Customer Service Makes Sales Sense
It is a well-known fact that satisfied and committed customers exhibit certain unique behaviours. For instance, it is said that satisfied customers do not mind coming over to the location of the business rather than have the business come to them. This is very helpful because companies spend a lot of money on just getting to and winning a new customer.
There are many other things that satisfied customers do which makes managing them cheaper than acquiring new customers. One study insists that it is six times cheaper to maintain a satisfied customer than it is to acquire a new one. The issue of customer acquisition and customer retention is one that is widely studied.
Satisfied customers are also known not to mind slight price increases. They will not haggle over relatively small increments. Satisfied customers are so accommodating that it has been said it is ten times easier to successfully cross-sell or upsell to such a customer than it is to get a new customer to buy.
Satisfied customers are also known to be great advocates of the brands they are satisfied with. They will go out of their way to speak to others about the business. They feel obliged to let others in on the good thing they are enjoying. Truly satisfied customers are the best advertising media any organisation can ever wish for. They do a good job and come relatively cheap.
Even when things go wrong—and things do go wrong once in a while—the satisfied customer will be more understanding of the situation. The satisfied customers will be more easily convinced that the situation is just an unfortunate incident and not an everyday occurrence. He/she will even proffer solutions to whatever problem might have arisen. In short, it would take quite some work to lose the trust and custom of a truly satisfied customer.
It is common-sense to assume that all these actions of satisfied customers will someway, somehow have a positive effect on the bottom-line of the organisation – albeit mostly indirectly.
But of all the behaviours of customers who are genuinely in love with a brand, two really stand out for me. This is because they have a more direct effect on the organisation’s profitability. These are:
- Satisfied customers buy more, and
- (ii) Satisfied customers buy more often
If these two statements are proven to be factual, then one can say with all confidence that customer service indeed makes sales-sense. Fortunately, there have been a number of studies carried out over the years in the attempt to throw more light on benefits of these behaviours.
As far back as 1986, a study was carried out and reported in the International Journal of Physical Distribution and Materials Management. Titled ‘Effects of Customer Service on Sales: An Analysis of Historical Data’, the researchers looked at a number of studies over the years to ascertain the relationship between level of service and sales response per level. The overwhelming conclusion was that customer service contributes to a company’s sales.
Unfortunately, much of the work was of a theoretical nature. The studies were mainly based on the responses or promises of the customers. There was nothing concrete to link quality of service to sales. All the studies had was the intentions of respondents, with expectations that the intentions would be put into action.
However, in more recent times some studies have gone ahead to state clearly that customer service really contributes to sales. According to the study carried out in April 2013 by Dimensional Research and sponsored by ZenDesk, as much as 83% of customers who have had great customer experiences said their behaviour toward the business changed positively.
When they were asked to state the ways in which their behaviour changed toward the brand, more than half of them – exactly 52% – indicated that they purchased more from the company. For business-to-business interactions, the percentage of respondents who stated that they bought more from the customer-friendly business was as high as 62%.
One factor that plays a very important role in the effect of customer service on sales volumes is the concept of Customer Lifetime Value. Customer Lifetime Value is the total value a customer brings to a business over the duration of the relationship. There is a growing awareness of the need for businesses to appreciate and even measure the lifetime value of their customers. Many businesses are aware that when customers are treated well they stay with that the brand for longer. And by staying longer they bring more value to the business.
A 2018 study by Paris-based Internet advertising company Criteo – of 100 marketers and 2,023 consumers across the UK – brought about some interesting findings on the issue of customer lifetime value. The study claimed that 81% of businesses that measured and did something about the lifetime values of their customers had gained more sales, as opposed to just 51% of companies that did not measure the customer lifetime values.
Another factor that plays a role in the effect of customer service on sales is truncated sales. The 2012 research report prepared for American Express and conducted by Echo Research between February 22 and 29, 2012 stated that more than half of customers surveyed, specifically 55%, had intended to conduct a business transaction or make a purchase but changed their minds because of a poor service experience. There is another study that insists the percentage of customers who bailed out on purchasing decisions is as high as 78%. Whichever figure is closer to the truth, the fact is that businesses directly lose sales due to poor customer service.
There are other ways in which customer service directly affect the sales volumes of an organisation. For example, an organisation with a reputation for great customer service is more likely to attract paying customers. Figures in a report from the stables of San Francisco-based customer service software company Zendesk assert that: “40% of customers begin purchasing from a competitor because of their reputation for great customer service”.
On the reverse, companies with reputations for poor customer service end up losing customers to the competition. Such actions directly and negatively affect the organisation’s profitability. According to the study by the UK-based cloud contact centre solutions provider NewVoiceMedia, “44% of US consumers switch to a competitor following a poor customer service experience”.
If there is one thing every customer service manager has to tackle at one time or another, it must be attempting to prove the case for any expenditure into customer service. If the customer service manager or supervisor is lucky enough to have a Chief Executive who understands and really appreciates customer service, then the stress is less. But if the customer service manager is unfortunate enough to have a CEO who thinks customer service is a waste of time and money, then the customer service manager will be in real trouble. I have personally experienced the two kinds of Chief Executives in my working life, so I really know what I am referring to.
Studies such as those mentioned above are therefore of great importance to customer service managers and supervisors, since they provide a reason for the existence of customer service departments or even units. Interestingly, those who should be most interested in the quality of customer service being provided are those in the finance and accounting department.
Those whose job it is to manage the bottom line must be very much interested in the quality of service the business provides. If the ‘figures people’ in the company understand the importance of customer service to the company’s profitability, they would take customer service managers through less hurdles when there is a need to spend some money to push the customer service agenda.
One thing organisations should do constantly is ensure every employee is regularly reminded of the fact that quality of service has a direct effect on the sales volumes. This constant reminder will have a direct corresponding effect on the way these employees treat customers. This will result in a culture of great customer service throughout the entire organisation.
The direct effect of customer service on sales should also urge businesses to ensure that every single employee regularly receives customer service training, regardless of schedules and departments. More often than not, customers have no idea what departments or schedule an employee works in. in fact, even if customers know the specific task that the employee undertakes for the organisation, they really do not care. All customers want is to be given the best of service.
Therefore, not being in a particular department cannot be used as an excuse not to offer customers great service. A staff cannot therefore say that he/she does not work in the customer service department, so he/she cannot offer great service to a customer. If the truth be told, the entire organisation is a customer service department.
One last statistic to look at has to do with the amount of money businesses lose on a yearly basis due to poor customer service.
“Businesses are losing US$62billion per year through poor customer service. That’s up US$20billion since 2013, just three years ago.”
This is a line from an August 2016 article by American customer service guru published in Forbes magazine. When one considers the fact that this figure is just for the US, it becomes even scarier. With the poor quality of customer service in our part of the world, one can only imagine the amount that businesses lose annually.
So, next time you feel like wearing a frown to serve a customer or are tempted to serve a customer without giving of your very best, know that very act is about to take money out of your pocket. If you have any doubt about this assertion, you can carry out your own research and let’s see what you come up with.