Benefits of effective customer service

The central aim of effective customer service and call-centres is retaining customers, but when an organization gets this right the acquisition of new customers – and so many other things – automatically becomes much easier too.

Retaining customers – enabled by excellent customer service – produces many positive benefits for the organization aside from the obvious revenue and profit results:
Retaining customers through effective customer service enables easier growth, indirectly and directly, for example by sustaining healthier volumes and margins, and by business expansion from word-of-mouth referrals.
High levels of customer retention via effective customer service also improves staff morale and motivation. No-one enjoys working for an organization that feels like a sinking ship, or where stressful arguments or pressures prevail. When customers are happy, all the
staff are happier too – and more productive.
Improved staff morale and motivation resulting from reducing customer attrition also positively benefits staff retention and turnover, recruitment quality and costs, stress, grievance, discipline and counselling pressures.
Reduced customer attrition and upset naturally reduces litigation and legal problems, from customers or fair trading laws.
Retaining customers also enables the whole organization – especially middle-managers – to focus more on proactive opportunities (growth, innovation, development, etc) rather than reactive fire-fighting, crisis management, failure analysis, and the negative high pressures to win replacement business.
Having a culture of delighting and retaining customers fuels positive publicity and reputation in the media, and increasingly on the web in blogs and forums, etc. The converse applies of course, when nowadays just one disgruntled customer and a reasonable network of web friends can easily cause a significant public relations headache.

For these and other reasons the cost difference and relative impacts on organizations between gaining and retaining customers can be staggering. A useful analogy is that only a fool tries to fill a bucket of water when the bucket has lots of holes. Better to fix the holes and stop the leaks before you try to fill the bucket. Especially consider the actual cost of retaining customers when all that many customers require is not to be upset. While the trend is apparently for more people to complain (mobile phones and the internet make it easier to do so, and people are less tolerant than they used to be) this does not necessarily mean that customers are more likely to migrate to competitors.

In fact these days time pressures and the ‘hassle factor’ combine to create huge inertia in people’s decision-making, which means although they might complain more, they have less inclination to actually change suppliers because of the time and inconvenience of doing so. There are arguably some exceptions in fast-changing sectors, but largely inertia tends to make it more likely for customers to stay than go. People behave like organizations, when the true costs of change in time and hassle are recognized often to be greater than the savings that the change will achieve.

Consequently most people prefer not to change suppliers – they have better things to do with their time – which means that retaining customers should actually be easy – if only organizations would attend to the basic customer service principles and keep customers happy. In short, customers largely don’t usually leave unless they are upset enough to do so. Contrast the cost of achieving happy customers – virtually zero aside from normal customer service and operating overheads required to run a business – with the costs of marketing, advertising, selling, sales training, sales management, credit-control and account set-up, that necessarily arise in the acquisition of new customers.

Consider also that the main factor in keeping a customer – even if the situation appears irretrievable – often comes down to a simple apology or update – just by keeping someone informed and avoiding upset – and compare this with the huge costs of acquiring a new customer. It is then easy to see that the costs of gaining a customer can be five, ten, a hundred or a thousand times greater than retaining a customer. And yet from the customers’ view many organizations seem unaware or dismissive of the need to prioritize great customer service above many other perhaps more exciting or fashionable initiatives – typically related to sales, marketing, advertising, technology, the web, etc.

These high-profile customer acquisition activities, plus systems, policies, procedures, training, etc., all play a major role in running a high-quality organization, but the glue which holds it all together for the customer – and often the only thing that really matters to the customer, is the quality of customer service that the customer feels and experiences. Within customer service there are many elements which must be organised to make effective customer service happen properly – pricing strategy is important of course – but the crucial
constant factor is the human element – how people are treated and communicated with – because simply, customers are people, and people tend to behave like people and respond to people – they do not behave like computers, and they do not respond like machines.

Policies, systems, technology all enable customer service, but none of these actually determines effective customer service. Only people – your employees – can do this, particularly when serious problems arise which by their nature must be escalated to a ‘real person’.
People – your employees – also (if encouraged and enabled) perform another critical customer service function – that of giving feedback and suggestions to improve customer service systems, policies, processes, technology, etc. Often policies and technology are dreamt up by managers or consultants working away from the actual day-to-day customer-facing activity. Feedback and recommendations from customer service staff – and customers too – are vital in refining and improving the systems and policies within which the function is operating. So again, people – your employees – are the most crucial in shaping effective customer services capabilities. Ignorance and avoidance of these factors is a problem, but also a big opportunity. Where customer service is neglected and ignored the function is powerful lever waiting to be pulled.

Improving customer service – especially empowering and listening to customer service staff – offers many organizations a bigger return on investment than any other initiative. Customer service is generally the critical factor in determining whether a customer buys and is
retained, which is ultimately what the organization exists to do – to serve and retain customers.

Understand Your Customers
In business-to-business trading, providing a high level of customer care often requires you to find out what your customers want. Once you have identified your most valuable customers or best potential customers, you can target your highest levels of customer care towards them. Another approach, particularly in the consumer market, is the obligation to treat all consumers to the highest standard.

Collect Information About Your Customers
Information about your customers and what they want is available from many sources, including:

  • their order history
  • records of their contacts with your business – phone calls, meetings and so on
  • direct feedback – if you ask them, customers will usually tell you what they want
  • changes in individual customers’ order patterns
  • changes in the overall success of specific products or services
  • feedback about your existing range – what it does and doesn’t do
  • enquiries about possible new products or services
  • feedback from your customers about things they buy from other businesses
  • changes in the goods and services your competitors are selling
  • feedback and referrals from other, non-competitive suppliers
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