How much is poor customer service really costing you?

July 15, 2020
By Duncan

 

Businesses in the UK lose roughly £37bn a year because of bad customer service, according to a report by The Ombudsman Services.

Take that in for a minute.

£37 BILLION lost by businesses, every year, just because they didn’t provide a good enough level of customer service.

This is worrying in and of itself.

But when you consider that 89% of businesses now compete primarily on customer service rather than product, according to research by Gartner, then customer service definitely needs more investment.

It shouldn’t be underestimated how much good customer service can earn you.

We've already written about why you can't afford not to invest in customer service in this blog.

Take research from American Express for example, which found that people will pay 17% more on average to do business with a company with a great reputation for customer service.

That’s people wilfully paying more money for a product they could get cheaper elsewhere, just because they are more certain they’ll get better customer service.

Similarly, other research by Zendesk found that more than half of customers (52%) have made additional purchases with a company after a positive customer service experience.

A single good customer service experience can inspire your customers to spend more with you.

So, with so much to gain from providing good customer service, businesses must be tripping over themselves to provide it, right?

Well, apparently not. At least not all businesses are.

Microsoft for instance produced a piece of research claiming 52% of people believe companies need to take more, quicker action on feedback provided to them.

Makes sense doesn’t it.

You fail on something, your customers tell you about it, and you fix it.

But companies seem not to be doing it. Or at least not with any urgency.

Take the 87% of organisations which agree that traditional experiences no longer satisfy customers.

What do we mean by “traditional experiences” when it comes to customer service?

Well, we’ve all had to go through the pain of trying to get somewhere with customer service with a company we’ve used.

Some good, some bad experiences.

Traditionally, customer service is built around calling a helpline and trying to get your problem solved by talking to someone.

Lately it’s more around trying to navigate information on websites and failing to find a way to get in touch with anyone.

These methods are now outdated and there are much more effective ways to deal with customer problems.

Live chat for instance is great for providing customers with answers to regular questions, getting information from them to automatically create tickets that your team can deal with, and allows you to have real-time conversations with them directly where they are likely to go for answers - your website.

Using social media as part of your customer service strategy is something many businesses are waking up to - mainly because they’ve noticed customers often go to social media to complain about something.

If your customers do this, you need to be ready to dive in to offer help.

Acknowledge the problem and show empathy for their situation, but reacting quickly is essential for using social media in customer service.

Also, if your customers are going to your website to find answers to problems or questions, fill your website with content that can help them, and make it easy to find.

Creating a customer service focused knowledge base or resource centre for instant can store information and answers to FAQs that you can direct customers to to help.

A lot of customers prefer this because they like being able to solve problems, they just want the information.

Creating this source of information has the added benefit of helping your site’s overall SEO performance.

 

What are the pitfalls of failing on customer service?

So we’ve seen the cash losses businesses face by failing on customer service, but the negatives go beyond just the finances:

 

Reputational damage

Getting a bad reputation because of poor customer service can be fatal to any business today.

And this reputation can be “earned” extremely quickly.

Dissatisfied customers are believed to share that experience with between nine and 15 people, according to research by the White House Office of Consumer Affairs.

With news of poor experiences travelling so quickly you can quickly find yourself in a hole that your company can’t get out of.

 

Customer Lifetime value drops

We’ve all seen the stats that the longer a customer stays with you the greater their lifetime value.

Similarly, retaining and up selling existing customers is far cheaper than relying on winning new customers.

If your customers churn quickly because of poor customer service, their customer lifetime value can diminish quickly while you will ultimately spend more money winning new customers to meet your growth targets.

 

Employees will leave

Nobody wants to work in a toxic environment or work in a customer facing role without the ability to actually help customers.

If your business is consistently criticised for poor customer service you are going to end up with poor morale amongst your team.

And no-one wants to work in a place full of unhappy people and low morale.

So, you’ll risk losing your best people if you fail to get a grip on customer service.

 

Ultimately, failing at customer service can cost your business in both financial and reputational ways, as well as hinder your ability to create a business people want to work for.

It could already be the case that customer service has become the growth strategy you've forgot about.

As customer choice continues to grow, customer service will continue to become more the critical battleground that businesses will fight over, and the those who can get to grips with service will end up being the ones to benefit most.

 

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