Your business went from hot to not in a flash. How can that be? The advertising and emails get response. The sales team is working hard. Although some customers complain, it’s about minor things – nothing worth worrying about. You’re too busy anticipating the next fire or working on a product upgrade. What you need is to pump up the marketing campaigns … Or do you? Customer service expert John Tschohl has some great perspective on what really may be holding your business back.
Bad customer service can effectively wipe out any successful marketing campaign. I have seen organizations spend millions on advertising, trying to attract customers. But then they used baseball bats (figuratively) to drive them away. This was bizarre behavior, I felt.
Service is a strategy as powerful as marketing and, when done right, as potent as a quality product itself.
Quality service programs increase profit by developing customer satisfaction and loyalty. Satisfied customers buy more, and they buy more often. They don’t switch to competitors. The larger base of loyal customers that is the yield of a quality service program reduces the need for advertising and marketing. Why? Because fewer customers abandon a company for its competitors, leaving behind a need to replace them with new customers attracted by advertising and marketing. In shorthand: better service, more profit.
Yet most businesses do not understand that customer service is really selling. Great service inspires customers to return more often and to buy more. Patronage by loyal customers who buy again and again because they like the service yields 65 percent of a typical organization’s sales volume, according to a study by the American Management Association (AMA).
Studies like the AMA’s prove that service actually is more effective in many companies at enhancing volume and profit than marketing, promotion, or advertising. I suspect that in companies with comprehensive, highly professional service strategies, service adds more to bottom-line results than research and development, product innovation, capital improvements, broad selection, credit services, or any other strategy.
For example, another study determined that average return from service activity for makers of consumer durables such as washing machines and refrigerators is 100 percent. In other words, if a company spends $1 million on a service program, the company received $2 million in bottom-line benefits.
For banks, return on service is as high as 170 percent. Payoff can be even higher ⎯ as high as 200 percent ⎯ in the extremely competitive retailing field. Here, high-quality personal service is the star of the team, and customer loyalty is the first-round draft choice.
Customer service exerts a multiplier effect: it multiplies results achieved by advertising, marketing, and sales. The basis for this multiplier effect is a positive feeling or goodwill about a company that quality personal service places in the minds of customers who may then be motivated to recommend the company to others.
Even in the absence of advertising and other marketing, businesses that successfully adopt a professional service strategy, see sales, profit, and return on investment usually improve geometrically ⎯ not just proportionately. Customer satisfaction and loyalty increase, and customer complaint numbers drop.
If a company treats its customers right, makes customers feel at home, and gives them the distinct impression that the company values their patronage, then profit is the quite certain result. On the other hand, if the company treats service and acting on those little complaints as “nice to do if you have the time,” then the company will find that other strategies, such as advertising, achieve only anemic results and fall short of expectations or potential.