In this blog, I want to share how one company, Carocon Corporation, has created client loyalty in an industry not known for much loyalty.
Carocon Corporation is the fourth largest apartment contractor in the US. They build over 2,600 apartment units annually. I have had the privilege of working with the company since early 2000 and currently serve on its board of directors.
I was recently talking with the company’s president, Ambrose Dittloff, and he made mention that nearly all of their backlog was with very loyal developers (repeat projects over many years). Ambrose joined the company in 2001 and said they have increased their loyal clients by a factor of six.
This piqued my interest, given that the transactional, one-off nature of construction projects doesn’t naturally lend itself to a focus on long-term client loyalty. This led to more discussion about how they have accomplished this. Here are some things I learned:
- Choose Developers (Clients) Carefully: While real estate developments are transactional in nature, Carocon looks for developers who are in the business for the long-haul. Carocon looks for clients that tend to have:
- A focus on doing business an ongoing basis, as opposed to creating a one-off business to serve a single project.
- Long-standing relationships with architects, investors, bankers, and even other contractors. Does the developer have a track record of building strong relationships, or do they have a history of claims and disputes with other contractors?
- A business model built on shared success with clients and suppliers, as opposed to contractual terms and conditions slanted so that they strongly favor the developer? Better to avoid the us-first types of clients.
According to Ambrose, “the discipline of say “no,” leads to repeat business.”
- Early Involvement in the Process: Carocon wants to be involved early in the process when plans are being developed. In this way, they can better understand the project and offer useful suggestions to the architect and developer on ways to improve the project.
- Improve Their Processes: It is not all about selecting the right clients. Carocon has made some changes as well. Most noteworthy are:
- They take a long-term view with the client. They do not nickel and dime the client with small change orders. They make the experience a positive one. Carocon recently absorbed a significant fee reduction on a project due to a mistake. The client then awarded them two new projects.
- Make clients aware of problems immediately. The longer you wait, the problem is only likely to grow.
- Carocon created a very clear change order policy. They review this with clients on every project. This helps avoid surprises.
The last thing that Ambrose talked about was creating emotional satisfaction for clients leading to stronger long-term client loyalty. When building a $25 million+ project hitting deadlines and budgets is critical. The client has to “feel” that they are in good hands when entrusting a major project to Carocon. One of the ways they do this is to make certain that the senior management team is visible, attending project meetings, visiting job sites, and generally staying in touch with the client. According to Ambrose, “You can’t be satisfied just doing a good job. The client has to see the involvement of senior managers to develop the confidence that they made a great choice in their contractor.”
To find out more about Carocon, click here.