The Financial Payoff of Great Customer Service Experiences


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Customer service experiences either generate or diminish company revenue. In other words, customer service is not a neutral factor in your business. It either makes you money or costs you money.

Several years ago, Wendy’s devised one of the most memorable commercials of all time. It featured several old ladies in a hamburger shop examining the hamburgers they had just purchased. When they opened the bun, the burger was so minuscule that they cried out, “Where’s the beef?”

In essence, they were saying there was nothing to be found in the hamburgers sold by Wendy’s competitors. And in a similar sense, there are some people who say there’s nothing to be found in the hoopla surrounding customer service.

In other words, customer service is nice in theory, but it doesn’t pay off. And if it doesn’t pay off, why bother?

The Financial Payoff In Great Service

A short time ago, Petouhoff, Leaver, and Magarie answered that very question when they released their research findings in “The Economic Necessity of Customer Service.” They concluded, “Customer service experiences EITHER generate or diminish company revenue.” In other words, customer service is not a neutral factor in your business. It either makes you money or costs you money.

They went on to say, “Customer service has a profound effect on a corporation’s bottom line.” How can that be?

Great customer service assists retention, which leads to continued profits

A simple formula says it all: Great Service = Customer Retention = Profit. A Harvard Business Review article found that companies that boosted their customer retention by as little as 5% saw increases in their profits ranging from 25% to a whopping 95%.

Poor customer experiences hurts retention, leading to lower profits

But the reverse is also true: Poor Service = Lost Customers = Lost Profit. A US News and World Report article stated that the average American business loses 15% of its customer base annually. And 68% of the customers who stop doing business with a company do so because of “poor or indifferent customer service” and another 14% because of an “unsatisfactorily resolved dispute or complaint.”

The most shocking discovery is that ONLY 9% of customers stop doing business with a company because of price! Indeed, price may be one of the least of your worries when it comes to keeping customers. You need to be more concerned with that whopping 82% (68% + 14%) that stop doing business with you because of a customer-service related issue.

The Financial Cost Of Poor Service

If you’re still not convinced that good customer service pays off big time, then consider this. Bad service costs you big time.

In a ground-breaking study, the Genesys organization conducted one of the first global surveys on customer service. In their research findings called “The Cost of Poor Customer Service,” Genesys concluded that their 16 studied countries lost $338.5 BILLION DOLLARS each year due to customer defections as a direct result of poor service.

Of course, the cynics can say, “Big deal. So we lose a customer once in a while. You can’t please everyone.” True enough. BUT it’s a much bigger deal than you might think … because that defecting, disgruntled customer WILL hurt your future business.

After all, that one unhappy customer doesn’t just shut up and slink away. Oh no! He talks. In fact, it’s quite well known that an unhappy customer will tell 10 other people face to face about his bad experience with your company … and another 100 people on Facebook and Twitter. And chances are they won’t buy from you either.

If you give your customers poor service, it’s going to cost you … financially … in lost sales, lost customers, and lost future customers.

A Few Ways To Retain Customers And Profitability

To retain your customers and boost your profitability, you must have quality products and services. That’s a given. But in today’s marketplace, that’s not enough. As Pine and Gilmore make clear in “The Experience Economy,” you must also give your customers a memorable experience. You must give them something to talk about as well as an extra reason to come back.

Over the years, I’ve learned that customers who experience three of the following emotions … when doing business with you … will become your enthusiastic ambassadors.

  1. Make them feel welcome. Let them know you’re glad to see them and welcome the chance to work with them.
  2. Make them feel comfortable. Give them the assurance that their needs will be met.
  3. Make them feel understood. Listen to the meaning of their words as well as the feeling behind their words.
  4. Make them feel important. Show respect. Make them feel like an individual rather than a number.
  5. Make them feel appreciated. Show appreciation for the individual as well as his business.

Brainstorm the perfect customer service welcome

My recommendation? Sit down with your team and brainstorm 15 specific ways you can make your customers feel welcome. And then brainstorm another 15 ways you can make them feel comfortable, and so on. Publish the list. Give everyone a copy. And look at it daily to make sure you’re doing exactly that.

When customer service is done well, everybody wins. The service provider feels good about his ability to make a difference. The customer feels good about his needs being met. And the company feels good about its extra nice financial payoff.

Dr. Alan Zimmerman is a speaker and author of the new book, “The Service Payoff: How Customer Service Champions Outserve and Outlast The Competition.” His web site offers many additional resources at

Republished with author's permission from original post.

Flavio Martins
Flavio Martins is the VP of Operations and Customer Support at DigiCert, Inc., a leading provider of enterprise authentication services and high-assurance SSL certificates trusted by thousands of government, education, and Fortune 500 organizations. Flavio is an award-winning customer service blogger, customer service fanatic, and on a mission to show that organizations can use customer experience as a competitive advantage win customer loyalty. Blog: Win the Customer!


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