From which company are you more likely to buy? An existing vendor whose products you already enjoy or a retailer that is completely new to you?
Most people are more likely to buy from a brand they already know and trust. Research shows that the probability of people buying from an unfamiliar company is 5-20%, while the odds of people buying from a company they trust is 60-70%.
What’s more, when they actually make purchases, returning customers on average spend 31% more than new customers.
[clickToTweet tweet=”When customer retention is boosted by as little as 5%, sales increase by 25% to 95%. ” quote=”When customer retention is boosted by as little as 5%, sales increase by anywhere from 25% to 95%.”]
Most Brands Do Not Take Advantage of the Customers They Have
It’s not as though companies are unaware of the cost-effectiveness of retaining customers. 70% of brands believe that retention is cheaper than acquisition. Yet most businesses spend the majority of their time and money trying to acquire new customers instead of nurturing the ones they already have. Somehow, there is a disconnect between what company leaders know and how they are implementing their marketing strategies.
Even though obtaining a new customer costs 5 times the amount it does to retain one, only 18% of companies actually focus on keeping their clients. In contrast, 44% of businesses expend their resources on winning new customers.
Companies do, however, generally recognize the value of customer service. 89% of them perceive customer service as being essential to their organizations.
The Consequences of Customer Service
I’ve spent a lot of time flying on various airlines over the past two years. Several stand out in my mind as treating their customers either poorly or extremely well.
One of them is Frontier Airlines. While Frontier does offer some impressively low fares, the company seems pretty happy to charge people for anything else it possibly can. These charges include fees for services such as onboard snacks and beverages or allowing passengers a carry-on item.
The fees seem particularly mercenary because this policy is so different from those of most other airlines. The majority of airlines I’ve flown with typically offer a small complimentary snack and beverage, as well as one free carry-on to all passengers. Needless to say I (and others I know) have a fairly poor impression of Frontier overall, despite how often the company offers extremely cheap flights.
In contrast, Alaska Airlines, Southwest, and JetBlue are all airlines whose customer service stands out in my mind as a step above the rest. JetBlue’s overall presentation feels classy, an impression aided by small gestures, such as when flight attendants handed out mints at the end of the flight.
I can think of instances when on both Alaska Air and Southwest the flight attendants were particularly attentive, kind, and even amusing. I appreciated that they made their safety talks entertaining as well as informative. Southwest even occasionally offered free WiFi for certain TV shows.
Quite possibly, some people have had excellent customer service experiences with Frontier and negatives ones with my favorite airlines. The point is, every interaction matters. Whether it’s fair or not, people will judge a company by one very positive or very negative encounter.
Plus, customer service interactions accumulate. In the case of flying, travelers certainly talk with each other and spread the word about their various experiences.
Size Doesn’t Matter
Customer service is important whether your brand is large or small. Damian Ornani of Fisher Investments says that:
[Excelling in customer service is] “a matter of commitment to service as a core function, and then devoting the necessary resources to building that capability.”
There is a certain stereotype of small businesses being more “homey” and personable, while large companies are faceless monoliths. I am sure both types of companies sometimes act according to these clichés. But a large brand that places a high premium on customer service actually has the resources to shine at implementing it.
One example would be Amazon, a company often mentioned as an example of a retailer that does customer service well. Amazon makes it easy to resolve problems if customers need to return or exchange products. They also do well at responding and following up quickly.
It helps to know a lot about the company you’re working for in order to serve clients better. Chase and American Express do well at this aspect of customer service. Their employees are well-versed in the ins and outs of company products.
I can also testify to the fact that USAA is a large company with which I have consistently experienced helpful and effective service.
Tips for Your Company
Here are a few tips for evaluating how you are doing customer service at your company.
1. The more efficient and thorough you can be, the better. Streamline the process for your customers to get their complaints resolved, and do what you can to be available to them around the clock.
2. It helps to enable both your customers to resolve their problems on their own and your employees to be creative when helping your customers: “Top-performing companies are more than three times more likely than poor performers to have empowered employees.”
3. Companies that are succeeding at customer service are much more likely to use technology. Technology helps brands more effectively discover problems. It also helps organizations meet customers’ needs through resources such as CRM and social listening tools.
4. Social media can be a valuable asset for strengthening your customer service. It’s true that customers can destroy your reputation in a way they could not a few years ago. But social media also provides a new way of discovering their complaints and resolving them. Whatever you do, get feedback from your clients somehow.
5. However you can, try to make your most loyal customers feel special. Reward them for their dedication to your company.
6. Do what you can to bring your customers together in community. You could do so in person through conventions or trade shows or online through something like a webinar.
7. Make sure you’re training your employees on how to interact with customers. They should have good interpersonal skills, empathy, and patience. A detailed knowledge of your company is important, as is having a strong work ethic.
8. It’s highly beneficial to cultivate in both your employees and yourself the ability to admit you are wrong. There will always be a temptation to gloss over your mistakes so your company doesn’t look bad. But being dishonest is worse than admitting your errors, and people will know if you are not taking their problems seriously.
Reliable Customer Service Is Both Profitable and Ethical
Obviously, entrepreneurs are out to make money. No company can survive without increasing its assets. However, the best companies hold to a set of values that guide how they run themselves. For every organization, one of those values ought to be treating its customers well.
Strong customer service is both ethical and good for your business. And it’s more profitable for your company overall if you understand and nurture the customers you have than if you focus the majority of your energy on bringing in new ones.
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