I recently read an article about a tow company suing a large motor club over their soured relationship. The tow company, who lost the account and subsequently went out of business, claims it was unjustly branded a low-performing provider by inaccurate customer satisfaction data. The motor club’s position is they were forced to replace an underperforming provider to ensure quality service. Independent of fault, relationships fail, and being overly dependant on any one customer for too much of your company’s revenue can force you into difficult situations, and in extreme cases, can cost you your business.
It is the paradox of providing quality service—the happier a customer is, the more work you earn from them and the more reliant you are on them for business. But as we all know in the towing business, each call is an opportunity to succeed or fail. And with high-volume operators, even a short lapse in employee training can have a powerful impact on success metrics. When that relationship goes south, you have to be prepared to soldier on without them, and their revenue. Even if you don’t lose the account, a high-volume customer can also wield their power over you by pressuring you to reduce your fees, or even into adding less profitable services to your offering. There are many ways to protect your livelihood from an overinvested relationship, and a good rule of thumb is to avoid having any one customer represent more than 33% of your overall revenue.
Here are a few ideas to keep your customer base diversified:
Target customer’s competitors. If your business model proves successful as a motor club provider, for example, target other clubs for work. Motor clubs are always interested in partnering with providers who understand how to efficiently respond to a high volume of calls with minimal issues. Reach out to other clubs to start developing relationships. It is unlikely you will become their primary provider immediately, but you want to be on their radar when they’re in a pinch needing a reliable, high-volume provider quickly. Another great opportunity to facilitate these introductions is at your state or regional tow show. Most, if not all motor clubs, regularly attend tow shows, so come prepared with copies of your equipment list sheet, insurance certificate and any letters of recommendation or awards you have won. This small step demonstrates your professionalism and preparedness—often face-to-face—with your area rep and can leave a lasting impression. Conversely, if your company proves to be particularly successful at providing emergency response services to police departments maintain a mini database of the contacts for each contract. Developing those relationships over time will eventually deliver results.
Diversify your service offering to diversify your customer roster. Adding services like roadside repair, battery delivery, tire sales, 24 service, cargo and long-term vehicle storage, heavy-equipment hauling and additional weight classes of towing and recovery services can make your company more attractive to a greater number of customers. Look at your competitor’s capabilities for ideas on how to expand your service offering and develop a plan for your growth.
Focus on adding cash customers. Often a cash customer call can represent as much as 100% more revenue per call than those sourced though club relationships. Diversification through cash calls may not require as many calls as you might think. Developing an effective local online marketing plan and investing in local sponsorship opportunities can deliver cost-effective results and start you on the road to being less dependent on your large customers.
The old saying, “the only constant in towing is change” holds true even today. Being prepared to respond to change can keep you in business and from allowing others to force your business decisions.
Dennis Wencel is the author of the Black Book of Towing & DVD Set that offers over 100 ways to make your towing company more profitable. He is also the President of TowProgram.com, a marketing services company that provides affordable and effective Online Marketing Solutions to towers nationwide. He can be reached at firstname.lastname@example.org or 888-834-1123.