"Why is it necessary....."

A business owner asked me recently, “Why is it necessary for me to invest the time and effort installing these customer service principles you speak of, when my business is doing fine? We are growing around 5% per year and our profits are in line. Our customers seem to be satisfied and we treat our customer as well, if not better than our competitors. Why should I change anything? Besides, we have done business this way for years.”

“Great question” I answered, after being somewhat astounded. Apparently, he had only read my last blog article. Several previous articles I have written dealt with this very question.

I decided to answer his question differently than I normally would. Usually, I discuss how the business’s revenues and profits can drastically improve when these core customer service principles are implemented. Also, I typically point out that the only thing constant in today’s business climate is change. If your business is not changing you are not growing. This time though, the scared straight approach seemed more appropriate. I shared some very frightening and sobering business statistics with him.

* On average most American companies lose one-half of their customers every five years.

* Another study estimated that a business will lose up to 25% of their customers yearly.

* US News & World Report found that the following percentage of customers quit buying from companies because:
Someone in the company dies – 1%
Make other friendships – 3%
Change locations – 5%
Go to competition – 9%
Product Dissatisfaction- 14%
Of attitude indifference towards the customer by one employee - 68%

* Research further shows that out of 25 dissatisfied customers:
Only one customer complains
Twenty-four are dissatisfied but don’t complain
Six of the twenty-four non-complainers have “serious” problems
The twenty-four non-complainers tell between 10 and 20 other people about their bad experiences (this means that between 250 & 500 potential customers learn about the bad service experiences).

* A typical business only hears from 4% of its dissatisfied customers. The other 6% quietly go away. Of this 96%, 68% never reveal their dissatisfaction because they perceive an attitude of indifference in the owner, manager, or employee.

* 91% of unhappy customers will never purchase goods or services from you again.

* It typically takes twelve positive service encounters to make up for one negative experience.

* Businesses having a low quality service average a 1% return on sales and lose market share at a rate of 2% per year.

* A survey done by Technical Assistance Research says that “It also costs 5-7 times more to get a new customer than it does to keep the one you already have.”

* Studies show that company culture affects employee performance by as much as 30%.

“That’s enough of the bad news. Here are some encouraging statistics”, I told him.

* According to Harvard Business School, “A 5% increase in customer loyalty can increase profitability by 25-80%”

* A 2% increase in customer retention equals cutting operating costs by 10%.

* Business with a high quality service average a 12% return on sales and gain market share at the rate of 6% per year while charging significantly higher prices.

* According to a J. D. Power study through the years 1999 – 2004, those companies that continually improved customer satisfaction during these five years had a 52% increase in shareholder value.

Now it was my turn to ask him some questions. Based on this information can you really afford not to install and implement these customer service principles into your business? Are the new customers you are acquire adding to your customer base or are they only replacing the customers you have lost? Do you honestly know your customer’s satisfaction level? Are they just satisfied, completely satisfied, or are they dancing in the street with joy? How many of your satisfied customers are becoming loyal customers? If you improved your customer loyalty by 5, 10, 15%, how much will your profits increase?

From the expression on his face, I could tell he was giving this information and these questions deep thought.

I reminded him, “Running your business by these customer service principles not only makes good business sense, but it is also good for your customers and good for your employees. This ultimately is good for you.”

Where do we begin? He asked.

To start; let’s review the top customer service principles:

1. Belief
2. Commit to Excellence
3. Formulate a Plan
4. Build Team Unity
5. Measure Performance
6. Establish Relationships
7. Develop Employees
8. Create Happy Employees
9. Take Action
10. Focus