Cost Cutting Can Be A Leading Indicator of Unhappy Customers

Filed in Blog, Customer Service by on October 31, 2012
Cost Cutting Can Be A Leading Indicator of Unhappy Customers

Many years ago, before I started my own business, I worked for a Fortune 100 company.  I had started as an account executive, ran a large contact center, was promoted to General Manager, and subsequently to VP of Customer Service and Client Retention.

I learned many things over the years, but one of my most important lessons was how cost cutting was a leading indicator of unhappy customers and high customer turnover.

When I was General Manager, there were 40 other regions. Each region received a monthly report comparing their performance against the others. Items such as revenues, profits, employee and customer retention, etc. were measured and monitored. General Managers were not only evaluated on their results, they received large bonuses for exceeding their goals and were invited to participate in lavish trips to far away exotic places.

Almost one hundred percent of the time, those regions that had the highest profitability and at least met their other goals and objectives, somehow ended up with the highest customer churn rate, the lowest survey scores and the worst profitability of any region….only one year later.  The lesson is clear. Yes, you need to work within your budgets, but you must always provide the highest degree of customer service.

In a retail environment, a customer can instantly change from one store to another.   In business-to-business, customers can’t generally bolt after one bad experience or even a pattern of poor service. They may have paid a hefty set up charge, training fees or licenses. They may have integrated one supplier’s software with another.   However, customers will eventually leave or just start doing less business with a supplier who is cutting costs at the expense of their customers.

I’m not sure what some company executives are thinking.  Let’s start taking company executives on sales calls, let them listen in on cold calls, let them help search for potential prospects, and let them experience long travel delays and cancellations at busy airports. I’m sure they will soon realize that growing businesses by retaining customers is a great deal easier than searching for new ones.

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About the Author ()

Richard R. Shapiro is Founder and President of The Center For Client Retention (TCFCR) and a leading authority in the area of customer satisfaction and loyalty. For 28 years, Richard has spearheaded the research conducted with thousands of customers from Fortune 100 and 500 companies amassing the ingredients of customer loyalty and what drives repeat business. His first book was The Welcomer Edge: Unlocking the Secrets to Repeat Business and The Endangered Customer: 8 Steps to Guarantee Repeat Business, was released in February, 2016.

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