The Customer Pays Your Salary — Why Excellent Customer Service Is Vital for Client Retention
The scene was all-too familiar. A cluster of sales people lounged against a glass counter. They were too busy chatting to help the older woman waiting patiently to ask her question.
Across the sales floor, two reed-thin sales associates clad head to toe in chic black pegged pants and button up shirts wheeled a metal rolling rod filled with $500 cocktail dresses to the elevator. A shopper stopped to ask where the shoe department could be found; the men pointed disdainfully to the sign board. They never spoke, but turned their backs and continued on their journey without interacting directly with her.
Shoe sale or no shoe sale, it’s no wonder she turned and left without boarding the elevator.
Was I in a big box store somewhere? A tiny, fading five and dime on the corner of Main Street in Nowhereville?
I stood among gleaming woodwork and brass, crystal vials of expensive perfume, shimmering gowns and more the first floor of a well-known department store on Fifth Avenue in New York City, in one of the most expensive shopping neighborhoods in the world.
The service was appalling. Is it any wonder retailers are suffering and customers shop elsewhere?
Customer acquisition costs 5 to 25 times more than customer retention. Research by Bain & Company underscores this and indicates that increasing retention rates by even 5% results in an increase in profits by 25 to 95%.
With so much data proving that retention rather than acquisition is where a company’s time and efforts should be focused for maximum profitability, and the correlating information that exceptional customer service improves retention — why aren’t companies paying more attention to better service?
Everywhere we go these days, it seems that excellent customer service is the exception rather than the norm. Yet studies prove that when all else is equal, good customer service wins loyalty father than any rewards program, computerized email system, or chatbots.
“A single purchase experience can leave a lasting impression,” stated Susan McPartlin in a National Business Research Institute article.
Approximately 89% of customers switch brands due to a poor customer service experience. Investors look at churn rate, which equals client loss, to determine a brand’s value, among other things.
Factors that contribute to high customer churn and poor service include:
- Hiring the wrong people for the right jobs, or putting people in customer-facing roles who may be better suited for other positions.
- Lack of consequences-based management. Employees who demonstrate desired service-focused behaviors should be rewarded immediately to reinforce positive actions.
- Poor or nonexistant training. Just 30% of small companies, which reflect most retailers, offer training of any kind; large companies, just 29% offer training.
- Empowering people to make service decisions. Much of what passes for customer service in call centers is highly scripted and restricted. This prevents people from doing what they may understand needs to be done to solve a problem or satisfy a customer request. With empowering staff to make decisions on their own, the endless “I have to get a manager to approve that” response can be frustrating for customers.
- Priorities. What are your company’s priorities? If the company’s priority is to acquire more customers and market share, then customer service suffers. Setting priorities that includes customer service is a great first step to improving service levels.
You Can’t Improve What You Can’t Measure
I mentioned earlier the concept of customer churn, or how many customers leave your company to go elsewhere. The customers remaining reflect the customer retention figure for your company or the number of customers who return for repeat sales or service.
To obtain these figures, you need to know your customer list quite well. Start with data from your company’s CRM or accounting system to ascertain how many customers are new, how many are repeat customers.
You can’t improve what you can’t measure. Find the baseline retention and churn rates for your business, monitor them quarterly or annually, and take steps to improve them.
Five Steps to Improve Customer Service and Boost Retention
Improving customer service and retention rates needn’t involve costly loyalty programs, punch cards, or gimmicks. Any size company can take one or more of the following steps to improve customer service — starting now.
- Listen to your customers: The biggest complaint among customers is that companies don’t listen to them. The art of listening involves active silence; waiting for people to speak, nodding or making affirmative noises so that the people on other end of the phone realize someone is listening, repeating back for confirmation of understanding. Listen to your customers and ensure that anyone working directly with customers understands and utilizes active listening skills.
- Respond promptly: Make it a companywide expectation to return phone calls and emails from customers within 24 hours. Have someone monitor social media channels and respond swiftly to complaints, questions, or issues.
- Hire for emotional intelligence: Emotional intelligence, a term coined in the early 1990s, refers to the ability to recognize, interpret, and respond to emotional cues. In customer service roles, high EQ is possibly more important than IQ; you want people who can read and respond appropriately to a customer’s emotions. During the hiring process, ask questions around service situations. Look for people who describe service situations where they demonstrated a knack for reading and responding to emotional cues.
- Empower people to do the right thing: Empower customer service and call center agents to make decisions and choices on their own. Set reasonable boundaries and a clear path to reach a manager in the event that an issues is questionable. Reward good service. Never punish anyone for going the extra mile to do the right thing for a customer, even if they go against the rules. Make sure they understand that you truly believe in “customers first.”
- Training, training, training: New employee training should include a section on customer service expectations. Refresher training, demonstrations, sales training and more should be part of every one’s job — and pay employees to attend training. Don’t ask them to attend after their shift has ended.
Lastly, take a magic marker and a piece of paper, and write in big letters:
THE CUSTOMER PAYS YOUR SALARY
The original quote is attributed to Henry Ford — “The customer pays your wages” — but I’ve heard this quote repeated often enough, in many different ways, to allow some paraphrasing.
It’s been the guiding principle of my business life, my marketing life, and my life as a retail manager. Companies that follow this mantra improve their retention and loyalty rates without spending a fortunate on plastic punch cards or special “loyalty tracking” and rewards points programs. It’s a simple thought that means a lot, because it provides the focus for everything your business does. It provides the principle by which your company can thrive.