How Customer Service Influences Profit
Customer service and support are one of the most important aspects of any business.
Yet, many business owners and customer support managers often underestimate its importance and the impact it can have on your revenue.
This is despite a plethora of data that supports the importance of delivering a great CX so there is clearly still a gap in communication to senior executives that there is a clear link on engaged customers leading to more profit.
Of course, some successful companies clearly understand it (Disney and Amazon come to mind) and with the emergence of Net Promoter Scores, Customer Effort Score and more, measuring customer engagement and satisfaction is easier than its ever been.
In this article, we explore how the link between delivering great customer service and profit.
Five ways customer service influences profit and how you can avoid simple mistakes
1. Word of Mouth
Sometimes things go wrong, and your customers know that there can be different reasons for it.
This is when they will take to the phone and call your customer support or write them an email about any issues they have with your product or service.
Once they get in touch with you, there are two possible outcomes:
- You Deliver A Positive Experience: Your customer support team communicates well with the customer and solves their problems. Your customer is happy and satisfied. They go on with their lives and tell one or two of their friends about their positive experience with you. One of the friends decides to buy something from you. You get a new customer.
- You Deliver A Negative Experience: Your customer support team is terrible at solving your customer’s problem. The customer is upset or even angry about their experience. They tell ten or twenty of their friends about it. These people firmly decide that they will not purchase anything from you. You don’t get new customers and instead get a bad reputation that could spread like wildfire.
2. Delivering Bad Customer Service
Bad customer service can influence profit just as much as good customer service.
This is why delivering bad customer service can be detrimental to your company’s reputation.
Never underestimate the power of your customer service and always strive to perfect it as much as you can.
For instance, A recent Zendesk Customer Experience Trends Report 2020 revealed that “roughly half of customers say they would switch to a competitor after just one bad experience. In the case of more than one bad experience, that number snowballs to 80%”.
You could potentially use a third of your customers if you deliver bad customer experience, so obviously, your sales will drop drastically after such a loss.
By the way, it is estimated that Australian businesses lose over $122B per year to poor customer experiences.
3. Customer Retention
Did you know that retaining existing customers is much cheaper than acquiring new ones?
It is a common misconception that getting as many customers as possible will be more beneficial and profitable for you than trying to keep the ones you already have.
This is why so many businesses spend tons on advertising to bigger audiences and forget to care about their existing customers.
Consequently, your strategy should be the opposite.
And one of the ways to improve your customer retention is by focusing on your customer service and support.
If your existing customers are satisfied with you, they will not want to leave, and you won’t need to invest as much money to find more customers.
Of course, you will still need to work on growing your business, but you won’t be losing as many existing customers as you would with bad service.
4. New Products
One more way to attract new customers organically and grow your business is by introducing new products.
Once again, you won’t need to worry about spending too much to attract new customers because your new products will be doing this already.
After all, if you’ve looked after your existing customers they will be strong advocates for your brand already!
However, to identify what kinds of products your customers want to see, you will need to use some Voice of the Customer techniques first that can include:
- Set Up Surveys: Firstly, set up surveys that your customer service team will give to your customers for them to complete that is sized correctly (not too long as that will impact completion rates and not too short as to not provide sufficient data).
- Research: Secondly, get as much feedback as possible not only through the surveys but also by searching online. In other words, get as much information as you can to get more accurate results.
- Identify New Products: Finally, analyse all the data you collected and identify what kind of products your customers want to see. Then do something crazy – ask them if you’ve got it right! This will show them that you value their opinions and want to give them everything they are looking for.
5. Identifying Problems
One of the last ways customer service influences profit is by helping to eliminate Failure Demand that can save your organisation a heap of money and improve your customer service delivery.
It’s incredibly important to quickly identify problems within your business in order to improve trouble spots and your customer service team is typically at the forefront of customer feedback and close to all your businesses deficiencies because they hear about it all day!
You can identify problems through your customer support team in the same way as you researched new products or do what all the successful companies do, just go and ask your frontline agents directly!
If you can avoid miscommunication with customers or late delivery, for example, you will not have to spend money on unnecessary expenses trying to rectify the issue…
Jeff Bethos was famously quoted as saying “The best service is no service”. By eliminating the need for customers having to contact your business to resolve issues as the starting point, and then if, and when they do, ensuring its a great customer experience your business will be well on the way to sustainable success.
Recommended further reading: The false economy of customer retention
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