Transactional Vs. Relational

[LawnSuccess]

Let me ask you a simple question; your answer to this one question will reveal what type of lawn business you have.

Question:

Do you spend more time chasing new clients, or more time building a relationship with existing clients?

If you’re spending more time chasing new clients, you have a “Transactional” lawn business.

If you’re spending more time building relationships with existing customers, you have a “Relational” lawn business.
Why do you need a relational lawn business?

Your goal should be to have a “relational” lawn business. Why? This is where the profit is for a lawn business.

Let’s say for example you have a landscaping business, and you don’t do anything but landscaping - no lawn maintenance. Let’s also assume that your average profit from a typical customer is $1,000.00.

If you’re a “transactional” company, you’ll provide your landscape service, make your $1,000, and then start looking for your next customer. So in this case, the lifetime value of your customer is $1,000.

On the other hand, if you have a “relational” lawn business you can easily turn that $1,000 lifetime value into $10,000.

Here’s how:

The same as before, you go out and provide exceptional landscaping services. But now after you’re finished with the landscaping job, you spend time and money building a relationship with the customer.

You take the time and effort to build a relationship. You make them feel special, unlike a number, but a real person.

Here is the math:

Regular Landscaping:

You make a $1,000 off of the initial sale. Let’s assume this customer will live in your area for 20 years. At some point in the next 20 years it is very likely they will be interested in landscaping services again. They may move to another house in the area, or they may decide they want to change out some of their landscaping 10 years down the road.

If you build a relationship with them, you can easily expect to make an additional $1,000 from them at some point in the next 20 years, from installing new landscaping.

So the lifetime value of your customer has jumped from $1,000 to $2,000.

Ad-On Sales:

IF you have a relationship with your former clients, you can easily inform them about special opportunities they may want to take advantage of. For example, you could send them a special offer to add a new deck in their backyard, a new pergola, or simply just to come out and re-mulch and change out their seasonal flowers.

Each fall you could send them a letter reminding them that it’s time to replace their seasonal flowers, and offer a special discount to them for being a valued customer. Twice a year you could send them an offer saying it’s time to re-mulch their beds.

If you build a relationship, you can expect to easily make an additional $200 per year in profit from them from add on sales.

$200 x 20 years = $4,000.00

That’s $4,000.00 you would have lost if you were operating a “transactional” landscaping company.

Referrals:

If you do an exceptional job for your customers - and take the time to build relationships with them - they will send you referrals, but you have to ask.

With a “relational” landscaping business, you can realistically expect to get a couple of purchasing referrals (referrals who will purchase your services) each year, from each of your customers.

But for the sake of this example, we are going to only assume each customer only sends you one purchasing referral every five years. (Four referrals during the 20 years you can expect each customer to live in your area.)

Let’s take a quick look at the math:

four referrals x $1,000 profit from each customer = $4,000

Now let’s review and see how the lifetime value of each customer has changed.

Remember, as a “transactional” landscaping company your customer lifetime value was $1,000.

Here’s a Recap

Transactional Landscaping Business:

Landscaping service: $1,000

Total Lifetime Value: $1,000


Relational Landscaping Business:

Two landscaping services over a 20 year period @ $1,000 profit each = $2,000
Ad-on sales at $200.00 profit per year x 20 years = $4,000
Referrals profits (assuming no add-on sales) = $4,000

Total Lifetime Value: $10,000


No Arm Twisting

I’m not here to twist your arm, but I think it’s fairly obvious what type of lawn business you should have.

The choice is really yours to make. It’s only matter of time and effort.

The easiest way to build relationships with your customers is through a monthly newsletter. I recommend sending a printed newsletter to all of your customers and prospect each month.

Build relationships & be remarkable,

Wayne Mullins

[slamjamrockinman]

Good post. I would call myself a combo of both, more transactional at this point. I really like the letter idea.
I think in the spring you have to be very transactional, then as the season progresses you can develop into being more relational. By July or so once the spring rush slows down, you can upsell to all your customers, maybe land a couple installs do keep you busy on the off days. That is what I do, though I need to work on being more relational. In a bad economy, I think trying to get the most out of each client is tough, there is definately a limit. Again good post, I like spending time in the wonter crunching numbers like this and putting a plan into place, this definately helps.

[JosephLawnCare]

I like your post. But more about the monthly newsletter. What does a "relational" lco say in a monthly news letter that the customer doesnt already know? Running a relational lawn co is the only way to build a business, and make money, imo.
Posted via Mobile Device

[LawnSuccess]

Hey Peter, thanks for the kind words. I hope it will give you a few ideas you can implement this year.

The economy doesn't look like it's going to get better anytime soon. The slow economy creates problems for most lawn businesses, because many of their customers view a lawn service as a commodity.

To many customers, every lawn business stands right next to a bunch of other lawn companies, each striving to be like the other, but maybe a little better. Like products on a shelf, lawn companies sitting waiting on the next customer to come along and pick them over their competitors.

That mindset works in a good economy, but in an economy like we're in it's a plan for failure.

