Growing the Top-Line with Smart Customer Service
- by SmartSamantha
Smart customer service is one of the key ingredients to growing your business and making it more profitable. For small businesses, it is one of the secrets to doing business with and competing against larger companies. Customer service is an important differentiator when providing what customers perceive as commodity products and services like many retail, wholesale and business services. Study after study shows that consumers and businesses alike make buying decisions based not just on factors like quality and price, but also customer service. You probably make many personal buying decisions for items like clothing, food, dining, entertainment and others based the customer service you expect to receive or have experienced in the past.
Customer service is defined many different ways. More and more companies manage and measure customer service at any touch point with the customer – face -to-face, over the phone or Internet – for many activities like:
- Order taking
- Fulfillment and delivery
- Resolving disputes
- Returns
- After sales services
There are two financial benefits to outstanding customer service:
- Higher Revenues
- Increased Profits and Profitability
In this Bizdom we explore how excellent customer service helps increase revenue. The Bizdom “Growing the Bottom Line with Smart Customer Service” explores how world-class customer helps increase profits and profitability.
Higher Revenues
Outstanding customer service helps grow revenues by:
- Retaining and selling more to current customers.
- Attracting new customers.
Current Customers
Retaining existing customers is one of the secrets to managing the top line – revenues. Many businesses measure “retention” – what percentage of customers we did business last year are still doing business with us this year? Customer service is an important part of higher customer retention. If your business is growing and you are seeking outside funding, such as from a bank, one of the questions you likely will be asked is what is your customer retention? Investors know that customer retention provides valuable insights into how well you are managing the business, including customer service. By the way, the opposite of retention is “churn.” If your retention is 80%, churn is 20%. Churn is very expensive as we will explore in “Growing the Bottom Line with Smart Customer Service.”
Think about customers with whom you have built a relationship over the last two, three or even more years. How much were they buying a few years ago versus today? Not just buying more of the same, which is good; but also buying different and new products, which is great. These same customers may also have been the motivation for your new products and services. Happy customers are one of the best sources of insights into where your business needs to go next.
You have likely heard the term “customer lifetime value.” It’s just a fancy way of saying, how much revenue and profit will a customer likely provide your business over the next three to five years?
What is one of the most important drivers of higher customer lifetime value and, in turn, the value of your business? You guessed it – customer service. Outstanding customer service may increase customer lifetime value by two to five times! Why? Happy customers do business with you longer and tend to buy more each year.
New Customers
Attracting new customers is another important benefit of stellar customer service. How many new customers are referred to you by current customers that give high marks to your customer service? From a personal perspective, how often do you recommend a restaurant you patronize not just because of great food but also great customer service that makes the food and dinning experience that much better? In this case, the restaurant’s revenues grow since you likely will return in the future (increasing your customer life time value) and now, they have a new customer. On the other hand, you’ve probably experienced poor customer service from a company and because of it, you strongly recommended to others they take their business elsewhere. That company’s revenues are lower because they not only lost your business but that of others.
Want to improve your customer service and the top line? Answer the following questions. Your answers likely will reveal areas of opportunity.
- Have you established a customer service policy and made clear each person’s role?
- Have you established measurable customer service goals like retention, number of complaints and how quickly disputes are resolved?
- Do you have a formal process for soliciting customer feedback on customer service and suggestions for improvement?
- How many sales leads are referrals from current customers?
- Are you satisfied with the way you are able to service all your customers? Are incoming orders and product and services inquiries handled promptly and to the customers’ expectations and satisfaction?
Returning customers, returning customers who buy more, and new customers are all key to growing your revenue. Treat them well.
“Do what you do so well that they will want to see it again and bring their friends.”
- Walt Disney
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