Customer investment pays profits

January 1, 2007 By    

Continued company growth de-pends on growing and retaining a strong customer base.

 Andrea Young
Andrea Young

Customers are key to your long-term success. Retaining your current customers and gaining new ones must be viewed as an investment. Customers are long-term investments that will help you realize your long-term goals.

So how do you ensure long-term success? You keep customers loyal and grow your customer base. You communicate regularly with the people who help to make your business profitable. Just as it’s wise to communicate your plans with employees so they help you steer a successful business plan, so too is it wise to communicate with your other important partners – your customers.

What would you invest per customer to save $300 per year or $35 per delivery for every will-call customer who became a routed partner? 50 cents? 70? A gallon of propane?

Would you consider a wise investment one that brought returns of improved summer cash flow, allowed you to spend less time and money servicing bad debt and reduced your operating expense? Encouraging customers to participate in an Equal Pay program accomplishes such goals.

The following examples illustrate some of the capital returns gained by investing in customer communication. For instance, increasing enrollment in your Equal Pay plan can:

Increase cash flow. Bring in 50 percent of your annual payments during the slower summer months.

Earn interest income on increased cash flow. Example: $1.15 per gallon x 500 gallons x 2 percent interest income = $11.50. At 500 customers you’ve earned $5,750.

Reduce bad debt. Example: Lowering bad debt from 2 percent to 1 percent at $1.15 per gallon x 1,000 gal. x 1 percent = $11.50. 1,000 customers x 1% x $11.50 = $115.

Reduce operating expense. Example: Increase summer deliveries from one to just 1.5 and no summer overtime; 10 percent winter overtime; 1,000 customers. Delivery cost = $35 per load with no overtime. Contrast this savings to the expense you’ll incur in winter. For winter add 10 percent with overtime = $3.50 add cost at 1,000 customers x $3.50 = $3,500.

These same principals apply by increasing participation in a pre-buy program or increasing your number of routed customers.

Do you encourage customers (as you do your employees) to help you improve your business? Do you view regular customer communication as an investment strategy that helps you fulfill your long-term goals? If you perceive customer communication as an investment tool that pays long-term dividends, you’ll begin to see how you can create many more opportunities for capital growth.

A survey conducted by Northeastern University and released by Standard & Poor’s, reported 92 percent of respondents say they read service newsletters, 84 percent find them useful, 75 percent save articles from newsletters, 74 percent visit the company Web site and 25 percent phone the company for more information.

There are additional financial benefits that can be accomplished by promoting your products and services. In today’s competitive marketplace communicating the right messages is an investment tool you can’t afford to ignore.

Andrea Young is a marketing and communications specialist for Propane Resources, which provides financial consulting, supply, transportation, training and marketing communications services for the propane industry.

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