How Customer Service Creates Value

As Bill Gates once said, “your most unhappy customers are your greatest source of learning.” Although customer complaints are commonly perceived as a negative sign of performance, wise companies realize that they can actually be a valuable asset. In fact, with proper handling, they have the ability to contribute to a company’s effectiveness and goodwill — but this is only possible with quality customer service.

Unlike other departments, customer service has the unique ability to change a consumer’s attitude towards a brand by turning their dilemma into a profitable solution that benefits both parties.

Customer Satisfaction

Great service recovery fosters satisfaction, trust, and loyalty.

Points of contact

Throughout the purchasing process, consumers have multiple interactions (or touchpoints) with a brand. These touchpoints affect the customer’s overall experience and satisfaction, which in turn shape the customer’s perception of the brand’s value.

Companies are always seeking to improve upon their brand’s touchpoints to enhance customer experience and improve customer satisfaction. But the way satisfaction is measured can sometimes be misleading.

Let’s use the example of a small online business that sells computers. A typical online retailer has five touchpoints: the website, customer service, the checkout process, distribution, and product quality. This particular company has been collecting customer satisfaction statistics via survey questions, and found that each of the five touchpoints has a 90% customer satisfaction rate.

At first, a 90% customer satisfaction score for each of the five touchpoints seems like a good achievement. However, if you multiply each score to derive the overall customer satisfaction across all five touchpoints, the score is effectively 59%.

.9 x .9 x .9 x .9 x .9 = 0.59 = 59%

This means that 41% of customers are walking away with a negative brand experience because the company didn’t fulfill its promises or meet the customer’s expectations. Only a fraction of that 41% of customers who had a negative experience will file a compliant with the customer service department. The majority of unsatisfied customers will simply take their business elsewhere without even notifying the company about their complaint.

Although every business strives for 100% customer satisfaction, it’s realistically impossible to achieve. This is why customer service is critical to a brand’s success – it’s often the last line of defense a company has when it comes to recovering customers who have been lost at any point of contact.

Convert unhappy customers into loyal ones

Dealing with customer complaints properly allows companies to create a strong bond with their customers by turning negative brand experiences into positive ones.

Suppose you work for a cell phone provider, and you receive a call from an unhappy customer who has been experiencing technical problems with their phone, but has continued to receive the same charges for their service. Providing this customer with a credit to their account will cost the company money in the short term, but it also means higher customer satisfaction and customer loyalty in the long term.

Customer Service Recovery Graph

Effective service recovery can lead to higher customer loyalty.

The way a company decides how to handle customer complaints will inevitably affect its reputation and bottom line. Implementing policies and procedures aimed towards improving a customer’s brand experience will lead to higher customer satisfaction, increased customer retention, and additional revenue. In fact, if these skills are implemented correctly, the company has the ability to achieve even better satisfaction ratings from the customer than they would have if the complaint never occurred. This technique is known as service recovery.

Keeping a current customer happy is less expensive

It's easier and less expensive for hairdressers to retain current customers.

It’s easier for most hairdressers to hold on to their current loyal customers than to acquire new ones.

Replacing customers is not an easy task because it costs more to acquire new customers than to keep current ones. In order to acquire new customers, you must spend money to make them aware of your company, convince them to purchase from you, and convert them into loyal customers.

In comparison, holding on to a loyal customer requires much less time, effort and money. For example, hairdressers working in salons know that it is much easier to satisfy their current customers than it is to convince new people to try them out.

When a customer takes a complaint to customer service, that experience becomes the brand experience–the customer looks to customer service to restore their trust in the brand. If a customer’s brand experience is positive, they’re more likely to become loyal, and loyal customers are more likely to make repeat purchases over time. This generates higher profits over the course of the business relationship–a higher customer lifetime value (CLV).

These higher profits could be used to attract even more customers through promotions and advertising. However, if you chose to sacrifice the quality of your customer service, you’ll reap the consequences of losing customers both old and new.

It’s vital for businesses to think about their relationship with their customers in the long term. Although handling customer complaints adds to a company’s expenses in the short term, cutting corners in customer service ends up costing even more money in the long run. When businesses think in terms of customer lifetime value, they view their relationship with customers and their complaints as valuable assets and manage them accordingly.

The power of “word of mouth”

Loyal customers can be your brand’s best advocates. Customers who have a positive customer service experience are more likely to recommend the company to others–but the opposite is also true. Customers who have a negative customer service experience are likely to tell others about their bad experience and detract business from the company.

As Andy Sernovitz states in his book Word of Mouth Marketing, for every person a happy customer talks to, an unhappy customer talks to five. However, a formerly unhappy customer who is made happy again talks to ten.

This means that a positive customer service experience can actually overshadow a bad brand experience. Consumers are more likely to talk about a positive customer service experience than they are to talk about the initial complaint they had. Because word of mouth has a multiplying effect, deciding how to effectively handle customer complaints can be the most influential marketing decision a company will make.

Unsatisfied Restaurant Customer

View customer complaints as an opportunity to discover unmet needs.

Turn complaints into profit

Smart companies view customer complaints as an opportunity to discover unmet needs, and use that information to improve upon their operations or find a new competitive advantage.

For example, let’s say a customer wants to place an order with an online retailer but has trouble navigating the website. The customer will likely seek out a competitor that makes it easier for them to find what they’re looking for–but if the company is fortunate enough to receive a complaint first, they can quickly fix the problem for the next visitor.

Here’s another example–let’s say a customer goes out for lunch at a restaurant. After looking over the menu, they don’t notice a section with healthy alternatives. The customer asks the waiter if the restaurant has a menu with healthier options, and the waiter replies “no.” If the wait staff notices that there are numerous inquiries or complaints about the lack of healthy options on the menu, they should pass that information to their managers, who can discuss the feasibility of adding healthier items to the menu in order to serve another segment of consumers.

When you consider how many other customers will benefit from implementing the same solution, it’s clear that customer complaints can become a profitable opportunity. Let them point you in the direction of ways to increase customer satisfaction and loyalty.

Conclusion

Wise companies realize the importance of effective customer service and handling customer complaints effectively. They view it as a critical component to their brand’s success and treat it as an extension of the brand. It’s clear that customer service has the unique ability to harness information from customer complaints and turn them into a valuable and profitable asset.





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