Customers are an Investment. Maximize Your Return.
Wednesday, August 10, 2011
Posted by: Dr. Alan Zimmerman
Dr. Zimmerman's TUESDAY TIP:
"Customers are an investment. Maximize your return."
Dr. Alan Zimmerman's Personal Commentary:
Several years ago, Wendy's devised one of the most memorable commercials of all time. It featured several old ladies in a hamburger shop examining the hamburgers they had just purchased. When they opened the bun, the burger was so miniscule that they cried out, "Where's the beef?"
In essence, they were saying there was nothing to be found in the hamburgers sold by Wendy's competitors. And in a similar sense, there are some people who say there's nothing to be found in the hoopla surrounding customer service.
In other words, customer service is nice in theory, but it doesn't pay off. And if it doesn't pay off, why bother?
It's a good question, and it deserves to be answered ... because I've run across a lot of cynics when I'm speaking on the topic of customer service. In one organization where I was really pushing them to improve their customer service, one audience member got quite defensive. He burst out, saying, "Hey, we're no worse than anybody else."
Now wouldn't that make a great slogan for a company or a product? "Come and buy from us ... because we're no worse than anybody else." It's rather absurd when you think about it.
Too many people are stuck in an old, outdated business model. They're convinced price is the only way to sell anything. And they may even think the delivery of great customer service is a waste of their time and money. Whether they actually say it or not, their motto tends to be "We give lousy service, but we're cheap."
As you might guess, I think those folks are wrong, but they still ask a very legitimate question. What's the payoff in delivering exceptional customer service? What's the bottom line? What's in it for them?
A lot. The research is quite clear. When you deliver great service, you're going to get several payoffs. And if you don't deliver great service, it's going to cost you.
But let me answer the question: Where's the beef in customer service?"
1. The Financial Payoff Of Great Service
A short time ago, Petouhoff, Leaver, and Magarie released the results of their extensive research on this very question. They called their report, "The Economic Necessity of Customer Service." They concluded, "Customer service experiences EITHER generate or diminish company revenue." In other words, customer service is not a neutral factor in your business. It either makes you money or costs you money.
They went on to say, "Customer service has a profound effect on a corporation's bottom line." How can that be?
A simple formula says it all: Great Service = Customer Retention = Profit. A "Harvard Business Review" article found that companies that boosted their customer retention by as little as 5% saw increases in their profits ranging from 25% to a whopping 95%.
But the reverse is also true: Poor Service = Lost Customers = Lost Profit. A "US News and World Report" article stated that the average American business loses 15% of it's customer base annually, and that 82% of the customers who stop doing business with a company do so because of "poor customer service" or an "unsatisfactorily resolved" complaint.
The most shocking discovery is that ONLY 9% of customers stop doing business with a company because of price! Indeed, price may be one of the least of your worries when it comes to keeping customers. You need to be more concerned with that whopping 82% that stop doing business with you because of a customer-service related issue.
The lesson? When you keep your customers and when you keep them happy, you can expect your profits to grow.
2. The Financial Cost Of Poor Service
If you're still not convinced that good customer service pays off big time, then consider this. Bad service costs you big time.
In a ground-breaking study, the Genesys organization conducted one of the first global surveys on customer service as they focused on 16 major economies in North America, Latin America, Asia Pacific, and Europe. In their report, called "The Cost of Poor Customer Service," Genesys concluded that these 16 countries lost an estimated $338.5 BILLION DOLLARS each year due to customer defections or an abandoned purchase as a direct result of poor service.
Of course, the cynics can say, "Big deal. So we lose a customer once in a while. You can't please everyone. True enough, you can't please everyone. BUT it's a much bigger deal than you might think when you lose a customer ... because that defecting, disgruntled customer WILL hurt your future business.
After all, that one unhappy customer doesn't just shut up and slink away. Oh no! He talks. In fact, it's quite well known that an unhappy customer will tell 10 other people about his bad experience with your company ... increasing the chances they won't buy from you either. And if you factor in Facebook and Twitter, your unhappy customer may badmouth your company to another 100 people.
For example, I remember one young couple who was in the process of getting married. They figured out what they would need for their new life together and listed those items on their wedding registry with a popular retail chain. This retail chain was easily going to generate thousands of dollars' worth of business.
Unfortunately, one of the couple's friends forgot to scan an item that they were purchasing, which resulted in the couple receiving two identical punch bowls. Upon returning to the retailer with the gift receipt, the couple was met by a store clerk who was not concerned with the customer's dilemma and refused to issue them a refund because they didn't have the "original receipt." The couple promptly asked to speak to the manager; however, the manager simply echoed the clerk's remarks.
Now on the surface, the retail outlet was dealing with a small service issue on a product that cost less than twenty dollars. The cost of refunding the couple would have been miniscule, but the value gained by keeping the customer happy would have been priceless.
