Your Customers Are Made of Money

I HAVE to break this to you, businesses cannot survive without customers. A business without customers is like a well without out water. Good customer service is the ground water that fills up your well. You’re high and dry without a reputation for taking care of your customers. Plus, the longer you keep customers, the wetter your well, because long term customers are more profitable. A 5% increase in customer retention can boost profit by 25% to 125%

Not digging the well analogy? Here is another way to think about it; your customers are money, gold to be exact, because they appreciate in value as time goes on. You may not think of customers as goods that can be bought or traded, but they’re assets to your company, just like stock investments or an office computer. They are them most vital part of your business’s economic machinery.

You pay hard-earned business capital to market to your customers, you essentially buy their patronage, one person at a time. Once bought, a customer will continue to generate your income, without much further advertising effort. On the flip side, customers who leave take with them every cent that you invested in marketing to them.

Customer retention is FREE MONEY! If you go the extra mile to keep customers, your marketing budget will go down, and your profits will go through the roof. You’ll have to ‘buy’ less new customers, and loyal customers generate some powerful word-of-mouth patronage.

Losing customers has the opposite effect, and can be truly devastating. And, you have no excuse for customers walking away from your business because of poor service, it’s the most controllable factor of your business. Technology can fail, accounts can pay late, but there is no reason to be rude or inattentive to a customer.

One way to gear up for fantastic customer service it to train employees to see each customer for how much they’re really worth. They may treat customers a bit differently if they imagined them as giant stacks of money or piles of gold. Each retained customer is (literally) money in the bank.

Customer Service Case Study #1: One Delay Turns Into 5,000 Reasons To Come Back

This case study is about American Airlines.^[i] The author of the original article was on his way from a business conference in Denver to his home in Chicago. Shortly before arriving at the airport he received a text message from American Airlines stating that his flight was to be delayed by thirty minutes. While waiting in the airport he received several more text messages, each subsequently stating that his flight was to be delayed for even longer. It turns out there was a mechanical problem with the plane and he ended up leaving five hours after his original departure time.

The author, like many disgruntled customers, did not complain to American Airlines. However, American Airlines recognized their mistake, sent the author an unsolicited apology letter, and offered him 5,000 free frequent flier miles for his trouble. American Airlines preemptive good service gave the company another loyal customer.

Customer Service Case Study #2: A Bad Process Is Reversed

This story concerns Best Buy, a consumer electronics store.^[ii] The author of this article and his wife were browsing the laptop section when they spotted a laptop on sale for $699. A service representative asked if they needed help, and they declined because they were unsure about the purchase. They left the store, discussed the purchase, and returned a few hours later with the intent to purchase the laptop.

The author sought out the customer service representative who had previous asked him if he needed help. The representative was rude to him when he asked with help purchasing the laptop. Then the representative asked him to fill out a form before discussing the service. After the author filled out the form he was informed that the store was out of the sale item. He was told he could not order another because the sale ended the next day. The author asked the representative to put one on hold for him in neighboring city, to make sure that it was still there after a drive. He was told that was not possible.

The author and his wife got ready to leave, angry that they were unable to buy the laptop. On their way out they were approached by one of bust buys “Customer Experience Managers”. The manager went out his way to make sure that the author was able to purchase the laptop. He helped the author use the company website to order the laptop from a Best Buy in a city nearby, ensure that the author and his wife would have a sale priced laptop waiting for them. It took some ‘out of the box’ thinking and true dedication to the customer to save the author’s patronage.

Customer Service Case Study #3: Great Service Has No Linguistic Boundaries

This last story concerns an unnamed hotel in South Korea. ^[iii] This is an important story because, were it not for excellent customer service, the author of this article would have been in dire straights. The author had to attend a business meeting in Southern Korea, he didn’t know the area or the language. He took a two hour taxi ride away from his airport, bound for a hotel in a remote region of the country.

When he arrived at his hotel he was informed that they had been overbooked and there was not a room for him. The author’s hotel room had been prearranged, an overbooked room left him virtually deserted in a foreign country.

Th hotel manger appeared, and told the author he was sorry about the mistake. The manager went ahead and booked the author a room in another nearby hotel, then gave his taxi driver instructions to the ensure that he made to his room safely. Th hotel manager took the time to understand the situation, and did everything he could to rectify it.

The moral of these customer service stories is simple: Where there is a crisis, there is an opportunity – you just have to make sure the people you hire know HOW to turn a bad experience into a good or great one. We’ll talk about how to do this in future blog posts.

^[ii] http://www.bieberlabs.com/archives/2007/10/28/customer-experience-managers-at-best-buy-a-bad-experience-turns-good/

^[iii] http://www.allbusiness.com/finance/cash-management/3874656-1.html

Furthermore, long term customers are usually more profitable. A 5% increase in customers retention can boost profit by 25% to 125% ^[2] You also run the risk of her leaving and telling other people and losing potential customers because of her bad experience. Clearly you have to keep her from leaving angry, but how?

