7 hidden costs that are bigger than people ever imagined
We recently met up with a CEO scaling up his 3rd solar business. Our friend was interested in how Bodhi could help his company increase referrals, but something he said early on struck us. He said, “When I ask my team, ‘What do you need?’ They always tell me, ‘more people.’”
“Why is that?” we asked. Here are a few of the complaints he rattled off:
After a discussion we suggested that poor communication was the root cause of the headcount requested by his team. Our friend initially disagreed with us, stating that his CRM has built-in automations to email customers at milestones, and they have processes in place to ensure tasks are automatically assigned. When we dove in, however, he recognized the fact that if a customer can’t confirm receiving a communication, it didn’t happen.
This interaction had us thinking about the costs of poor communication. Not just the obvious costs that we can quickly list - lower close rates, negative reviews, fewer referrals, more change orders, but also the hidden costs of poor communication - the costs to a business that manifest as an indirect result of poor communication practices.
In this post, we walk you through the hidden costs of poor communication and the impact it could be having on your solar business. Each of these costs can be evaluated and calculated. We conducted an exercise to attach values to these costs. It highlights the unfortunate reality that poor communication is a bigger problem than people ever imagined.
Let’s first take a look at the more obvious costs of poor communication that most people are aware of. And when we say “obvious,” we by no means suggest that they are easy to address. In fact, they are pretty pervasive across the industry.
Unanswered leads - Leads now come from all different sources, from forms on your website, social media, lead generation companies, events, referrals, and other random encounters. Then combine that with the busy lives of your prospects that require multiple outreaches to finally connect. When a solar company is small, having 1 deal fall through the cracks might not be a big deal. However, these inefficiencies scale exponentially as your company scales. What was originally 1 lost lead could now be 1 lost lead every week or even more as you’ve grown. That’s $1.5 million lost in pipeline value over a year and will continue to grow as you grow.
Negative reviews - A Harvard Business School study found that a one-star decrease on review sites leads to a 9% reduction in businesses’ revenue. And even 1 single negative review is known to drive away as many as 22% of prospective customers. (Moz.com). For a solar company installing about 25 projects a month, that’s about $1 million a year because of a 1-star decrease or around $600,000 a year in extra lead gen costs because of that 1 negative review.
Lost referrals - Close rates for referrals are about 50% or 10x that of cold leads. Therefore, the weighted opportunity cost of 1 unrealized referral is about $15,000 in revenue. You then just had to pay $500 to lead gen companies to make up for that 1 lost referral. And for companies that rely on referrals, a loss of a single referral opportunity represents all the potential referrals from the network that customer represents. The opportunity cost may be exponentially expensive
Lost time - When not everyone in the company is on the same page as the customer, it just leads to lost time. For example, remember the last time your team showed up at the customer’s house at the wrong time because the text exchange of the customer’s schedule wasn’t logged in the CRM? That cost your company at least $1000.
When an existing customer feels their assigned project contact is not responsive, who do they call next? The sales rep. Sales reps are invested in their customers and feel an obligation to address this. Sales reps have told us they spend 15% of their time keeping existing customers updated which is 15% of their time that’s not being used to close deals. That’s about $150,000 in lost sales per sales rep.
Poor communication leads to customer frustration which leads to stressful phone calls for your staff. Nobody likes those phone calls. That’s why there is such high turnover in customer support roles. One current Bodhi customer told us, “The weight of job pre-Bodhi has crushed people’s professional careers.”
The average cost of replacing an individual employee is as much as 2 times the employee’s annual salary. If your project managers or customer support roles are making $60,000, that’s over $100,000 each time a person leaves. Backfilling the role incurs the cost of time for the existing team. Plus how long will it take to hire someone new in this tight hiring environment and for them to ramp up to the skills needed to do the job?
When a customer is unhappy, it's not the review sites they first turn to. They turn to social media. We recently saw a Linkedin post from an unhappy solar customer calling out their installer. He not only tagged the company but personally tagged 3 people at the company, including the CMO. And because it’s social media, other unhappy customers saw it and piled on in the comments. We’re sure that CMO wasn’t happy to be trending in Linkedin that day.
Some upset customers will eventually reach out directly to the CEO. The CEO gets briefed by the Director, the Rep, and contacts the customer to empathically communicate that the company truly cares about their experience. What could have been averted with timely communications that takes a minute to make (or no time at all with Bodhi’s automations), now sucks the sum total of everyone’s time from dealing with the customer and then making sure it doesn’t happen again. That’s thousands of dollars of staff time. And furthermore, no one likes to be micromanaged.
Your customer loss of trust and confidence results in increased scrutiny on future communications. This experience is then foisted onto other members of the team that may interact with the customer in other settings. Imagine that a project manager has lost the customer’s trust. A quality control inspector, upon arriving at a site, inherits the attitude the customer has towards the PM and must carefully navigate this sensitive dynamic. What should have been a short 15 minute visit is now drawn out to hours.
If your company doesn’t have great reviews or getting referrals, what lever do you have to win deals? Lowering your sales price. And for commissioned based sales reps, that means less money. Taking that 9% loss in revenue from negative reviews, that translates to a loss of $5,000 to $10,000 in take home pay for sales reps.
Happy customers will refer friends for free because they want to share their great experience. However, in the words of a Director of Marketing of a national solar company, “The customers that don’t love you, you have to bribe them for referrals.” No wonder customer acquisition costs are so high.
What then is the potential cost of a single missed communication? It is certainly more than the time it takes to compose the message and could measure in the tens of thousands of dollars.
A successful approach to avoiding the costs of poor communication involves multiple strategies. First, it is important to acknowledge that humans are fallible and need help. Second, customers have specific expectations and not every customer will be 100% satisfied.
But a company can establish an infrastructure, follow a plan, and aim for the best outcome with each customer journey. Tools like Bodhi can establish a consistent infrastructure accessible to each customer. No single tool will replace the human, but it can reduce the chance for error, omission or inconsistency. As described above, these reductions will reap benefits to the bottom line, staff morale, and the company brand.
If you’d like to talk more about best practices in customer communications, contact us.