Customer Servces
Customer Service Breeds Customer Loyaltyby John Tschohl
The goal for any business is to increase sales. Reaching that goal has become more difficult than ever due to increasing competition. What most business owners don't realize, however, is that within their strategic arsenal is a weapon more powerful than any advertising or new technology.
What is it? Customer service.
Getting a customer in the door to your business is relatively easy--once. Getting that customer to return is much more difficult. I've seen organizations spend millions of dollars on advertising to attract customers, then use baseball bats, figuratively speaking, to drive them away. It is that repeat business that has a positive impact on the bottom line.
A recent study by the Washington, D. C.-based Technical Assistance Research Program (TARP) found that each problem a customer encounters causes, on average, a 20 percent decline in long-term loyalty. Another study, this one conducted by the American Management Association, found that patronage by loyal customers yields 65 percent of a typical business' volume.
You can do all the advertising and promotions you want, but if customers don't have a pleasant experience while doing business with you, they will not return. Customer service encompasses many things: speed, convenience, a quality product or service, phone calls that are returned promptly, competitive prices, and knowledgeable sales people.
The reasons customers continue to patronize a business are many, including location, price, product, and customer service. Studies prove that customer service actually is more effective than marketing, promotion, or advertising in enhancing the bottom line. Unfortunately, many business owners are reluctant to view customer service as a marketing strategy. Instead, they see it as an after-sale service, something that relates to a previous sale rather than to a future one.
Another study conducted by TARP determined that the average return from service activity for makers of consumer durables, such as washing machines and refrigerators, is 100 percent. In other words, if a company spends $1 million on a service program, it receives $2 million in bottom-line benefits. For banks, the return on service can be as high as 170 percent. Payoff can be even higher--up to 200 percent--in the very competitive retailing field. Here, high-quality personal service is the team's star, and customer loyalty is the first-round draft choice.
If you don't want your sales to head south, you had better treat your customers well. Customer loyalty that results from exceptional customer service will increase your sales and your profits.
A study by The Forum Corporation found that customers are five times more likely to switch vendors because of perceived service problems than because of price concerns or product quality issues. Poor service is responsible for 40 percent of customer defections, according to a study by the management consulting firm of Booz, Allen & Hamilton, Inc.
Exceptional customer service also reduces employee turnover. Turnover is inversely proportional to employee perceptions of the quality of service provided by the employer. When a company's service is perceived as bad, not only do consumers not like to patronize the business, but employees don't like to work for it. High employee turnover should be a warning sign to employers that the company is not customer-focused.
A company that focuses on customer service will reap bountiful rewards in the form of increased sales and customer--and employee--loyalty. The competitive edge will continue to go to companies with personal, personable service. Customer service is a high-yield investment. The bottom line is this: Satisfied customers buy more--and they buy more often.
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John Tschohl is president of Service Quality Institute, speaks all over the world, is author of four best-selling books & a leading authority on customer service. TIME refers to him as a "customer service guru." Contact John at www.customer-service.com.
Customer Servces