A company's reputation is only as good as the customer service it provides. Please a customer, and your client base will swell with relatives and neighbors who catch wind of your top-notch representatives. But upset one, and brace yourself for disaster. "The experience that individuals have with a company and then what they hear from friends and family influence their perception of and likelihood to do business with a company," says Megan Burns, a senior analyst at Forrester Research, a Massachusetts-based research firm that specializes in customer service. It's "absolutely an essential moment of truth for companies."

Though a teetering economy may tempt executives to cut corners, improving service is your best chance for survival. "Companies of any size should understand what the customer experience is," says Andy Fromm, president of Service Management Group, a Missouri-based firm that works with retail and restaurant chains on improving customer service. Fromm stresses that companies should streamline their resources without sacrificing the essentials. "Understand what's important to customers. Speed and availability of service are universal truths."

But how do you balance satisfying demanding customers with maximizing cost-effective resources? Read on.

Dig Deeper: There's No Substitute for Great Customer Service

Improving Your Customer Service: It Starts With Your Staff

The most critical person to hire in the customer service schema is the manager, says Fromm, since employee turnover is directly driven by manager turnover. You want someone who'll stick around, because otherwise, Fromm cautions, "it will be almost impossible to keep up with the hiring challenge." But everyone should care about the product at hand: "Make sure that pet retailers like pets. It's not rocket science."

Other qualities to look for, according to V. Kumar, author of the book Managing Customers for Profit, include empathy, consistency and patience. Experience is vital, too, but it can be a double-edged sword: too much, and the representative may sound pedantic or condescending; too little, and the representative won't know how to handle delicate situations. The ideal? Three to five years.

Dig Deeper: Have a Sense of Humor to Connect with Customers

Improving Your Customer Service: Cater to Your Clientele

Customer Service expert Robert Dewar divides customers into two categories: tech-savvy transaction-oriented people, and others who just want to talk. Automated response systems are okay, says Dewar, who teaches at Northwestern University's Kellogg School of Management, but companies should facilitate access to live representatives by making direct contact the first option on a service menu.

The customer's mood also matters here. If you're a healthcare company, your customer is probably dealing with something "emotional," like illness or medication, Burns explains. "A website or a phone menu is not going to be able to give the customer a dimension of empathy." Similarly, problems that require detailed explanations, such as a broken television or a defective refrigerator, are difficult to convey in a text box. Other customized strategies include:

Clientelling: This strategy, often employed by high-end businesses, pairs a customer with a representative, who logs the client's every action into a database and caters future service accordingly. It's great for building relationships with profitable clients, Fromm says.

Service Levels: Divide customers into categories, so that the ones who are worth (and spend) a lot of money receive tailored service. Credit card companies and airlines offer exclusive benefits to top-tier members to signal appreciation and attract others to upgrade.

Dig Deeper: Minimizing Voice-Automated Customer Service

Improving Your Customer Service: Don't Waste Money

Use these cost-cutting methods to balance the budget without eliminating necessary service:

Act on the Customer's Terms: Interact with customers in the way that they see fit. Rather than hire a greeter whom customers often dismiss, instruct employees throughout your store to welcome incoming shoppers. "It's about offering service on the customer's terms," says Fromm.

Optimally Allocate Resources: Large companies notoriously flood mailboxes with dozens of catalogues that go straight to the trash and waste money in the process. Use customer data to figure out which type of catalogue (children's toys, luggage, jewelry) each household should receive and send accordingly. Provide as many means as possible to purchase a product – store, website, catalogue – to maximize the likelihood of a sale, adds Kumar.

Dig Deeper: Offering Personalized Customer Service

Improving Your Customer Service: Use Online Tools to Personalize Assistance

Your website is usually the customer's first exposure to your company, so your homepage should be personal and user-friendly. Include staff bios or embed a Twitter feed to build an intimate relationship with your customer, and consider these online tools:

Customer Relationship Management (CRM) Software: Programs like Microsoft Access, Salesforce.com and Oracle collect important consumer background, including search history and time spent online, says Kumar. If you're selling an Internet-based service, knowing your customers' operating systems or connection speeds will reveal their intent for the product, give some context to you concerning their complaintn and strengthen the company-consumer relationship.