You have to distinguish your lawn company from all the others, you have no choice but to be remarkable.

Give your customers something to remark about!

All the best,
Wayne

[coolluv]

Originally Posted by LawnSuccess

Hey Peter, thanks for the kind words. I hope it will give you a few ideas you can implement this year.

The economy doesn't look like it's going to get better anytime soon. The slow economy creates problems for most lawn businesses, because many of their customers view a lawn service as a commodity.

To many customers, every lawn business stands right next to a bunch of other lawn companies, each striving to be like the other, but maybe a little better. Like products on a shelf, lawn companies sitting waiting on the next customer to come along and pick them over their competitors.

That mindset works in a good economy, but in an economy like we're in it's a plan for failure.

You have to distinguish your lawn company from all the others, you have no choice but to be remarkable.

Give your customers something to remark about!

All the best,
Wayne

I always like posts like this that speak in general terms. Like the late night infomercial that says you too can dare to be rich, only to never really explain it unless you spend x dollars to find out how. Which usually is some pig in a poke and the only guy who dares to be rich is the guy running the infomercial.

Quote"You have to distinguish your lawn company from all the others, you have no choice but to be remarkable." End Quote

Well there's not much you can do different when it comes to mowing lawns, and most don't give a rats @$$ about how it looks, just what it costs. You want to set yourself apart from the rest? Lowball. Wait a minute.... that wont work, too many guys do that anyway.

Maybe I could dress in a clown costume and juggle balls while on my mower. Give me a break.... You too could be living in a mansion and driving a nice car, the only thing stopping you is you have to "Dare to be Rich"!

Dave...

[LawnSuccess]

Hey Dave, thanks for your input, but I have to disagree.

Sure the slow economy has forced more lawn customers to become price sensitive, but there are still lawn companies charging rates double those of their competitors, and doing just fine.

Originally Posted by coolluv

Well there's not much you can do different when it comes to mowing lawns, and most don't give a rats @$$ about how it looks, just what it costs. You want to set yourself apart from the rest? Lowball. Wait a minute.... that wont work, too many guys do that anyway.

Not everyone is only concerned with price. If that were true everyone in your town would be driving around in a Chevrolet Aveo (which has a MSRP of just over $10k).

If it were true everyone would be wearing clothes from Goodwill.

If it were true people would only eat out at McDonalds.

If it were true everyone would have the cheapest cable or satellite package, but they don't. The cable/satellite companies have convinced people they "need" to upgrade to premium packages...which cost more.

I don't disagree with you that people have become more price sensitive, but not all people. People are still willing to spend money on remarkable products and services.

So, I stand behind my statement: DARE TO BE REMARKABLE! Even if it means dressing in a clown costume and juggle balls while on your mower. ;-)

All the best,
Wayne

[coolluv]

Originally Posted by LawnSuccess

Hey Dave, thanks for your input, but I have to disagree.

Sure the slow economy has forced more lawn customers to become price sensitive, but there are still lawn companies charging rates double those of their competitors, and doing just fine.



Not everyone is only concerned with price. If that were true everyone in your town would be driving around in a Chevrolet Aveo (which has a MSRP of just over $10k).

If it were true everyone would be wearing clothes from Goodwill.

If it were true people would only eat out at McDonalds.

If it were true everyone would have the cheapest cable or satellite package, but they don't. The cable/satellite companies have convinced people they "need" to upgrade to premium packages...which cost more.

I don't disagree with you that people have become more price sensitive, but not all people. People are still willing to spend money on remarkable products and services.

So, I stand behind my statement: DARE TO BE REMARKABLE! Even if it means dressing in a clown costume and juggle balls while on your mower. ;-)

All the best,
Wayne

Well I didn't say everyone or all customers..... but most customers. Sure I have a few that don't even question what I charge. They say do it and I bill them, wish I had more of them. The rest, which is a large percentage don't care about quality only price. I have seen it right up to the million dollar homes. Most don't look at a lawn like you or I do, they look at it like a burden... something that is a necessary evil.

Some can afford the service and pay the price...most others will pay as little as possible to get the job done, and usually the ones with the supposed money, are the late payers and rip offs. The working guy will pay on time but usually lives in a middle class neighborhood so he's not worried about keeping up with the Jone's. He wants price. So does the Millionaire. Maybe my area is just full of Redneck wanaabees.

Your experience may vary, and you still haven't said anything relevant.

Oh Yeah, what PO. Box do I send the money too in order to get your answers?

Dave....

[Hawg City Lawns]

great info

[topsites]

Originally Posted by coolluv

Some can afford the service and pay the price...most others will pay as little as possible to get the job done, and usually the ones with the supposed money, are the late payers and rip offs. The working guy will pay on time but usually lives in a middle class neighborhood so he's not worried about keeping up with the Jone's. He wants price. So does the Millionaire. Maybe my area is just full of Redneck wanaabees.

I'd have to agree with this but to add one more thing...
Because in my experience it's NOT just during hard economic times, either.
It's ALWAYS like that around here lol