Customer Service Mediocrity – Part III – The Cost of Poor Customer Service

You don’t have to be a mathematician to understand that losing customers costs money and is generally bad for business. And you don’t have to be a psychologist to understand that poor customer service equals unhappy customers equals lost customers.  Perhaps an explanation of the four key cost factors associated with customer loss can better illuminate the costs of poor customer service.

Direct Costs

Direct costs are the obvious revenue you lose, current and future,  when customers stop buying from you and take their business elsewhere.   Many times, the “word of mouth” customer marketing works in reverse and also increase lost revenue because unhappy customers talk loudly.

Acquisition Costs

It costs 25 times more to acquire a new customer than it does to retain an existing customer. In other words, you would have to acquire 25 new customers to make up the revenue for the one you lost.

Social Costs

Ninety-five percent of consumers who have a negative encounter with a business share it with at least five people, and 45% of that 95% also share the experience on social media. Remember, each person who uses social media has anywhere between 100 and 400 friends and followers, so bad customer service can have a staggering ripple effect on your current and potential customer base (Brandwatch).  The opposite works when customers are well taken care of and happy.

Operational Costs

In some industries, you may need to return certain property to lost customers as well as share their information with the new goods/service provider. You incur these operational costs when you’re no longer receiving any revenue from the customer, so you have no way to recoup them.

How to Prioritize Customer Service

Following are some key points to create, implement and improve your company’s customer service model.

Customer service policies don’t create themselves. Put thought and intention into your customer care model and make it part of your company’s strategic plan, mission, vision, and handbook (Forbes).

Train Your Team

In the long run, comprehensively training your team about key customer service values will cost far less than losing customers due to poor service. These key values include but are not limited to:

  • Empathy and patience
  • Consistency
  • Adaptability
  • Communication
  • Work Ethic
  • Knowledge
  • Thick skin (not taking complaints personally)

Seek and Respond to Customer Feedback

You should not only not be afraid of what your customers have to say, you should hang on their every word (KSL Training). A very small percentage of people are never pleased, but if you get a lot of repetitive feedback, you know you have a real issue.

Always respond when you get a complaint. Everybody wants to feel heard, and customers are far more likely to stick around if you validate and resolve their concerns.

Treat Your Employees Right

A happy staff leads to happy customers. It’s far easier for employees to represent their companies with authentic positivity when they feel they are being treated fairly and with respect (Clarion Ledger). When it comes to the “why” behind customer service, perhaps Barry Moltz, small Business Expert with Shafran Moltz Group says it best: “Customer satisfaction is not measured by the number that leave happy, but by the number of loyal customers who return.”