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

From previous blog posts, you know that (1) for every poorly served client, you’re handing him/her over to a competitor and (2) the costs of bad customer service can be astronomical.

How ‘herding’ makes a bad situation worse

People prefer individual analysis of a business over advertisements and marketing. Whenever a consumer has uncertain private information, she is likely to be influenced by others because their opinions contain new information^[ii]. In some cases individuals may discard their own private opinions to follow others, this is a marketing phenomenon known as ‘herding’.

Herding is why every instance of bad customer service drives business away at an alarming rate. A typical dissatisfied customer will tell eight to ten people about their problem. One in five will tell twenty. ^[iii] Those told will often choose not do business with the offending company, and often times they will then tell even more people to avoid the business. A single occurrence of bad service is a spark that sets off an uncontrollable word-of-mouth wildfire that has the potential to destroy a business.

How the Internet can take a worse situation and turn it into a disaster.

The herding problem is compounded in the information age, one customer can use the Internet to spread their bad experience to thousands with a click of a mouse.

The internet is riddled with websites where consumers can post about their experiences with companies.

Viewpoints, Rate It All, and Consumer Search are among the top customer driven business reporting and rating sites. Google recently bought out another popular rating site, Deja.com, and now has a massive database of consumer reports.

Hundreds of thousands of people access these sites everyday to receive guidance on businesses and products from all over the world. This can be a serious problem for companies who receive poor ratings because these reports will pop up when a potential customer searches a business.

It is often the 4 percent that do complain that end up posting their bad experience on the web. The number one reason that people post their stories on these consumer complaint web sites is because nobody in the company is willing to resolve the complaint after the error is made. ^[vii] The best way to avoid a bad service wildfire is to train representatives to offer the best service possible, and to resolve all customer issues immediately.

It takes an average of twelve positive service incidents to make up for one negative incident. ^[viii]

There is good news, customers who have superior service experiences are as likely to tell other people as patrons who have had poor experiences.^[ix]

It is the mediocre service representatives that get no mentions. Stellar customer service makes patrons return, tell others about their positive experience, and give the company excellent ratings on consumer web sites. Ideally, the only ratings that pop when a company is searched are positive ones, full of glowing customer service reports.

^[ii] Guodong (Gordon) Gao, University of Maryland, Bin Gu, University of Texas at Austin, Mingfeng Lin, University of Maryland.(2007) THE DYNAMICS OF ONLINE CONSUMER REVIEWS

^[iii] http://www.content4reprint.com/business/management/poor-customer-service-can-kill-your-business.htm

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

^[viii] http://www.streetdirectory.com/travel_guide/1144/business_and_finance/tips_for_curing_bad_customer_service.html

^[ix] Guodong (Gordon) Gao, University of Maryland, Bin Gu, University of Texas at Austin, Mingfeng Lin, University of Maryland.(2007) THE DYNAMICS OF ONLINE CONSUMER REVIEWS

The Costs Of Bad Customer Service

Example #1: One sale of $100 with $20 of revenue per month:

If a disgruntled customer tells 8 people (the minimum) the company will lose $800 in sales and $160 in revenue a month. That’s $2,400 in sales and $480 in revenue quarterly. It’s also $9,600 in sales and $1,920 in revenue yearly.

If a disgruntled customer tells 10 people (the median) the company will lose $1,000 in sales and $200 in revenue a month. That’s $3,000 in sales and $600 in revenue quarterly. It’s also $12,000 in sales and $2,400 in revenue yearly.

If a disgruntled customer tells 20 people (the maximum) the company will lose $2,000 in sales and $400 in revenue a month. That’s $6,000 in sales and $1,200 in revenue quarterly. It’s also $24,000 in sales and $4,800 in revenue yearly.

Example #2: One sale of $15 with a $5 revenue per week:

If a disgruntled customer tells 8 people (the minimum) the company will lose $120 in sales and $40 in revenue per week. The company will lose $540 in sales and $180 in revenue a month. That’s $1,620 in sales and $540 in revenue quarterly. It’s also $6,240 in sales and $2,080 in revenue yearly.

If a disgruntled customer tells 10 people (the median) the company will lose $150 in sales and $50 in revenue per week. The company will lose $675 in sales and $225 in revenue a month. That’ss $2,025 in sales and $675 in revenue quarterly. It’s also $7,800 in sales and $2,600 in revenue yearly.

If a disgruntled customer tells 20 people (the maximum) the company will lose $300 in sales and $100 in revenue per week. The company will lose $1,350 in sales and $450 in revenue a month. That’ss $4,050 in sales and $1,350 in revenue quarterly. It’s also $15,600 in sales and $5,200 in revenue yearly.

Can you afford NOT to have good or great customer service?!?!?

Stay tuned for ways to improve your customer service in future blog posts – if you can’t afford to wait, contact Positive Training Solutions <– by clicking here!