KQ Article

Everyone knows exceptional customer experiences are important. How big an impact do they really have on your institution’s bottom line?

Many years ago, Wendy’s devised one of the most memorable commercials of all time. It featured a trio of elderly ladies in a generic fast food joint suspiciously examining a burger. As they looked under the bun, the meager patty caused one of them to belt out the famous query: “Where’s the beef?&rdquo?

In essence, they were saying the burgers sold by Wendy’s competitors had no substance. There was nothing to them. I bring this commercial up because I hear a lot of similar complaints about all of the hoopla surrounding customer experiences — and how next-level customer service makes those experiences great.

In other words, improving customer service is a nice theory, some say, but there isn’t a payoff. And if there isn’t a payoff, why bother at all?:

Formidable financial impact
A short  time ago, the research team of Petouhoff, Leaver and Magarie answered this question when they released their findings in a widely circulated report called “The Economic Necessity of Customer Service.” The findings lead to the following conclusion: “Customer service experiences either generate or diminish company revenue.”

In other words, customer service is not a neutral factor in your business. It either makes you money or costs you money — and it can’t be dismissed.

Another finding, this time more to the point: “Customer service has a profound effect on a corporation’s bottom line.” How can that be?

One simple formula says it all: Great Service = Customer Retention = Profit. According to a recent Harvard Business Review article, companies that boosted customer retention by as little as 5% saw increases in profits ranging from 25% to a whopping 95%. Think about that. Service nearly doubling profits.

Of course, the reverse is also true: Poor Service = Lost Customers  = Less Profit. U.S. News and World Report recently ran an article that said the average American business loses 15% of its customer base annually. But here’s the kicker: 68% of customers who leave do so because of “poor or indifferent customer service,” while an additional 14% leave because of an “unsatisfactorily resolved dispute or complaint.” Which means 82% of the customers you lose, you lose because of service.

The most shocking discovery here is that only 9% of customers stop doing business with a company because of price. Indeed, price may be the least of your worries when it comes to retaining your best, most profitable customers.

The  cost  of not  caring
If you're still not convinced that good customer service truly pays off, consider the altemative: bad service costs you - big time. In a groundbreaking global customer service survey, the Genesys organization found that the 16 nations they studied lost $338.5 billion ­ that's "billion" with a "B"- every year due to customer defections caused directly by poor service.

Of course, cynics might say, "Big  deal. So we lose a customer once in a while. You can't please everyone." True enough. But it's a much bigger financial deal than you think. And you can be sure that defecting, disgruntled customers will hurt your future business.

Let's use some common sense. That one unhappy customer doesn't just slink away and keep quiet. He talks. In fact, it's well known that an unhappy customer will tell 10 other people about his bad experience with your company - and that's just in person. He will tell another 100 people on Facebook and Twitter. Chances are, this negative review means they won't buy from you, no matter how your products or services are priced.

To bring this home, I always talk about some young friends of mine who used a big brand-name retailer for their wedding registry. Unfortunately, one of their guests forgot to scan a gift, so the couple received two punch bowls. As expected, they went back to the retailer with the gift receipt hoping for a refund.

The retums clerk they encountered, however, showed no concern for their double-punch-bowl dilemma and refused to issue the refund because they didn't have the original receipt. The couple asked to speak to the manager, who simply echoed the original clerk's remarks.

The infuriated couple immediately chastised the company on Facebook with multiple status updates that reached hundreds of friends and acquaintances. As a result, two newly engaged couples and two expecting mothers decided not to use this sam e retailer for their wedding and baby registries.

The retailer had already made thousands from the couple's registry. Yet it refused to budge on a service issue that would cost about $20 to resolve, when the value gained by keeping these customers happy would have been worth much, much more.

This aspect of service is easy for banks and credit unions to overlook. Think about a customer complaining about a legitimate but relatively small service charge. In these instances, it helps to elevate your perspective and focus on all of the revenue customers will generate during their relationship with your institution. How does the amount in question stack up? Is it worth losing them, not to mention all of their friends and neighbors?

The financial payoff of good service is real. Poor service costs you severely in the form of lost sales, lost customers and lost future customers. With exceptional customer service, everybody wins. Employees make a difference in a customer's life, customers' needs are met, and banks and credit unions generate a measurable financial payoff ­ today and tomorrow.

_{© 2010 Dr. Alan Zimmerman}