Play Nice

Customers were asked what single factor best defines high-quality service. The most frequent response was personal attention. ^[3] You have to let the customer know that you are concerned that they are upset. Tell them that you will personally do everything that you can to fix the situation. Make them feel like you are on their side.

Be friendly from your first interaction, whether or not the customer is complaining, an aura of kindness goes far in any industry. There are certain customers that will make it hard to be nice. You have to try to maintain your cool, no matter what the customer does or says, you have to respond politely. Her reaction will escalate if you respond in anger, whereas overreaching politeness has the power to diffuse the whole situation.

Give It Away

No, you shouldn’t give away products to every customer who files a complaint. However, you can offer coupons, discounts, and the occasional freebee. It also helps if you have reasonable and bureaucracy-free return policy. Customers who are disappointed in a product do not want have to fill out tons of forms to get their money back.

Just under 60% of Australian respondents said they refused to buy a particular brand if prices were too high, but that number jumps to 75% when high prices were combined with poor service – the highest figure worldwide. ^[4]

The solution is in the problem, if you offer a dissatisfied customer a coupon or discount, you are both lowering the price and showing exemplary customer service.

Over Deliver

Seven out of ten complaining customers will do business with you again if you resolve the complaint in their favor. If you resolve it on the spot, 95 percent will do business with you again. ^[5] This is why you have to go ‘above and beyond’ to fulfill the needs of a complaining customer. Right away is better, but after the fact is okay if that’s not possible.

It is important to keep every customer you have. A five percent increase in customer retention will yield a 25-100 percentage improvement in profits.^[6] It is worth your effort and the price of the discount or return to keep a customer. Put yourself in the customer’s place and imagine what you would like out of the interaction. The ‘Golden Rule’ is often the key to customer retention.

You know from previous posts that Bad Customer Service is costly, whichever way you calculate the costs of losing a customer.

^[2] http://waiterbell.wordpress.com/2006/04/06/research-commonly-quoted-customer-service-statistics/

^[3] http://findarticles.com/p/articles/mi_m3190/is_n29_v25/ai_11070542/

^[4] http://www.smartcompany.com.au/retail/customer-service-in-australia-hits-new-low.html

^[5] http://www.prlog.org/10320523-are-companies-cutting-back-on-customer-service-in-bad-economy.html

^[6] http://www.financialsense.com/fsu/editorials/tycoon/2008/0725.html

The introduction of technology in the workplace speeds up interaction and makes for smoother customer service, right?

Well, in many cases that’s wrong. Customers crave old-fashioned, friendly, and informed service over speed. What’s more, the quality of customer service is vital to any company because poor customer service is the number one reason that customers switch to another company.

Nearly 70% of all customers who switch companies switch because of poor customer service.^[i] Inadequate customer service doubles down on trouble for a company because it drives business away and into the open arms of their competitor.

Business’s desire to use technology to streamline the customer interaction process has actually sped up the switching process!

Many patrons feel that point-of-sale (POS) technology gives the service representatives an excuse to ignore customers in favor of a screen. The representative may also rely on technology to retrieve information, which makes them appear unknowledgeable about the product or service. These reasons, plus a lack of customized solutions, and/or policy-driven bureaucracy, are the main motivations for service related company switches.

Don’t forget the painful truth – every time someone leaves you it means your competitors gain a new client – OWCH!

The problem is particularly severe in the retail industry, which has the highest customer turnover rate.

In the past year, 19% of people have patronized a different retailer, such as a grocer or department store, because of poor customer service. ^[ii]

This means that, if you company is retail, it’s likely that poor customer service has sent almost 20% of your business to a competitor. There is not a single company out there that can afford to be giving away business at that rate. Let’s say that your small retail company would net $150,000 in income every year, if you lose patrons due to poor customer service than you are losing upwards of $28,500 a year. That’s $28,500 that you are literally giving away to your competition, you might as well be handing them a $30k check.

The problem is compounded by word-of-mouth on customer disservice.

The average disgruntled consumer tells up to twenty of their friends about their negative experience. Many of those informed will also chose to do business with another company to avoid a repeat of their friends bad experience. If we go back to the original small business example, and take an average of ten friends foregoing a business because of rumors of bad service, the small business in now losing $285,000 a year. That’s negative income, that’s bankruptcy.

So, why aren’t all retail stores bankrupt? It’s because patrons are constantly switching companies in search of better customer service. The only way to break the cycle is have innovative, friendly, and well-informed service that none of your competitors offer to their patrons. Then your business can start collecting all the ‘bad-service’ checks from competitors. Poor customer service may be an easy way to lose a lot of business, but good customer service has the potential to increase your income tenfold.

Want to know how to cash all those checks in?

You’re at the right place – bookmark this blog and stay tuned – we’re going to show you how to do that — EXPONENTIALLY!

^[ii] http://www.redorbit.com/news/technology/186467/poor_customer_service_is_top_reason_consumers_switch_service_providers/