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Here again, there are several ways to measure


customer retention: 1. Ratio of number of customers who stop using our service versus the number of customers we start with at the beginning of the period. (i.e. Retention rate is 85%—this means that for every 100 custom- ers, 15 will leave during a given period). Using this method we focus on just the number of accounts.


2. Ratio of dollars of route work of those who stop using our service versus the total dollars of route work that we had routed at the beginning of the period (i.e. Retention rate is 90%—this means that for a $15,000 route we lost $1,500 dollars worth of recurring work during the period). Using this method we focus on the importance of the ac- counts lost in terms of dollars.


Both techniques are important as we obviously


want to know the number of customers who are leav- ing us but also if key accounts are getting away. Here is an interesting way of measuring retention that also considers effectiveness of advertising: Total Advertising Spend percentage. This measurement tool is not used often by too many PCOs, but is key to a pest control company’s success. Example:


Year One ■ A brand new company with no clients ■ Spends $20,000 on advertising


BENCHMARKING CALLBACKS AND CUSTOMER RETENTION while consistently raising the bar goes a long way in your firm’s ability to grow.


■ That $20,000 yields $100,000 of new service contract work


■ Year One advertising is 20% of revenues


Year Two ■ At the end of year one either retention is 80% or there is $80,000 of business from prior year customers during year two


■ The same $20,000 is spent on advertising ■ Again, that $20,000 yields $100,000 of new service contract work


■ Year two advertising is 11.11% of revenues Figured: $20,000 of advertising divided by $80,000 of prior year customer revenue plus $100,000 of current year customer revenue $20,000 = 11.11% $180,000


As long as advertising as a percentage of revenue is falling, we are experiencing positive customer retention.


www.npmapestworld.org


MARCH/APRIL 2011 PESTWORLD 15


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