Will you book more jobs if you have a slightly more seamless interaction over the phone? Less worrying about customers digging for credit cards, repeating numbers back-and-forth, ect.
Or will you keep more booked jobs by making sure customers have “Skin in the game”?
These are great questions that are worth asking to help you run your business better.
Let’s answer them with data.
Oncue, a booking service and CRM platform built specifically for movers analyzed 18,000 jobs booked in 2019 to answer two questions:
Should you take a deposit on a booked job?
If there is a benefit, how much?
What’s the point of a deposit?
Let’s start with the essentials. Movers take a deposit upfront because it gets customers invested in their move.
Taking a deposit ensures you have the resources allocated to do the job and that you don’t get a last-minute cancelation – which can lead to having a day with no jobs.
Canceled jobs lead to wasted effort for that move, and they costs money because that’s time not going to a booking that might have gone to completion.
Obviously, you probably won’t be able to recover all of that time and effort with the size of most deposits, but that’s not the point.
The point is to keep your customers invested in you and your business.
So does this actually work?
Let’s look at the data:
Oncue analyzed booked jobs and correlated each job to deposit amounts, then compared this to cancellation rates. Data was sampled from bookings across the United States, and used in aggregate.
What do we see?
Taking No Deposit:
The data shows that a $0 deposit means that you can expect an 88% retention rate.
With no money down, customers cancel at a rate of almost 12%!
Why are they leaving? The top reason for cancellations in this range according to customers was: They found a “better” price. This shows that if customers don’t make a deposit, they “Shop Around.”
Ok, what if you do take a deposit?
How about a small one?
Here’s where things get interesting.
Based on the data, when you take a deposit between $50-$99, your retention rate jumps 4% to 92%! Meaning anticipated cancellations drop to 8%.
With the average value of a move being ~$850, taking a deposit at 6% of the total move value seems to offer the desired effect of retaining your customers.
This small deposit is enough to make a measurable difference.
Let’s take this to the next level, though.
What if you increase your deposit to $100?
Increasing your deposit from $0 to $50 offers a good increase in retention, so more must be better, right?
The answer is: kind of.
Going from a $50 deposit to a $100 deposit increases your retention rate by an additional 2%, to 94%. That’s not the significant jump you see by collecting any deposit at all, but it is measurable.
However, there’s another perspective: Collecting a $100 deposit cuts your cancellation rate in half.
From 12% to 6% cancellation rates – that could be a savings of a ton of time, stress, and money!
What about going even higher?
What if you take a $150+ deposit?
The data suggests that you could see your cancellation rates drop down to 4%!
A quarter of the $0 deposit rate!
That could be the difference between retaining 98% of your customers, or 88% of your customers.
The bottom line:
What does all of this mean for you?
Let’s assume you book 60 jobs per month:
out on almost 90 jobs per year! That’s $74,000!
The data offers one clear message: Take a deposit. It makes a difference.
How much to take is up to you. If every job matters and you can’t afford a higher cancellation margin, you can go with a higher deposit. If you have more resources to allocate, maybe it’s worth testing if a lower deposit increases your volume. That part depends on the mover, their rates, their market, and their sales team.
What are your experiences with deposits? Do they work? Do customers hate them? Let us know over on Facebook!