Customer Retention Key to Business Success
"Don't they know that if they just treated us nicely, we'd give them our money?" This from a friend who has elevated shopping to a discipline worthy of a liberal arts degree, as we swapped customer service horror stories. Everyone has tales of abysmal service, often so bad the story becomes comical for the sheer inanity of a situation. (Trying to get an answer at an "answer desk" is one of my favorites.) It seems so simple -- treat customers with dignity and respect, and they'll reward you with buying loyalty. The paradox is that this golden rule approach to customer service, at its core so basic, is becoming increasingly elusive.
Even before Faith Popcorn coined the term "vigilante consumer," I've been a vociferous advocate for consumer rights, holding companies accountable for their customer service standards. But in the last few months I seem to have entered a vortex of shabby customer relations, apathetic "sales associates," and blatantly sullen demeanors. Perhaps the downside of a robust economy is the lack of enough customer-savvy bodies to fill service positions. Perhaps our society really has become a ruder, crasser place in which to live and do business. Whatever the underlying reasons, one recent experience illustrates rotten customer service.
I received a postcard from the dealership where I've purchased three vehicles in five years. The card announced a recall, but made no mention of which vehicle the recall pertained to, nor what the recall was for. (Exploding gas tank? Faulty airbags?) I called the dealership, and was told that "Don" would get "right back" to me. After hearing nothing, my husband called the next day. Same promise of a quick call back. Three days later, my husband finally tracked down a human for an answer. This wasn't the first instance we've been disappointed in service at the dealership, so we'll take our business elsewhere for our next purchase.
This example may seem innocuous, an insignificant lapse in good judgment and service. People are busy, mistakes happen. Yes, we're all prone to a mistake now and then. In fact, remedying a service failure can have a dramatic impact on customer relations. According to Journal of Marketing, handling a complaint becomes a "moment of truth" in maintaining and developing long-term customer relationships. You can lock in customers for life by treating them fairly during a dispute. Consumers point to getting a "fair shake" and a "just" resolution as reasons for continued purchases. In fact, LL Bean built an empire on the simple tenet that no customer should have a product that isn't completely satisfactory.
Quality customer service leads to retention, and customer retention is the hallmark of a healthy business. We're experiencing a time of massive "customer churn," a problem that is extremely costly. According to Frederick F. Reichheld, author of The Loyalty Effect, U.S. corporations are now losing half their customers in five years, half their employees in four, and half their investors in less than one. Vic Hunter, author of Business to Business Marketing, offers more dramatic statistics. According to Hunter, it can be 30 to 40 times more expensive to acquire new customers than it is to manage existing customers. A 5% increase in overall customer retention equates to a 25% to 55% increase in the profitability of a business.
Pervasive poor customer service is all the more apparent when you actually encounter exemplary customer support. Consider my loyalty to Bookland. There are several reasons for my patronage, including logistics, selection, pricing, and a wonderful half-priced paperback section. However, none of these variables would matter if I weren't treated well every single time I visit. As I walk in the store, someone greets me. Wandering the stacks, I'm offered assistance in finding titles. After purchasing hundreds of books and asking dozens of questions, I am a loyal Bookland customer. I have equity in the Bookland relationship, and that makes me willing to forgive small inconveniences should they arise.
At a time when customers have so many methods for researching and purchasing products, it's time for service providers to wake up. Would I go to Bookland instead of an online chain if I weren't treated well? I can buy just about anything I want through catalogs and the Internet. With so little price, warranty, and quality differentiation between products, consumer loyalty turns on only one thing: service. That's why I go to the local hardware store instead of a huge warehouse. That's why I'll drive 25 minutes to a furniture store when there are closer options.
Consumers have become more demanding. Buyers expect fair pricing and quality to be a given. They are more self-reliant, and if their current brand doesn't give them what they want, they'll jump ship. This is happening amidst a decline in customer satisfaction. According to the American Society for Quality, shopper satisfaction dropped 5% from 1994 to 1997. And just because you aren't hearing complaints doesn't mean you're doing well. While some customers holler, others are tired of fighting the good fight. The apathy that affects service providers trickles down to their customers. Many customers just quietly leave. Silent attrition is deadly because companies get no chance to rectify problems and keep the customer.
As service providers, it's crucial for us to remember that every contact we make in the community, be it locally, nationally, or globally, is a potential customer. Customer service is neither a quaint notion nor a meaningless sentence in a corporate mission statement. As marketplace competition continues to intensify, it is a matter of business survival.
Copyright © 2000 Kimberly L. McCall