Is Good Customer Service Really a Good Investment?

Filed in Blog, Customer Service, Hospitality by on July 19, 2013
Cost Cutting Can Be A Leading Indicator of Unhappy Customers

MSN Money recently published an on-line article highlighting those companies who were named to their Customer Service Hall of Fame. The research establishing these ratings clearly suggests that investing in customer service does pay off. Too frequently customer service efforts fall into the category of fire-fighting instead of fire-prevention. When companies consistently trim those programs that reduce service to their customers, the results overtime will negatively impact customer retention and profits.

Unfortunately, the results of service cuts, i.e. less staff, shorter call center hours, etc., may not instantly reduce financial performance so companies think a wise decision was made. However, it is soon discovered that most reductions in service delivery are just plain foolish. Once you lose a customer, they rarely come back.

Marketing costs can average 9 to 12 percent of an organization’s revenue. Some of the companies in the Customer Hall of Fame have almost completed eliminated the need to spend dollars on advertising and marketing. Instead, they depend on their happy consumers to spread the word. Of course, with social media, the floodgates have opened and it’s easy to share their experiences with a vast audience.

Trader Joe’s is on the list. I’m amazed when I walk into the Trader Joe’s store in our neighborhood; the checkout line usually starts at the entrance. Amazing! Customers love the food, the prices and the service. Believe me, no matter how good the merchandise and cost, people would not wait on long lines to pay unless the store had sufficient associates in place to move customers quickly through the maze. Not only is the staff efficient in the checkout process, they are enthusiastically welcoming and make you feel appreciated and that your business is important.

State Farm CEO’s compensation is partly based on customer retention, employee satisfaction and growth results. In 2012, Ed Rust, CEO, received a 4 percent increase over 2011. Lowe’s invests over 350,000 hours a year in role-playing, coaching and providing personal feedback to their associates in order to better provide customer support.

Customer Service cannot be treated like the Fruit of the Month Club. Focusing on the service component of your business should be at the heart of any company’s corporate strategy. Excellent results may not come immediately, but over the long-run, with a happy and loyal base of customers, your company will find dollars that were previously allocated to attract new business going directly to the bottom-line.

The complete list of the companies listed in MSN Money Hall of Fame and how the research was conducted can be found in the following link. The study also highlights those companies who found themselves in the Hall of Shame. I’m sure many of those names will not be a surprise to their former customers either.

http://money.msn.com/investing/2013-customer-service-hall-of-fame

Just think about it. How many times have you walked out of a store because there was no one around who could answer your question or, thought to yourself, they could care less if I ever came back again. Cutting costs is not always a bad strategy, but cutting service just doesn’t make sense. Yes, good customer service really is a good investment.

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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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