Customer Experience: The Secret to Cutting Costs


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We often talk about great customer experience as a means to unlock revenue: You retain customers, realize more of their lifetime value, and mobilize an army of word-of-mouth marketers. There’s another benefit to it that is equally valuable, though; and it’s one that’s not as often talked about.

This is: dramatically cutting the cost to serve your customers.

Think about how much an unhappy customer (before they churn) costs you. They call your help lines. They file support tickets. They return products. Each of these instances is a touchpoint that represents a real cost for you. And, depending on how you choose to resolve these instances (through refunds or discounts, for example), that cost could end up being quite high.

And, in the meantime, these same unhappy customers are likely to be telling others about their dissatisfaction. The White House Office of Consumer Affairs reports that unhappy customers will tell an average of 9 to 15 people about their experience — and 13% of those tell more than 20. This, in turn, creates a vicious cycle: As unhappy customers ward off potential new customers, you may be forced to invest more in your marketing and advertising, which means less to invest in your customer experience and more… unhappy customers.

So the question becomes: could investing in great experiences actually end up costing you less? This might seem counterintuitive: a cost to eliminate costs. But in the long run, the costs that customer painpoints create often exceed the cost of delivering a great experience. Solve painpoints, you don’t just make customers happy — you end up reducing the cost to serve your customers, too.

A great example of this: Sprint. Their customer experience hit a low point in 2007 when they actually fired their least happy customers — perhaps because they were receiving twice the number of support calls as their competitors. This debacle, among other things, brought a new CEO into the company that year, and a renewed focus on the customer. They started listening to their customers and quickly identified dozens of common painpoints that revolved around things like network quality, price, and problem resolution. They worked to fix these painpoints, and customers responded. By 2010, Sprint’s customers were happier — 12 consecutive quarters of better customer ratings.

Sounds expensive though, doesn’t it? Actually, it hadn’t cost Sprint a dime — in fact, it was the opposite. This increase in satisfaction had been accompanied by a reduction in service costs of more than 33%. Sprint’s investment in customer experience paid off: not just less customer churn and more revenue, but a substantial cost reduction in cost to serve.

The cost benefits don’t just accrue from customers requiring less attention and ending up in your support channels less frequently, however. They’re often associated with a meaningful impact on your workforce. How? Remember, employees churn, too. They, like customers, can be unhappy. In fact, working with unhappy customers all day could make an otherwise happy employee pretty miserable. Another vicious cycle. And when unhappy employees leave your business, you assume the cost of replacing them.

Fix it though, and it becomes a virtuous cycle. Happy customers beget happy employees — you end up spending less to serving your customers, they promote you more, and your employees enjoy working with those customers more and churn less.

So the next time you’re thinking about whether to make an investment in customer experience, make sure you’re not just thinking about the benefits in terms of revenue. Delivering a great experience can pay off significantly in reducing your costs, too.

Photo credit: Tax Credits

Republished with author's permission from original post.

Michelle deHaaff
Michelle leads marketing at Medallia, the leader in SaaS Customer Experience Management and has over 18 years of experience in marketing, branding, product management and strategic partnering in Silicon Valley. Michelle came to Medallia from Attensity where as Vice President of Marketing and Products she led the transformation of the brand and the products to be the leader in Social Analytics and Engagement. Michelle also led Marketing at AdSpace Networks, was a GM of Products at Blue Martini Software and worked at Ernst & Young as a CRM practice manager.


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