Social Media: Think of Facebook and Twitter as "listening posts," says Burns. People love to chat about their recent purchases and experiences, so why not tune in? But, she cautions, be mindful that those conversations may not represent the majority and should be put into context.

Online Reviews:
The blogosphere can be a cruel place, but embrace sites like Yelp and Citysearch for their comprehensive feedback and seize the opportunity to respond to customers. It's a "way to engage in a two-way dialogue," says Burns, and should be used for problem prevention and customer retention.

Mobile Strategy: Customers expect on-the-go service, and that means you need to be mobile-ready, Fromm says. Go green, like Apple, and email receipts, or follow the southern department store Belk, whose mobile address allows traveling customers to text in their feedback.

Dig Deeper: How Business Owners Should Respond to Online Criticism

Improving Your Customer Service: React Before the Customer Realizes Anything Is Wrong

You'll gain tremendous loyalty by solving a problem before the customer voices a complaint – especially if it is addressed by a low-level employee. Let's say a diner hasn't touched his or her food. If the waiter asks specific questions (I noticed you haven't touched your chicken. Did it taste okay?) and replaces the dish or removes it from the bill, it is "exponentially more beneficial," says Fromm, than if the customer leaves unsatisfied and hungry. A manager should follow up with customers about their experiences, but having to call one in draws out the problem and forces the unhappy customer to dwell on the complaint.

Dig Deeper: Building Customer Loyalty in Small Businesses

Improving Your Customer Service: Localize Support

For some industries, an in-person exchange is vital to return or repair a product, and so companies should make their addresses, hours and directions readily available. Of course, you save a lot of money by outsourcing call centers, especially if you're a shipping or financial services company that deals mainly with numbers and straightforward data. But businesses need to train outsourced employees and make sure they can communicate with all types of clients. Dewar stresses, "Heavy accents cause a lot of trouble. … People have to be able to understand the customer calling in," and vice-versa.

And don't forget to list a telephone number. Sending customers down an endless rabbit hole of dropdown menus and FAQ listings should never take the place of a prominently displaying a direct line to a company employee. 

Dig Deeper: Study Ranks Cities with Best and Worst Customer Service

Improving Your Customer Service: After Solving the Problem, Keep in Touch

Pay attention to service calls, since one complaint may be indicative of a larger issue. Does the company's internal infrastructure make it easy for employees to misenter a code that later results in a billing problem? Burns says that a close watch is vital if you sell complicated products, like financial services, where it may be difficult to follow instructions or understand arcane jargon.

And the conversation shouldn't stop there. Every relationship is a two-street, and customers deserve the chance to let you know how they're feeling. Offer exit surveys for users to describe their visit to your site or experience with a crisis. Soliciting questionnaires from online shoppers is especially key for retail companies, who can communicate with visitors who decide not to buy.

Dig Deeper: Secrets for Satisfying Tough Customers

Improving Your Customer Service: Make It Easy to Leave

Sometimes, your company simply isn't a good fit for the customer. But the more difficult you make it to leave, Dewar says, the more ill will you'll generate. Cable companies like Comcast, for example, insist that customers personally deliver their cable boxes before closing an account, and often require them to wait for hours at service centers in order to do so. Dewar warns, "It may look smart to try to make captive of a customer but if they have good reason to leave or they don't like you, all you've achieved is planting a time bomb that'll get you sooner."

Dig Deeper: Customer Service Tips from the Inc. 5000 Conference

Improving Your Customer Service: Additional Resources

A database of over 100 CRM programs, reviewed by industry and business size that will improve your customer service online.

Customer Lifetime Value by V Kumar. Now Publishers, Inc., 2008. This book details Kumar's research and support for forward-thinking strategies about detecting which customers will be most profitable in the long run – and how to retain them. His other books can be found here.

Groundswell by Charlene Li and Josh Bernoff. Harvard Business School Press, 2008. This book, authored by social media experts at Forrester Research, offers practical strategies for companies looking to tap into social technologies like blogs, Facebook and YouTube.