Whether your small business is in plumbing, HVAC, electrical, or even a combination of all three, repeat customer rates matter. Of course, repeat customers matter for businesses of all sizes and in all industries. But they're especially crucial for local home service businesses like yours.
Often, small home service companies spend too much precious time and money chasing new leads. At the same time, they're not spending enough time and money on re-engaging the existing customers — the ones they've already paid hundreds of dollars apiece to acquire.
This is what we like to call the treadmill approach: relying too heavily on third-party platforms to acquire new customers while simultaneously neglecting your existing and past customers.
Just how much does repeat customer percentage matter for local home service businesses? What's a good percentage of repeat customers? How can you calculate your repeat customer rate? Keep reading for the low-down.
How much does repeat customer percentage matter for local home service businesses?
The optimal amount of repeat customers varies by industry and size of the business. Some sources claim an average of 30% repeat customers is ideal for most industries.
But for local home service businesses, that's not good enough. Why? Home services are commoditized. You and your competitors offer the same services. To your customers, you're just another plumber, electrician, or HVAC technician. As long as you can get the job done promptly, professionally, and for an affordable price, your customers will usually be satisfied.
Apart from offering exceptional customer service that truly goes above and beyond, there's little wiggle room for differentiation — because the work you do is fundamentally the same. Which means service-based differentiation isn't enough to drive growth and revenue.
It also means local home service businesses can't rely too heavily on third-party platforms like Google to attract customers. Think about it. If you live in a heavily populated area, you might be competing with dozens, perhaps even hundreds, of other local businesses in your industry. They're all advertising on Google just like you.
The problem with Google Ads
Are we saying you need to stop running Google ads? Absolutely not. What we are saying is relying too much on Google to generate business is a dangerous move.
Google constantly updates their algorithms. In October 2020, the platform opened up bidding for local service businesses. Previously, Google used 3 ranking factors to determine which business won the top spot: reviews, responsiveness, and proximity. Now, a fourth factor is shaking up the way local home service businesses advertise on Google: maximum bid.
That automatically puts small businesses with lower budgets at a disadvantage. Even small home service businesses are already paying $300+ to acquire one new customer.
It's difficult to say how much the new ranking factor will affect ad visibility and conversion. But Google is already saturated and fiercely competitive. At the outset, it certainly seems like the top spot will go to the highest bidder. As the average bid continues to rise, small businesses might be knocked out of the running.
What's a good percentage of repeat customers for local HVAC businesses, plumbers, and electricians?
Now that you know the dangers of depending too much on third-party platforms to bring in customers, let's discuss optimal repeat customer rates for local home service businesses.
Earlier in this article, we mentioned that an average benchmark for repeat customers is 30%. Which means most businesses generate 70% of their revenue from new customers.
But the most successful local home service businesses have swapped that figure. Think 70% repeat customers, 30% new customers.
Sure, that seems a little high and perhaps even impossible. To grow, you have to attract new customers, right? Of course. But a high percentage of repeat customers can also drive new business.
Generating new business through your existing customers doesn't have to be complicated. After all, local home service businesses have relied on word-of-mouth for decades. (In fact, it's still the main source of new business for many local plumbers, HVAC technicians, and electricians.)
Outstanding customer service, referral incentives, reconnecting with past customers through educational emails — these are just a few clever ways you can attract new customers through your existing customer base.
That's all well and good, but maybe you don't have a clue how much of your business comes from repeat customers and how much comes from new customers. Here's how to figure it out.
How to calculate repeat customer rate
Figuring out your repeat customer rate could be as simple as glancing at your CRM or Google Analytics dashboard. If you don't have the processes or bandwidth to review the metrics — or if you're not using a CRM — here's a simple formula you can use:
Repeat customers / total customers
If you served 100 customers in a month, and 80 of those customers were returning customers, your repeat customer rate is 80%. Easy peasy!
If you discover your repeat customer rate is low, there are a few things you can do to improve it.
- Invest in providing a 10-star customer experience. Are your communication channels instant? Do you regularly miss customer calls because you're pulled in a dozen different directions at once? A tech-enabled process that harnesses the power of automation backed by humans can solve those problems and so many more.
- Start tracking revenue from repeat clients. If you're not already tracking how much revenue you generate from past and existing customers, now's a good time to start. Which leads to our next tip.
- Build processes for converting leads, recovering lost leads, and retaining customers. Creating a customer retention framework is a daunting, but necessary, task for home service companies aiming to drive more repeat business while also keeping costs low.
Overwhelmed just thinking about it? Wish someone could take care of all this for you? We understand. We know small business owners like you have your hands full managing every aspect of your business while also trying to grow it.
We know because we've joined the teams of 2,000+ local home service businesses just like yours nationwide. Drive more repeat business through smarter customer interactions with ZyraTalk — without lifting a finger. Allow your customers to connect with your business on their terms, using their preferred platforms. SMS, web chat, email, click-to-call: we thought of everything. Robust analytics let you track attribution, source, and campaigns at a glance. No fancy developer knowledge required. Our tight-knit team will even assign you a dedicated account manager, making it easy to access support whenever you need it.
We've crunched the numbers, and we've seen the results in action. It's time to flip the script and get off the treadmill. If you don't have a re-engagement and lead recovery process in place, you're not only failing to grow — you're losing money. Lots of it.
If you'd like to know just how much lost revenue you can recover by re-engaging past customers, get in touch today for a FREE lost revenue analysis. No obligation, no gimmicks. Mention this blog post and we'll even throw in a free trial run of our full Growth Suite!