Customer support 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 focus on them. I’ve often discovered that you never get upper management’s or the owner’s full attention regarding customer support unless you give you the financial impact to the company. Customer support includes a dual role because it both creates and preserves revenue. Let me explain why I think this to be true.
Customer support creates revenue via the recommendations avenue. Each time a great product or service is in conjunction with great customer support, your customers become your ambassadors. Their willingness to speak positively about your organization results in additional customers, thereby creating additional revenue. Recent research by the Technical Assistance Research Program (TARP) suggests that for every single 10 people hearing either positive or negative “recommendations” information, 1 person takes action. Any particular one new customer, should they receive the level of service expected, will consequently keep consitently the positive “recommendations” cycle in motion. Another form of revenue creation as a result of great customer support are price increases. TARP has also studied the impact of price increases on the customer’s willingness to continue to accomplish business with companies. In a study of the banking industry, 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 purchase price increases because of the level of customer support supplied by their particular bank.
In regards to customer support acting as a revenue preserver, there is one question that must be answered before we continue. That question is – How much can be your customer worth to your organization? Whether your company is small or large, the necessity to figure out what your customer is worth to your organization is crucial when calculating the total amount of revenue being preserved by addressing customer support related issues. As an example, if your organization has 1,000 customers and the common annual revenue generated by each customer is $400.00. If 10 percent of these customers experience customer support related problems, that’s 100 customers. Bear with me even as we start the calculations! Telus customer service Now let’s believe that 50% of these 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.
What about another 50% that do complain? Let’s claim that you’re in a position to satisfy 40% (20), 40% (20) become frustrated together with your attempts to satisfy and 20% (10) remain dissatisfied. So now let’s look at the repurchase behavior of these complaining customers. Should 10% (2) of the customers that you’re in a position to satisfy once they complain decide not to repurchase, that represents $800.00 in lost revenue. In the frustrated together with your attempts to satisfy group, 25 % (5) discontinue purchases together with your company, which represents $2000.00 in revenue. Onto the customers that remain dissatisfied after complaining – 60% (6) of the group decide to not repurchase from your company, this means yet another $2400.00 in lost revenue. The full 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 together with your company. In this scenario, considering the 50 customers that left without complaining, add the 13 customers that complained yet didn’t 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 information (63 people), there’s potential revenue missed because of dissatisfied customers. Even though the newest customers average annual purchases equals $300.00, you’re still possibly facing $18900.00 in lost potential revenue. Don’t neglect 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 worthwhile as it pertains to determining the financial impact of customer service.Read More