A widely quoted statistic gets to the heart of the value proposition behind customer service: The cost of acquiring a new customer is five times that of retaining an existing one. For businesses that succeed by forming a bond with the customer, the disparity is surely even greater.

Good customer service is essentially a variation on the golden rule: You want to meet the same expectations you would have if you were the customer. "The basic things will never change," says Tony Maggiotto, an adviser at the Buffalo State College Small Business Development Center in New York. "If people believe that they're being remembered and are known to the business, that will have a positive impact on their disposition toward your business."

Providing good customer service is often a matter of common sense, but that doesn't mean it comes naturally to all business owners. For some, in fact, it means behaving differently than they do in other business situations, says Richard Proffer, a counselor at a University of Missouri Small Business & Technology Development Center. If you are used to fighting about every detail of a business deal, say, you may have to adjust your attitude. Ditto if you feel that selling is a zero-sum game; to win customers, you will sometimes have to make them feel they have won, too. The pages that follow are a guide to providing excellent customer service.

Caring for Customers

1. Great Customer Service Begins With You
Simply put, the most inspiring leadership is by example. If you show indifference to your customers, your employees will mimic it. If you are enthusiastic and courteous, your troops are more likely to be so as well.

2. A Culture of Customer Service Must Be Codified
Start by hanging on the wall a set of core values, 10 or fewer principles that include customer service ideals, suggests Susan McCartney, Maggiotto's colleague at the Buffalo SBDC. "Share them during the training, have employees sign them, and evaluate employees based on the values," she says. "But don't call them rules."

Employee training on customer service precepts should be intensive: written materials, verbal instruction, mentors, and on-the-job demonstrations all ought to be part of the coursework, says McCartney.

3. Employees Are Customers, Too
Companies renowned for their customer service -- the online shoe retailer Zappos, for example -- treat employees as they would have their employees treat their customers. "Employees take on more responsibility because they know they are appreciated and an important part of the team," says the University of Missouri's Proffer. "People who don't feel like they're part of the bigger picture, who feel like a small cog in a big machine, are not willing to go the extra mile."

Not every business can afford to shower staff with generous pay and benefits, but not every business has to. Small companies, says McCartney, can show "intense interest" in employees, in their welfare, their families, and their future -- what McCartney calls the family model. It's also important to recognize an employee -- publicly -- for a job well done. Some companies also offer incentives for exceptional customer service, but if you can't spare the cash, you might throw an office party or offer another token of appreciation. When he was a manager at cable provider Tele-Communications Inc., for instance, Proffer personally washed the cars of notable employees.

4. Emphasize the Long Term
Short-term sales incentives can sometimes undermine long-term customer satisfaction. Prevent that by building short-term programs atop an ongoing program that rewards broader improvements, says Paula Godar, brands strategy director for Maritz, a sales and marketing consulting firm based in St. Louis. Moreover, winner-take-all incentives "can drive a lot of unhealthy competition and disengage the rest of the sales force," says Godar. "We've improved sales performance by much greater percentages when we've improved the performance of the large group in the middle of the bell curve."

5. Build Trust
Use your customer's name whenever you can. And sometimes you have to give to get. In his book The Knack, Inc. columnist Norm Brodsky relates how he won a sale against long odds by venturing his time and expertise to help a prospect cut costs. "I was showing him not only that we could help him save money but that we cared about saving him money," writes Brodsky.

6. Listen
"The best salespeople spend 80 percent of their time listening, not talking," says Marc Willson, a retail and restaurant consultant for the Virginia SBDC network. Ask open-ended questions to elicit a customer's needs and wants. "Once they've identified what they're looking for, use their words throughout the process," suggests Proffer. "That way, they've sold it for you."

If the prospect is "just looking," don't press further. But be discreetly nearby. "Straighten the racks, or dust something," says Willson. "You need to be within earshot or eyeshot, because every retail sale involves a re-approach."

7. Sometimes It's the Little Things That Matter
Small gestures that anticipate customers' needs or attend to their comforts -- such as offering a cold glass of water on a hot day or a children's area with toys -- go a long way toward winning them over.

8. If You Can't Help a Customer, Point to an Establishment That Can
And saying "You might try Smith's, on Main Street" won't make nearly as strong an impression as confirming that Smith's has the item in question and giving directions to Main Street. "This is the ultimate in customer service," says Tom Maydew, regional director of the SBDC in Pocatello, Idaho. "That customer will be back."

9. Show Your Appreciation
One important element of retaining customers is communication. Willson suggests a personalized thank-you note after a deal or sale -- "If Nordstrom's can do it, everybody can do it" -- and even a follow-up phone call a month or so later. In a retail business, loyalty programs or rewards cards drive repeat business (as well as help you collect information about what your customers are buying). Many businesses send out birthday and holiday cards; Proffer prefers marking the anniversary of a client's or customer's first purchase.

10. Treat Your Best Customers Better
If your company relies on a relatively small number of clients to provide a disproportionately large share of revenue, it makes sense to devote a disproportionate amount of time and energy to serving them. (Think of airlines and the escalating benefits in their frequent-flier programs.)

Some luxury retailers and services practice "clienteling," by which all of the activity around every customer -- every conversation, every visit, every transaction -- is logged with contact management software. Most businesses need not go that far, but it's well worth keeping your best customers informed. You might, for example, keep track of their preferences and let them know when new merchandise arrives that they are likely to be interested in. You might also organize appreciation days just for those clients, or invite them to private pre-sales in advance of the public.

Resolving Customer Disputes

It's bad enough when a customer is unhappy with your product or service. But if the attempt to redress the problem is frustrating or fruitless, it makes matters much worse. A satisfied customer may tell one or two friends about your company, says Richard Proffer, but "an angry customer might tell a dozen." Some aggrieved customers can never be placated, but, more often, successful dispute resolution lies in a business owner's hands.

Solve the problem when it occurs. It's always best when people on the floor or in the field are the first line of response, say Proffer and Marc Willson. Vest them with authority to resolve certain types of problems themselves.

Don't greet agitation with agitation. "Our first tendency is to match our tone to their tone, but you don't want to do that," says Proffer. "If we stay calm, their voice will start coming down, and they'll begin to relax."

The Five A's. Proffer says it's helpful to think of resolving a dispute as a five-step process called the Five A's: Acknowledge the problem. Apologize, even if you think you're right. Accept responsibility. Adjust the situation with a negotiation to fix the problem. Assure the customer that you will follow through.

Don't forget salesmanship. The skills and techniques of good selling discussed earlier are even more valuable in difficult situations. Address customers by name, and repeat what they've said. "Whether you resolve the issue or not," says Willson, "they'll see that you have their best interest in mind."

Hiring for Service

For employees who interact with customers, technical proficiency at the job isn't enough. Nor is passion for your product or service. Staff members who deal with customers ought to be intuitive, empathetic, and good listeners. Here are tips for vetting those traits.

Interview in a neutral, public place. Tony Maggiotto suggests meeting the prospect in a café or restaurant to see how he or she interacts with other people -- like the wait staff.

Ask the right questions. Ask questions about how the applicant reacts to a situation. For example: "Tell me about a recent situation in which you had to deal with a very upset customer." Check references in the same fashion. You should also ask questions to see how well the interviewee listens and processes information. "Outline a problem and ask them to respond to that," suggests Susan McCartney. "Even if they ask you questions to clarify, I would give them points for that."


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