The actual Monetary Effect associated with Customer Service.

Customer care is what drives the success of the any business. Some would surely say, “No Errol, a great product or service concept drives the success of any business.” While that statement is somewhat true, a great product or service concept without great customer service is like expecting your beautiful garden flowers to flourish without your giving awareness of them. I’ve often discovered that you don’t get upper management’s or the owner’s full attention regarding customer service if you give you the financial impact to the company. Customer care has a dual role because it both creates and preserves revenue. I’d like to explain why I believe this to be true.

Customer care creates revenue via the word of mouth avenue. Whenever a great product or service is coupled with great customer service, your customers become your ambassadors. Their willingness to speak positively about your company contributes to additional customers, thereby creating additional revenue. Recent research by the Technical Assistance Research Program (TARP) indicates that for every single 10 people hearing either positive or negative “word of mouth” information, 1 person takes action. That one new customer, as long as they receive the amount of service expected, will in turn keep the positive “word of mouth” cycle in motion. Another type of revenue creation as a result of great customer service are price increases. TARP has also studied the impact of price increases on the customer’s willingness to keep to complete business with companies. In a study of the banking industry, only 10 percent of survey respondents who had not experienced a customer service related problem expressed dissatisfaction by having an escalation in fees and charges. Telus webmail outage Which means 90 percent of survey respondents were okay with the purchase price increases as a result of the amount of customer service provided by their unique bank.

When it comes to customer service acting as a revenue preserver, there is one question that really must be answered before we continue. That question is – How much is the customer worth to your company? Whether your company is small or large, the requirement to know what your customer may be worth to your company is crucial when calculating the total amount of revenue being preserved by addressing customer service related issues. Like, if your company has 1,000 customers and the average annual revenue generated by each customer is $400.00. If 10 percent of those customers experience customer service related problems, that’s 100 customers. Bear with me even as we start the calculations! Now let’s think that 50% of those customers don’t even bother to complain, they just simply go away. Their decision to leave without complaining represents $20,000.00 in lost revenue.

What about another 50% that complain? Let’s say that you’re in a position to satisfy 40% (20), 40% (20) become frustrated together with your attempts to satisfy and 20% (10) remain dissatisfied. So now let’s consider the repurchase behavior of those complaining customers. Should 10% (2) of the customers that you’re in a position to satisfy after they complain decide not to repurchase, that represents $800.00 in lost revenue. In the frustrated together with your attempts to satisfy group, 25 % (5) discontinue purchases together with your company, which represents $2000.00 in revenue. To the customers that remain dissatisfied after complaining – 60% (6) with this group decide not to repurchase from your company, meaning an additional $2400.00 in lost revenue. The full 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 together with your company. In this scenario, if you think about the 50 customers that left without complaining, add the 13 customers that complained yet decided not to repurchase, that’s 63 customers who have the potential to utilize 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 data (63 people), there’s potential revenue missed as a result of dissatisfied customers. Even when the 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 service – the employee costs to eliminate customer complaints and the material costs when rework is needed to satisfy the customer. Take this example and apply your real numbers to find out the financial impact to your business. Whew! Plenty of calculations, but it’s definitely worth every penny in regards to determining the financial impact of customer service.

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