Customer support 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 attention to them. I’ve often unearthed that that you don’t get upper management’s or the owner’s full attention regarding customer service if you don’t provide the financial impact to the company. Customer support features a dual role because it both creates and preserves revenue. Allow me to explain why I believe this to be true.
Customer support creates revenue via the recommendations avenue. Each time a great product or service is in conjunction with great customer service, your web visitors become your ambassadors. Their willingness to speak positively about your business results in additional customers, thereby creating additional revenue. Recent research by the Technical Assistance Research Program (TARP) shows that for every single 10 people hearing either positive or negative “recommendations” information, 1 person takes action. This 1 new customer, as long as they receive the amount of service expected, will subsequently keep carefully the positive “recommendations” cycle in motion. Another kind of revenue creation as a result of great customer service are price increases. TARP in addition has studied the impact of price increases on the customer’s willingness to carry on to complete business with companies. In a study of the banking industry, only 10 percent of survey respondents who’d not experienced a customer service related problem expressed dissatisfaction by having an escalation in fees and charges. Which means 90 percent of survey respondents were okay with the purchase price increases due to the amount of customer service provided by their particular bank.
When it comes to customer service acting as a revenue preserver, there’s one question that must definitely be answered before we continue. That question is – Simply how much can be your customer worth to your business? Whether your company is small or large, the requirement to determine what your customer is worth to your business is critical when calculating the amount of revenue being preserved by addressing customer service related issues. Like, if your business has 1,000 customers and the common annual revenue generated by each customer is $400.00. If 10 percent of these customers experience customer service related problems, that’s 100 customers. Bear with me once we start the calculations! Now let’s assume that 50% of these customers don’t even bother to complain, they only simply go away. Telus customer service Their decision to leave without complaining represents $20,000.00 in lost revenue.
Think about the other 50% that complain? Let’s claim that you’re able 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 these complaining customers. Should 10% (2) of the customers that you’re able to satisfy once 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. Onto the customers that remain dissatisfied after complaining – 60% (6) with this group decide not to repurchase from your own company, which means an additional $2400.00 in lost revenue. The sum total potential annual revenue lost in this scenario is $25,200.00! Wait, there’s more. Remember the “recommendations” factor discussed earlier. These dissatisfied customers will tell others about their experience together with your company. In this scenario, considering 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 “recommendations” marketing. If these dissatisfied customers tell 10 additional people about their experiences (630 people) and 1 in 10 acts on the info (63 people), there’s potential revenue missed due to 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 forget about the cost side of poor customer service – the employee costs to eliminate customer complaints and the material costs when rework must satisfy the customer. Take this example and apply your real numbers to determine the financial impact to your business. Whew! Lots of calculations, but it’s definitely worth it as it pertains to determining the financial impact of customer service.