The actual Monetary Effect associated with Customer Service.

Customer care 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 support is like expecting your beautiful garden flowers to flourish without your giving attention to them. I’ve often found that that you don’t get upper management’s or the owner’s full attention regarding customer support if you don’t give you the financial impact to the company. Customer care features a dual role as it both creates and preserves revenue. I’d like to explain why I believe this to be true.

Customer care creates revenue via the recommendations avenue. Whenever a great product or service is coupled with great customer support, your web visitors become your ambassadors. Their willingness to speak positively about your company contributes to 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. Any particular one new customer, as long as they receive the level of service expected, will subsequently keep the positive “recommendations” cycle in motion. Another form of revenue creation as a result of great customer support are price increases. TARP in addition has studied the impact of price increases on the customer’s willingness to carry on to accomplish business with companies. In a study of the banking industry, Telus customer service only 10 percent of survey respondents who had not experienced a customer support related problem expressed dissatisfaction by having an escalation in fees and charges. Which means 90 percent of survey respondents were okay with the cost increases due to the level of customer support given by their unique bank.

In regards to customer support acting as a revenue preserver, there is one question that really must be answered before we continue. That question is – Simply how much is your customer worth to your company? Whether your company is small or large, the need to determine what your customer is worth to your company is critical when calculating the amount of revenue being preserved by addressing customer support related issues. For instance, if your company has 1,000 customers and the common annual revenue generated by each customer is $400.00. If 10 percent of those customers experience customer support related problems, that’s 100 customers. Bear with me once we start the calculations! Now let’s assume that 50% of those customers don’t even bother to complain, they just simply go away. Their decision to leave without complaining represents $20,000.00 in lost revenue.

Think about one other 50% that complain? Let’s claim that you’re in a position to satisfy 40% (20), 40% (20) become frustrated along with your attempts to satisfy and 20% (10) remain dissatisfied. So now let’s look at the repurchase behavior of those complaining customers. Should 10% (2) of the customers that you’re in a position to satisfy once they complain decide to not repurchase, that represents $800.00 in lost revenue. In the frustrated along with your attempts to satisfy group, 25 % (5) discontinue purchases along with your company, which represents $2000.00 in revenue. On to the customers that remain dissatisfied after complaining – 60% (6) of this group decide to not repurchase from your company, which means one more $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 along with your company. In this scenario, if you think about the 50 customers that left without complaining, add the 13 customers that complained yet decided not to repurchase, that’s 63 customers who’ve the potential to work with 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 brand new customers average annual purchases equals $300.00, you’re still possibly facing $18900.00 in lost potential revenue. Don’t overlook the cost side of poor customer support – the employee costs to resolve customer complaints and the material costs when rework is needed to satisfy the customer. Take this example and apply your real numbers to determine the financial impact to your business. Whew! A lot of calculations, but it’s definitely worth it in regards to determining the financial impact of customer service.

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