*Boost Your Bottom Line With Better Service

Boost Your Bottom Line With Better Service

By Suzanne Martin

“Customer service,” the catch phrase of the ‘90s, promises to live on in the 21st century. Every industry boasts exceptional customer service. Yet too few businesses actually deliver it, says John Tschohl, founder of the Minneapolis-based Service Quality Institute. And that lack of service cuts deeply into profits.
“I suspect there are very few people who can sit down and name five businesses where they receive exceptional service every time,” says Tschohl, author of Achieving Excellence Through Customer Service (Bestsellers Publishing, 1996).

Many organizations don’t allocate the time—or the money —to deliver the service customers want. Often, says Tschohl, the reason is simple: Business owners don’t realize how important customer service is to their bottom line.
“Of primary importance is that it improves customer retention,” Tschohl says. “By finding out what services customers want—and then delivering them—businesses can develop and nurture a strong, loyal customer base.”

Loyal customers are essential to long-term success. Research shows that 65 percent of a typical organization’s business comes from current, loyal customers.

How important is customer loyalty to your bottom line? “There is no better illustration of the value of customer loyalty than the consequences of disloyalty and loss of customers,” says Tschohl. “Let’s use a 100-store supermarket chain as an example. If each of those stores alienated only one customer per day, how much money do you think that chain would lose annually? The loss was estimated at $94.4 million for one such chain.”

Frederick Reichheld and W. Earl Sasser, writing in Harvard Business Review, point out that “as a customer’s relationship with [a] company lengthens, profits rise. Customer defections have a surprisingly powerful impact on the bottom line. It is common for a business to lose 15 to 20 percent of its customers each year. When defections are cut in half, the average growth rate more than doubles. A 5 percent change in rate of retention swings profit increases from 25 percent all the way to 100 percent.” That, says Tschohl, is powerful research.

Loyal customers also help drive the company’s business by delivering the most powerful form of advertising—word-of-mouth. “A strong customer base is the most credible source to potential customers, spreading the reputation of the business free of charge and attracting new customers,” Tschohl notes.

Most business owners are experts at attracting first-time customers. Unfortunately, few dedicate time and resources to turn those first-timers into profitable repeat customers.

“Education of employees is a key,” Tschohl says. “Most organizations spend more money on the repair of their copiers than they do on training their employees to provide exceptional customer service. Once you get customers in the door, you’re shooting yourself in the foot if you don’t give them the service they want. You could be losing money right there on the spot. More importantly, you might be losing money weeks, months, even years from now.”

Bad service has another pitfall: It causes employee turnover that also eats into profit. “A study by the Forum Corporation found that employee turnover was inversely proportional to employee perceptions of the quality of service provided by their employers,” Tschohl says. “When service is perceived as bad, consumers don’t like to patronize the company, and employees don’t like to work for it. Reduced turnover not only decreases the costs associated with recruiting and training new employees, but also increases productivity,” says Tschohl.

It’s clear, Tschohl emphasizes, that a business that promises exceptional customer service—and then delivers—will increase profits by retaining its customers as well as its employees.

Courtesy of Article Resource Association; www.aracopy.com