to manage the client. When we hire someone, they get the mission statement, they are taught to understand the mission statement, and they should know it by heart. Whether it is a production meeting, sales meeting, company meeting, we will ask random people to get up and recite the mission statement without any help. It’s a big thing for everyone at Alure to understand the mission statement. To me, that’s our written customer service policy but it’s really more than that. The other policy we hand out to our clients describes exactly what they can expect from Alure on the jobsite. If we are not delivering that quality of service, I encourage them to call me and let me know.

SWARTZ: What is the most effective way to communicate with both existing and new clients?

FERRO: I don’t believe there is a silver bullet; everyone is dependent on each other in order to be truly effective. You need to find the proper mix that works. The most important ingredients for each client and the relationship you have with that client are going to be completely different. All forms of advertising work well if you can find a mixture that is affordable, and we will do some form of advertising in an effort to reach the clients. Over the years, we’ve lowered our advertising budget while maintaining our marketing budget because we’ve put more money into relationship marketing. The one thing I believe is closest to a silver bullet is repeat and referral work. The only way you can get that business is through the customer service channel. Create a raving fan and put that raving fan out there as part of your marketing team.

SHIGLEY: Advertising is just one part of the marketing that we do. Our pipeline is pretty small, therefore, our leads are different. The biggest thing we find is the lead generation we need comes from our past clients. We do direct mail and we keep in contact with past clients, which results in approximately 80 percent of our work. We might do six room additions on a client’s house over a period of 10 years. We work with the long-term dreams of the client a little differently. The next 20 percent of work comes from referrals as well as a little bit of lead generation that comes from our testimonial pieces that are generated as either direct mail or ads in local publications.

SWARTZ: Do you track the customer actions such as business from repeat and referral customers?

SHIGLEY: Yes we do, and it’s pretty easy with the amount of volume we do. We have jobs between $50,000 and $100,000 for approximately 20 jobs a year. We have a good sense of where the repeat and referral leads are coming from.

FERRO: We track every lead source and what we spend on every lead source. For a large volume remodeler, we’ve been very successful in maintaining marketing costs below 10 percent. Most large volume remodelers are not able to keep it under 10 percent. The lowest I hear is 15 to 20 percent in marketing costs when you are a $20 to $30 million company. They way we do it is this: 50 percent of our work is repeat and referral work. It is vital we track that because to generate new business, it’s expensive. Every time we go out there and get a client we haven’t worked for before, that hasn’t been referred to us, it does cost us over 10 percent, sometimes 20 percent—whatever that lead source may be. The way it balances out is the repeat and referral work is under 5 percent and the real volume of our business is driven through this area—it is well over 50 percent of our business.

SWARTZ: Are customer testimonials effective?

FERRO: I don’t think it’s necessary; anyone can give you a testimonial. I look at testimonials when I see them in advertisements with a grain of salt. Do you need them? Yes. Where do you put them? Your website, print, even on social media. I believe a testimonial is one thing, but the ability to have them out there as part of your marketing plan is even more important. With social media, testimonials are important. Websites such as Angie’s List, Yelp, and other sites all provide testimonials. Those testimonials are posted independently and they mean the most to a client. As an independent source, the client is reading the real deal about your company. With social media being a blessing as much as it is a curse, you have to monitor these sites very closely.

SHIGLEY: They are big for us and we’ve used them the entire time we’ve been in business. We use testimonials in print and social media because it is important to our business as well. We use testimonials not in everything we do because our pipeline of growth is different. Our growth is at 20 percent each year from new customers. We look for referrals from testimonials in the manner that accentuates who we are and so that customer service represents our bottom line.

SWARTZ: What advice would you give today’s remodeler to be more successful, specifically more effective with their customers?

SHIGLEY: First, you need to be a great listener to find out what the homeowner’s needs are then transfer those needs into their dreams. You must be attentive to their needs by listening to what they want and then being able to provide it. Cost is an important factor as well. There are only a certain number of ways to define costs. When we sell a job, there is a mutual benefit for the homeowner—they are receiving a value they can measure in some form of the product they are receiving.

FERRO: Know your costs. It is incredibly important to understand your costs and understand your numbers in order to grow. In the $1-million range per year, that can be a scary spot because the remodeler may wonder whether they want to maintain that size or try to get bigger. They wonder what it’s going to cost to get bigger. Unfortunately, it changes quite a bit because you can’t be chef, cook, and dishwasher to get the business to $3-to-$5 million per year. Understand what your skill set is. Understand where you are good and what you know. If you don’t know something or you are not good at a specific task, find someone who is good. Take care of your clients, internal and external. I always had a saying that I’ve used at Alure for many years, “If we take care of our clients, everything else will take care of itself.” This is true because at one time we were 68 percent repeat and referral business. If you take care of your clients, everything else does take care of itself. Be on the client’s agenda, not your agenda. Finally, you’ve must have fun in your business. If you’re not having fun, then do something else. PR

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