Their lack of service caused the company to lose much more than a twenty-dollar sale, because the infuriated couple went to their network of Facebook friends and publicly chastised the company. As a result, two newly engaged couples and two expecting first-time mothers decided not to use the retailer for their wedding and baby registries. A small unaccommodating procedure, coupled with apathetic service providers, cost this retailer thousands of dollars in immediate revenue and possibly more in the long-term.
One customer's poor experience could turn into a forest fire of bad publicity that spreads easily via the Internet. And like a forest fire, the damage of bad publicity via the Internet is often hard to contain, let alone extinguish. The company that provides poor service not only risks losing the customer who had the bad experience, but also possibly thousands more who will hear of the poor service.
3. The Emotional Payoff Your Customers Get ... When They Get Great Service
I've been outlining the financial payoffs that come with great service and the financial costs you have to pay when you deliver poor service. But customer service ALWAYS entails more than a financial transaction. It's ALSO an emotional experience.
Your customers want you to do more than put the goods and services in their hands. They want a positive emotional EXPERIENCE as well.
And that's the payoff they get when you deliver great service. Your customers feel appreciated and respected. And they want to keep on doing business where they get those feelings.
There's no better evidence of that than your standard cup of coffee. Just compare the EXPERIENCE you get when you buy a cup of coffee at a nearby gas station versus a Starbucks store.
You might argue that the coffee offered at each place has very little difference. But each place offers a vastly different EXPERIENCE. When you get your coffee from the gas station, you might be greeted by a store clerk who prefers to keep his attention more on the newspaper in his lap than on the customer in front of him. You may or may not get the polite "May I help you?" You complete the transaction, and that's it. You zip in and out of the gas station with a feeling of indifference ... coffee in hand.
However, with Starbucks you might argue that you're not just there to get a cup of coffee. You're there to enjoy the "Starbucks," and a part of that EXPERIENCE is excellent customer service. Getting your coffee at Starbucks is not a mere transactional activity. Getting your coffee often means getting to know the people there, letting them know your habits, or maybe even sharing a slice or two of your life's stories.
In a Starbucks store, a Starbucks barista may greet his or her customers on a first name basis, remembering frequent customers' regular orders, and even remembering their kids' names, where they go to school, and so on. The customer service EXPERIENCE is all about caring about the customers and what they need. And customers are willing to pay a very high premium for coffee that comes with that kind of an emotional EXPERIENCE. It's a huge payoff for them ... a payoff that is well worth the difference in cost.
But there's one more bit of good news. You also get an emotional payoff.
4. The Emotional Payoff YOU Get ... When You Deliver Great Service
According to "Workforce Management" magazine, only 50% of the workforce is satisfied with their jobs. Compare that to an 82% job satisfaction rate at Starbucks. Quite simply, companies that focus on providing great customer service soon realize that the service is not only good for the customer, it's also good for the employees. As employees deliver better and better service, they are transformed from "This is something we have to do" to "This is who we are."
It becomes a delicious cycle. The better people become at providing service, the more thanks and respect they get from their customers. And the better the employees feel about their jobs, the higher their enthusiasm, and the more enthusiasm they transfer to their customers. Employee morale, productivity, and retention all go up.
Plain and simple, it just feels good to help people. That's what one airline employee learned. Even though she worked in an industry that has been plagued with a reputation for bad service, she knew there is always something she can do to help the customer.
In this one particular flight, there was a two-hour delay due to bad weather conditions, causing passengers to idle around in the departure lounge while waiting for the sky to clear up. Among this group of passengers was a family of four with small children who were quickly becoming cranky due to the long journey and the late hour. The observant airline employee happened to notice this as she went around distributing refreshments to the waiting passengers.
On her own initiative, the airline employee went back to her counter and produced two stuffed bears, products of the airline, and presented them cheerfully to the grumpy kids. The kids' eyes sparkled with curiosity as they reached for the bears, and soon they fell asleep in their parents' laps while tightly holding the bears. The relieved parents were understandably grateful to the airline representative for making their journey much more enjoyable ... for them and their kids.
This thoughtful service gesture helped solidify a bond with a customer who is now much more inclined to do business with this airline in the future. And the airline employee got to feel better about her job and the difference it can make. She got an emotional payoff.
5. The Service Payoff ... It's The Perfect Win-Win-Win
When you deliver great service, you keep more of your customers. You keep them happy, and you make a higher profit. Even your service providers get to feel a great deal better about their jobs. Everybody wins.
List 5 things you're going to do this week to offer great service. Make sure one of those items is something new and better in the way you deliver service.
Make every day your payoff day!
Dr. Alan Zimmerman
Reprinted with permission from Dr. Alan Zimmerman's Internet newsletter, the 'Tuesday Tip.' For your own personal, free subscription to the 'Tuesday Tip' ... along with several other complimentary gifts, go to http://www.drzimmerman.com/