Customer service is what drives the success of the any business. Some would surely say, “No Errol, a good product or service concept drives the success of any business.” While that statement is somewhat true, a good product or service concept without great customer support is like expecting your beautiful garden flowers to flourish without your giving awareness of them. I have often found that you do not get upper management’s or the owner’s full attention regarding customer support if you provide the financial impact to the company. Customer service has a dual role as it both creates and preserves revenue. I’d like to explain why I think this to be true.
Customer service creates revenue via the word of mouth avenue. Each time a great product or service is coupled with great customer support, your web visitors become your ambassadors. Their willingness to speak positively about your business results in additional customers, thereby creating additional revenue. Recent research by the Technical Assistance Research Program (TARP) indicates that for each 10 people hearing either positive or negative “word of mouth” information, 1 person takes action. Any particular one new customer, should they receive the level of service expected, will in turn keep carefully the positive “word of mouth” cycle in motion. Another kind of revenue creation consequently of great customer support are price increases. TARP in addition has studied the impact of price increases on the customer’s willingness to continue to complete business with companies. Telus tv support In a study of the banking industry, only 10 percent of survey respondents who had not experienced a customer support related problem expressed dissatisfaction by having an upsurge in fees and charges. Which means that 90 percent of survey respondents were okay with the purchase price increases due to the level of customer support supplied by their unique bank.
When it comes to customer support acting as a revenue preserver, there’s one question that must definitely be answered before we continue. That question is – How much can be your customer worth to your business? Whether your company is small or large, the need to figure out what your customer is worth to your business is important when calculating the amount of revenue being preserved by addressing customer support related issues. As an example, if your business has 1,000 customers and the common annual revenue generated by each customer is $400.00. If 10 percent of these customers experience customer support related problems, that’s 100 customers. Bear with me as we start the calculations! Now let’s think that 50% of these customers don’t even bother to complain, they only simply go away. Their decision to leave without complaining represents $20,000.00 in lost revenue.
Think about another 50% that complain? Let’s claim that you’re in a position to satisfy 40% (20), 40% (20) become frustrated with your attempts to satisfy and 20% (10) remain dissatisfied. So now let’s consider the repurchase behavior of these complaining customers. Should 10% (2) of the customers that you’re in a position to satisfy when they complain decide to not repurchase, that represents $800.00 in lost revenue. In the frustrated with your attempts to satisfy group, 25 % (5) discontinue purchases with your company, which represents $2000.00 in revenue. To the customers that remain dissatisfied after complaining – 60% (6) of the group decide to not repurchase from your own company, meaning yet another $2400.00 in lost revenue. The sum total potential annual revenue lost in this scenario is $25,200.00! Wait, there’s more. Remember the “word of mouth” factor discussed earlier. These dissatisfied customers will tell others about their experience with your company. In this scenario, when you consider the 50 customers that left without complaining, add the 13 customers that complained yet didn’t repurchase, that’s 63 customers who have the potential to make use of negative “word of mouth” marketing. If these dissatisfied customers tell 10 additional people about their experiences (630 people) and 1 in 10 acts on the info (63 people), there’s potential revenue missed due to dissatisfied customers. Even though the brand new customers average annual purchases equals $300.00, you’re still possibly facing $18900.00 in lost potential revenue. Don’t overlook the cost side of poor customer support – the employee costs to resolve customer complaints and the material costs when rework is required to satisfy the customer. Take this example and apply your real numbers to ascertain the financial impact to your business. Whew! Plenty of calculations, but it’s definitely worthwhile as it pertains to determining the financial impact of customer service.Read More