GuildQuality

I just finished examining financial information from 457 recent remodeling projects for which we had survey responses. From the data, it looks like…

Gross Profit Margin = (0.0424 x Satisfaction Index) + 0.4155

Per that equation, if 50 customers were completely unsatisfied (zeros across the board and would not recommend) the remodeler would earn an average GPM of 41.55%. If 50 customers were completely satisfied (fours across the board and would recommend), the remodeler would earn an average GPM of 45.79%.

However, that equation assumes a linear relationship, and isn’t really a reflection of reality. In actuality, the influence is more dramatic on the far left and far right ends of the chart. GPM tweaks up and down in the extremes: when comparing the 50 most satisfied (avg GPM of 49.0%) and the 50 least satisfied (avg of 40.5%), the difference is actually 8.5%.

These customers are all from roughly the same period, so I theorize that the increases in GPM are attributable to a smoother experience. They don’t reflect any increases a member would ultimately realize from continued improvements in reputation. Those gains would certainly come (and some other research suggests they will be significant), but the positive trend I see here is likely a reflection of the direct and immediate benefits of less call backs, less fee disputes, etc.

Bigger gains in profitability come when the stronger reputation begins to earn the company premium pricing. But judging from this data, there are immediate financial benefits from delivering an exception customer experience: Jobs are more profitable when the customer is happy.

On a $10,000 job, the contractor makes $60 more by having a very happy customer (95%) as opposed to a moderately satisfied customer (80%). For a $400,000 job, the same improved satisfaction increases the gross profit by $2,400.